## SA 701 – Key Audit Matters (KAM)
### What are KAM?
Key Audit Matters are those matters that, in the auditor's professional judgment, were of most significance in the audit of the financial statements of the current period. They are selected from matters communicated with those charged with governance (TCWG).
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### Applicability
KAM communication is required for:
1. Listed entities (mandatory).
2. Situations where the auditor otherwise decides to communicate KAM in the report.
3. Where required by law or regulation.
> Critical Exception: The auditor cannot communicate KAM when issuing a Disclaimer of Opinion or Adverse Opinion — unless law or regulation requires it.
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### What KAM Communication is NOT
KAM reporting does not substitute for:
- Disclosures that management is required to make in the FS.
- A modified opinion when circumstances require one (SA 705).
- Going concern reporting when a material uncertainty exists (SA 570).
- A separate opinion on individual matters.
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### Purpose of KAM
- Enhance the communicative value of the auditor's report through greater transparency.
- Help users understand the entity and areas of significant management judgment.
- Highlight matters of most significance to the current period audit.
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### Determining KAM — Three Filters
1. Higher assessed risk of material misstatement or significant risks (SA 315).
2. Significant auditor judgment in areas involving significant management judgment (e.g., complex accounting estimates).
3. Effect of significant events or transactions that occurred during the period.
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### How to Communicate KAM in the Report
- Describe each KAM in a separate section under the heading "Key Audit Matters", using an appropriate sub-heading per matter.
- The introductory language must state:
- (a) KAM are matters of most significance in the current period audit.
- (b) These matters were addressed in the context of the overall audit and forming the opinion — the auditor does not provide a separate opinion on these matters.