Wiley Practitioner's Guide to GAAS 2022

31AU-C 701 Communicating Key Audit Matters in the Independent Auditor's Report

• Scope
• Definition of Term
• Requirements
  • Determining Key Audit Matters
• Objectives of AU-C Section 701
• Communicating Key Audit Matters in the Auditor's Report
  • KAMs Are Not a Substitute for a Modified Opinion
  • Descriptions of Individual KAMs
  • Circumstances in Which a Matter Determined to be a KAM Is Not Communicated in the Auditor's Report
  • Form and Content of the “Key Audit Matters” Section in Other Circumstances
  • Documentation

SCOPE

AU-C 701 addresses the auditor's responsibility to communicate key audit matters (KAMs) in the auditor's report when the auditor is engaged to do so. It provides guidance on what and how to communicate KAMs in the auditor's report when the auditor has been engaged to do so. It does not require the communication of KAMs. (AU-C 701.01)

The goal of communicating KAMs is to provide users with greater transparency about the audit, the entity, the audited financial statements, or the audit that was performed. (AU-C 701.02) KAMs can help users understand the entity and areas where management has exercised significant judgment. (AU-C 701.A2) Frequently reported KAMs include items related to goodwill, acquired intangibles, development costs, impairment, valuation of financial instruments, revenue recognition, business combinations, and income taxes. Note that KAMs are specific to a company.

Communicating KAMs is not a separate opinion on individual matters and is not a substitute ...