Page 171 - CA Final PARAM Digital Book.

Since, in the given case, Adverse Opinion is being expressed thus XYZ & Co. can communicate Key Audit
Matter in given below manner:

Key Audit Matters: Except for the matter described in the Basis for Adverse Opinion section, we have
determined that there are no other key audit matters to communicate in our report.

QNO Key Audit Matter, But No Relevant Disclosure in FST Old Course -- (M22R)
112.400 TITANIUM CNO— SA701.120
What is the auditor’s responsibility to report a key audit matter for which there are no relevant

disclosures in the financial statements?
Answer When communicating key audit matters, the fact that there are no disclosures in the financial statements
related to a matter determined to be a key audit matter does not relieve the auditor from the
requirement to communicate it. An auditor may determine a key audit matter related to the audit for
which relevant disclosure requirements do not exist in the applicable financial reporting framework. For
example, the implementation of a new IT system (or significant changes to an existing IT system) during the
period may be an area of significant auditor attention, in particular, if such a change had a significant effect
on the auditor’s overall audit strategy or related t significant risk (e.g., changes to a system affecting revenue
recognition

Also, if an auditor determines that it is necessary to include information about the entity in order
to effectively describe a key audit matter that has not been disclosed by management and
management does not agree to disclose that information, the auditor should reconsider the
adequacy of the disclosures in accordance with applicable financial reporting framework. The
auditor should communicate the matter as a key audit matter unless law or regulation precludes public
disclosure about the matter or in extremely rare circumstances, the auditor determines that the matter
should not be communicated in the auditor’s report because the adverse consequences of doing so
would reasonably be expected to outweigh the public interest benefits of such communication.

QNO Placement of KAM Old Course -- (M22R)
112.500 TITANIUM CNO— SA701.120
Where should the placement of the key audit matters section be in the auditor’s report?
Answer Generally, the Key Audit Matters section is required to be placed after the Basis for Opinion paragraph
and before the Management’s Responsibility paragraph.

In case, ‘Material uncertainty relating to going concern’ section is required as per SA 570(Revised),
then KAM section is placed after that section.

Further, regarding placement of KAM section, SA 706 (Revised), “Emphasis of Matte Paragraphs and Other
Matter Paragraphs in the Independent Auditor’s Report” provides as under:

When a Key Audit Matters section is presented in the auditor’s report, an Emphasis of Matter (EOM)
paragraph may be presented either directly before or after the Key Audit Matters section, based on
the auditor’s judgment as to the relative significance of the information included in the Emphasis of
Matter paragraph. The auditor may also add further context to the heading “Emphasis of Matter”, such as
“Emphasis of Matter – Subsequent Event”, to differentiate the Emphasis of Matter paragraph from the
individual matters described in the Key Audit Matters section.

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