## SA 701 – Key Audit Matters (KAM)
### What are Key Audit Matters?
Key Audit Matters are those matters that, in the auditor's professional judgement, were most significant during the audit of the current period's FS.
They are selected from matters communicated to TCWG (Those Charged With Governance) — i.e., KAMs are a subset of all matters discussed with TCWG, specifically the most significant ones.
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### Where do KAMs appear?
In a separate section of the Independent Auditor's Report titled 'Key Audit Matters'.
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### What must the auditor communicate for each KAM?
1. Description of the key audit matter.
2. How the matter was addressed during the audit (procedures performed, findings, conclusions).
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### Purpose of KAM
| Purpose | Explanation |
|---|---|
| Add communicative value | Makes the auditor's report more informative by providing greater transparency into the audit |
| Assist users in understanding the entity | Highlights areas of significant management judgement (e.g., impairment estimates, revenue recognition policies) |
| Assist users in understanding the audit | Informs users which matters required the most attention during the audit |
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### Key Rules
- KAMs are applicable to listed entities (mandatory) and may be applied to others voluntarily or by law.
- KAMs do not replace a modified opinion — if a matter leads to modification, it is dealt with under SA 705/706 and may also be described as a KAM.
- KAMs do not create separate opinions on individual matters; they are explanatory.
- If all KAMs are also reported as Emphasis of Matter (EOM) paragraphs, they are not repeated in the KAM section (no duplication).
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### Factors that determine significance (basis for selecting KAMs)
- Areas of higher assessed risk of material misstatement.
- Areas involving significant management judgement (e.g., accounting estimates, provisions).
- Audit areas that were especially challenging or required significant auditor attention.
- Effect of significant events or transactions during the period.