August 3, 2021

Key audit matters: unlocking the secrets of the audit.

Key Audit Matters : Unlocking the secrets of the Audit

By ACCA


Auditor’s report ISA 701 Communicating Key Audit Matters (KAM) in the Independent Auditor’s Report defines key audit matters 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. They are areas of high risk, high levels of management judgement or significant events or transactions arising within the period.  The auditor is required to explain why each matter was deemed important and how it was addressed during the audit.

The impact of KAMs was also not just limited to improving the quality of information for investors. The “Key Audit Matters” research by ACCA revealed three additional benefits of KAMs to the financial reporting process:

•  KAMs encourage better conversations between the auditor and those charged with governance; this in turn contributes to better governance

•  KAMs help the auditor to focus on the areas of the audit requiring the most careful judgement; this in turn contributes to higher audit quality

•  KAMs give preparers incentives for revisiting financial reporting and disclosures in areas related to those KAMs. This in turn leads to better financial reporting.

Together, these contribute to a much broader impact of KAMs on the financial reporting process beyond merely providing better information for investors.

Because of these wider benefits, one of the leading’s global professional accounting body, ACCA, has called upon regulators to take a balanced approach to enforcement to ensure that ultimately the full benefits of KAMs can be realised. While there is room for improvement in some of the reports within the scope of this review, an approach to enforcement that is too heavy-handed may fail to encourage better KAM reporting, but instead motivate a more defensive and ‘boilerplate’ approach to KAMs. In ACCA’s view, the way that the UK FRC encouraged firms while identifying areas for improvement is a case study in good regulation.

Practitioners may also wish to challenge themselves to see whether the number of KAMs can be increased without compromising quality.

Download the full report “Key Audit Matters : unlocking the secrets of the audit to read more.



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ACCA (the Association of Chartered Certified Accountants) is the global body for professional accountants, offering business-relevant, first-choice qualifications to people of application, ability and ambition around the world who seek a rewarding career in accountancy, finance and management. ACCA is currently introducing major innovations to its flagship qualification to ensure its members and future members continue to be the most valued, up to date and sought-after accountancy professionals globally. Founded in 1904, ACCA has consistently held unique core values: opportunity, diversity, innovation, integrity and accountability. More information is here: www.accaglobal.com or contact ACCA Indonesia at 021-2788 7830 or info.indonesia@accaglobal.com.