ISA 701 — Communicating Key Audit Matters in the Independent Auditor's Report

ISA 701 DEALS with the auditor’s responsibility to COMMUNICATE ‘Key Audit Matter(s)’ in the auditor’s report.

Table of Contents

ISA 701 – Introduction
- 1. Scope of this ISA
- 2. Effective Date
ISA 701 – Objectives
ISA 701 – Definitions
- 1. Key Audit Matters
ISA 701 – Requirements
Synopsis

ISA 701 – Introduction

1. Scope of this ISA

It applies to Audits of ‘Complete Set(s) of General Purpose Financial Statements’ of LISTED entitie(s) and circumstances when the auditor otherwise decides to communicate Key Audit Matters in the auditor’s report.

2. Effective Date

This ISA is EFFECTIVE for audits of financial statements for periods ending on or after December 15, 2016.

ISA 701 – Objectives

The Objectives of the ‘Auditor’ are to DETERMINE Key Audit Matters and having formed an opinion on the Financial Atatements, COMMUNICATE those Matters by describing them in the auditor’s report.

ISA 701 – Definitions

1. Key Audit Matters

Those Matters that in the auditor’s ‘Professional Judgment’ were of Most SIGNIFICANCE in the ‘audit’ of Financial Statements of the current period.

ISA 701 – Requirements

1. Determining Key Audit Matters

The Auditor Shall TAKE Into Account the Following:
(a) Areas of higher assessed risk of Material Misstatement or significant risks identified in accordance with ISA 315 (Revised).
(b) Significant auditor Judgments relating to areas in ‘Financial Statements’ that involved significant Management judgment, INCLUDING accounting estimates.
(c) The effect on the audit of significant events or transactions that occurred during the period.

2. Communicating Key Audit Matters

The ‘Auditor’ shall DESCRIBE each Key Audit Matter using an appropriate sub-heading in a Separate Section of the auditor’s report under the heading ‘Key Audit Matters‘.

2.1 Key Audit Matters Not a Substitute for Expressing a Modified Opinion

The ‘Auditor’ shall NOT COMMUNICATE a Matter in the Key Audit Matter(s) section when the auditor would be Required to MODIFY the opinion in accordance with ISA 705 (Revised) as a result of the Matter.

2.2. Descriptions of Individual Key Audit Matters

The Description of each Key Audit Matter in the Key Audit Matter(s) section of the auditor’s report shall INCLUDE a reference to the related disclosure(s), if any in the Financial Statements and shall ADDRESS:

Why the Matter was considered to be one of Most significance in the audit and therefore determined to be a Key Audit Matter; AND
How the Matter was addressed in the audit.

2.3 Circumstances in Which a Matter Determined to be a Key Audit Matter Is Not Communicated in the Auditor’s Report

The ‘Auditor’ shall DESCRIBE each Key Audit Matter in the auditor’s report Unless:

(a) Law or regulation precludes public disclosure about the Matter; OR

(b) In Extremely Rare Circumstances, the ‘Auditor’ determines that the Matter should not be communicated because the ADVERSE consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

2.4 Form and Content of the Key Audit Matters Section in Other Circumstances

If the ‘Auditor’ determines depending on the facts and circumstances of the entity and the audit that there are NO Key Audit Matter(s) to communicate, the auditor shall INCLUDE a statement to this effect in a separate section of the auditor’s report under the heading ‘Key Audit Matters‘.

3. Communication with Those Charged with Governance

The ‘Auditor’ shall COMMUNICATE with Those Charged with Governance:

Those Matters the auditor has determined to be the Key Audit Matter(s); OR
If applicable, depending on the facts and circumstances of the entity and the audit the auditor’s determination that there are No Key Audit Matter(s) to communicate in the auditor’s report.

Synopsis

ISA 701 ‘Communicating Key Audit Matters in the Independent Auditor’s Report‘ DEALS with the auditor’s responsibility to communicate Key Audit Matter(s) in the auditor’s report.

[700-799] Audit Conclusions and Reporting