Page 238 - CA Inter Audit PARAM

CA Ravi Taori
Those matters that, in the auditor’s professional judgment, were of most significance in the audit of
the financial statements of the current period. Key audit matters are selected from matters
communicated with those charged with governance.
st
1 - It should from matters communicated to TCWG
nd
2 - Required SIGNIFICANT AUDITOR ATTENTION
rd
3 - It should be of MOST SIGNIFICANCE
4 - It is should be from audit of CURRENT Period)
th

➢ Significant Auditor Attention
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:
(It gives us guidance on matters where there is generally Significant Auditor Attention)
Areas of higher assessed risk of material misstatement, or significant risks identified in
accordance with SA 315.
(E.g.-In Reliance JIO area of Revenue Recognition is considered as significant Risk
because of Volume and Complexity of Transactions hence it was identifies as KAM

Significant auditor judgments relating to areas in the financial statements that involved
significant management judgment, including accounting estimates that have been identified
as having high estimation uncertainty.
(E.g. In Mondi Limited a South African Company auditor Deloitte has specified
Capitalization of Fixed Asset as Key audit matter as it involves significant judgement by
management regarding which expenses should be capitalized and till what time and
what should be economic useful life.)

The effect on the audit of significant events or transactions that occurred during the period.
(E.g. In Philips Netherland KPMG has specified Separation of Health Tech Business &
Lighting Opportunities as separate company as Key Audit Matter, Also Acquisition of
Volcano Corporation)

➢ Most Significance
The auditor shall determine which of the matters determined in accordance with above points were
of most significance in the audit of the financial statements of the current period and therefore are
the key audit matters.
(E.g. Matters involving in-depth, frequent, robust interactions , important to users,
complex, subjective, material etc. For example, GST implementation may be of most
significance as compared to IDT cases pending against company)

QNO Is KAM substitute of Disclosure in FST Old Course--(M18R/N19R/SM20/SM21/N23R)
701.03 Bhaskar CNO - SA701.090 New Course—(SM25)
Communicating Key Audit Matter is not a substitute for disclosure in the Financial Statements rather
Communicating key audit matters in the auditor’s report is in the context of the Auditor having formed an
opinion on the financial statements as a whole. Analyse.
Answer ➢ Communicating key audit matters in the auditor’s report is not:

A substitute for disclosures in the financial statements that the applicable Financial reporting
framework requires management to make, or that are otherwise necessary to achieve fair
presentation;
A substitute for the auditor expressing a modified opinion when required by the
circumstances of a specific audit engagement in accordance with SA 705 (Revised);
A substitute for reporting in accordance with SA 570 when a material uncertainty exists
relating to events or conditions that may cast significant doubt on an entity’s ability to
continue as a going concern; or
A separate opinion on individual matters.

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