Question

Many have called for the auditor’s report to be more informative and relevant therefore many changes happened in the auditor report in the last five years. especially ISA 701 , which is about “Communicating Key Audit Matters in the Independent Auditor’s Report. So you are required to show the reasons for the changes in ISA 701 and what is the impact of these changes on the auditor and other stockholders (Please write the answer so I can copy it)

Answer 1

KEY AUDIT MATTER

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 auditor shall describe each key audit matter, using an appropriate subheading, in a separate section of the auditor's report under the heading "Key Audit Matters,".

The introductory language in this section state that:

(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

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.

New ISA 701 deals with the auditor’s responsibility to communicate key audit matters (KAM) in the auditor’s report. The ISA applies to audits of complete sets of general purpose financial statements of listed entities. It also applies when the auditor is required by law or regulation to communicate KAM for other entities or when the auditor decides to communicate KAM on a voluntary basis. ISA 701 is effective for audits of financial statements for periods ending on or after December 15, 2016.