SA 701 — Communicating Key Audit Matters

Issued by ICAI AASB · Reporting

KAMs in the audit report — what they are, what they aren't.

Objective

To address the determination of KAMs and the communication thereof in the auditor's report.

Key requirements

Determination of matters that, in the auditor's professional judgement, were of most significance
Mandatory for audits of listed entity FS
Each KAM: descriptive heading, factual statement of the matter, why it was considered a KAM, how the matter was addressed in the audit
Not a substitute for: disclosure required by the framework, expressing a modified opinion, or reporting on going concern

Typical procedures

KAM working paper per matter
Cross-check that each KAM's "how addressed" describes procedures, not conclusions

Common pitfalls

KAMs read like a list of audit procedures, not areas of significance
KAM language inadvertently states a conclusion (prohibited)
No KAM in a listed audit (likely a documentation gap, not a real "no significant matters" position)

SA 701 in practice

SA 701 sits in the Reporting phase of the audit. The Standards on Auditing are issued by the ICAI Auditing and Assurance Standards Board (AASB) and deemed to be prescribed by the Central Government under Section 143(10) of the Companies Act 2013. Compliance with SAs is mandatory for every audit conducted by a Chartered Accountant in India.

For authoritative text, refer to the ICAI AASB Compendium of Standards on Auditing at icai.org.

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SA 700 — Forming an Opinion and Reporting on FS (Revised)

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SA 705 — Modifications to the Opinion (Revised)