ICAI has issued an Implementation Guide on ‘SA 701: Communicating Key Audit Matters in the Independent Auditor’s Report’, for guidance of members in discharging their reporting responsibilities under this Standard in an effective manner, as under:
ICAI’s Implementation Guide on ‘SA-701: Communicating Key Audit Matters in the Independent Auditor’s Report dt. 18 Feb. 2018
ICAI’s Implementation Guide on SA 701 provides detailed guidance on various issues involved in this new reporting requirement, i.e. Communicating Key Audit Matters in the Independent Auditor’s Report. Key audit matters are defined as 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. The purpose of communicating key audit matters is to enhance the communicative value of the auditor’s report by providing greater transparency about the audit that was performed.
Communicating key audit matters in the auditor’s report is in the context of having formed an opinion on the financial statements as a whole and does not constitute a separate opinion on individual matters. Communicating key audit matters in the auditor’s report is not:
i) 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;
ii) a substitute for expressing a modified opinion when required by the circumstances of a specific audit in accordance with SA 705 (Revised);
iii) a substitute for reporting in accordance with SA 570 (Revised) 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
iv) a separate opinion on individual matters.
The auditor is required to communicate with those charged with governance the matters to be included in auditor’s report. This communication is intended to make management and those charged with governance aware of the matters that auditor intends to communicate in the auditor’s report, and to provide them with an opportunity to obtain further clarification when necessary.