Stories by Amaka Ifeakandu
Lagos
In its determined efforts to ensure transparency and reliability of financial reports, the Financial Reporting Council(FRC) of Nigeria has charged auditors to endeavour to communicate Key Audit Matters(KAM) as provided by International Accounting Standards(IAS) 701 which bothers on Auditor’s responsibility to communicate key audit matters in the auditor’s report.
Speaking in Lagos with stakeholders of the financial sector during a brainstorming session , the Executive Secretary of FRC, Jim Obazee, said that the basis for the implementation of ISA 701 lies on the need to evaluate the quality of the processes used to report results.
He said “Entities are required to provide their financial reporting stakeholders with fair, transparent and reliable financial results and secure the attestation of the information.” Speaking further he said “Internationalisation is beginning to change all of these in a new direction. The reporting of results alone is no longer sufficient. In addition to financial results, entities are now required to analyse and evaluate the quality of the processes and controls used to report the results.”
The FRC boss noted that the overall objective of the new and revised auditor reporting standards was to enhance the value and relevance of the auditor’s report.
Obazee, however, said that ISA 701 defines KAM as “those matters that, in the auditor’s professional judgement, were of most significance in the audit of the financial statements of the current period.”
He stated that KAM are selected from matters communicated with those charged with governance.
“IAS 701 includes judgement-based decision-making framework, which is further broken down into matters communicated with those charged with governance; matters that required significant auditor attention in performing the audit and matters of most significance in the audit of the financial statements of the current period,” the Executive Secretary disclosed.
Obazee noted that KAM is not required to be communicated where law or regulation precludes public disclosure about the matter or in extremely rare circumstances, where the auditor determines that the adverse consequences of the disclosure would reasonably be expected to outweigh public interest benefit of the communication.
The ISA 701 was issued by the International Auditing and Assurance Standards Board(IAASB) in January 2015.
