SA 701 — Key Audit Matters (KAM)

## SA 701: Communicating Key Audit Matters in the Auditor's Report

### Applicability

SA 701 applies to audits of:

• Listed entities
• Entities where required by law or regulation
• Public interest entities

> SA 701 does not apply to all companies — only to listed and notified entities.

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### What are Key Audit Matters (KAM)?

KAM are those matters that, in the auditor's professional judgement, were of most significance in the audit of the FS in the current period.

• KAM are selected from matters communicated with TCWG (Those Charged with Governance).
• KAM shall not pertain to previous years' audit matters.

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### How to Determine KAM — Three Criteria

The auditor selects matters that required significant auditor attention:

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### Communicating KAM

• KAM are matters of most significance addressed during the audit.
• The auditor does not provide a separate opinion on KAM — they are communicated for transparency.
• KAM are discussed in the context of the audit as a whole.

### When KAM Will NOT Be Communicated

1. Laws or regulations prohibit disclosure

2. Possible adverse consequences of disclosure (e.g., commercially sensitive)

3. Highly confidential information

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### Objective of SA 701

1. To enhance communicative value of the audit report through greater transparency.

2. To assist users in understanding matters of most significance in the audit of current period FS.

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### What KAM is NOT a Substitute For