The new Australian Auditing Standard ASA 701 “Communicating Key Audit Matters in the Independent Auditor’s Report”, will affect audit reports of financial statements ending on or after 15 December 2016. This new standard will require listed companies to include key audit matters (‘KAMs’) in their audit reports.
KAMs are any matters that are of most significance in an audit of the financial statements and require the most attention. These are usually areas of complexity, uncertainty and where the most judgement has been applied.
Each significant matter requires the following information to be disclosed:
- A description and explanation of why it is considered a KAM;
- A reference to related disclosures in the financial statements; and
- An overview of how the issue was addressed during the audit.
Some examples would be:
- Going concern
- Fair value adjustments;
- Goodwill and intangible asset impairment assessments; and
- Revenue recognition.
Many feel that this new standard is a step forward in terms of providing more context, transparency and information for the users of financial reports to aid their decision making. However, others believe that the additional requirements may provide too much information, some of which may be of a sensitive nature.
If you require any further information in relation to the new audit reporting standard, please contact our team of Auditors at The Quinn Group on (02) 9223 9166 or submit an online enquiry form today.