Page 136 - CA Final Audit Titanium Full Book. (With Cover Pages)

CA Ravi Taori

2. Applicability: SA 701 applies to audits of complete sets of general purpose financial statements of Listed
Entities.
3. Discretion: It applies when the auditor decides to communicate key audit matters in the auditor’s report.
4. Prohibition: SA 705 (Revised) prohibits the auditor from communicating key audit matters when the auditor
gives disclaimer of opinion on the financial statements, unless such reporting is required by law or regulation.

(CNO - SA 701.100) Determining Key Audit Matters
The auditor shall determine, from the matters communicated with those charged with governance, those matters
that required significant auditor attention in performing the audit. In making this determination, the auditor
shall take into account the following:
Shortcut: RJ Events
Risks: The auditor must identify areas with a higher assessed risk of material misstatement or significant risks as
per SA 315.
Judgments: The auditor should pay attention to significant auditor judgments relating to areas in the financial
statements that involved significant management judgment. This includes accounting estimates identified as
having high estimation uncertainty.
Events: The auditor should consider the impact of significant events or transactions that occurred during the
period on the audit.
Examples of Key Audit Matters:
Asset Related
Impairment: Assessment of Impairment.
Valuation: Valuation of financial instruments.

Liability Related
Taxation: Taxation matters (multiple tax jurisdictions, uncertain tax position, deferred tax assets).
Provisions: Provision for losses and contingencies.

P&L Related:
Revenue: Matters relating to Revenue recognition.

(CNO - SA 701.120) Communicating Key Audit Matters (Separate Section – (KAM) Below Going Concern)
Introductory language: The introductory language in this section of the auditor’s report shall state that:
Definition:
(a) Key audit matters are those matters that, in the auditor’s professional judgment, were of most significance in
the audit of the financial statements [of the current period]; and.
(b) These matters were addressed in the context of the audit of the financial statements as a whole, and in forming
the auditor’s opinion thereon, and the auditor does not provide a separate opinion on these matters.

No Key Audit Matter: In case there are no Key Audit Matter to communicate, the auditors’ report must
specifically mention that by carrying a Key Audit Matter Paragraph and under which they shall mention that
there are no Key Audit matter to communicate.

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