Communicating key audit matters (KAMs) is the biggest change in the auditor’s report we have seen in the last decade.
The Auditing and Assurance Standards Board (AASB) is supporting the implementation of this change with new resources to help audit firms develop strong processes for a successful implementation.
These resources are particularly important for small and medium-sized firms communicating KAMs for audits of financial statements for periods ending on or after December 15, 2022.
Effective date of KAM reporting
Entities listed on the Toronto Stock Exchange (TSX), excluding those required to comply with National Instrument (NI) 81-106, Investment Fund Continuous Disclosure, were required to communicate KAMs for audits of financial statements for periods ending on or after December 15, 2020. Other listed entities, excluding those required to comply with NI 81-106, are following suit for audits of financial statements for periods ending on or after December 15, 2022.
What are KAMs?
KAMs are those matters, that in the auditor’s professional judgment, were of most significance in the audit of the entity’s financial statements of the current period.
KAM practice runs
Since 2019, audit firms of TSX-listed entities have worked to develop processes to support the effective communication of KAMs in the auditor’s report. An important part of the process was for firms to undertake practice runs with their clients.
Taking the prior year-end audited financial statements as a base, engagement teams identified and drafted KAMs, applying the communication requirements as if in the live setting.
Real-life lessons learned
In 2022, an independent research study was undertaken on KAM reporting. Read more about the lessons learned from the research study.
In addition to the independent research, AASB staff interviewed firm representatives to gain insights into the practice runs, including the challenges encountered and lessons learned.
AASB staff leveraged the insights learned from the audit firm interviews and developed three pieces of implementation guidance that they hope will assist auditors in successfully implementing the communication of KAMs in the auditor’s report.
Key Audit Matters: Lessons Learned from Firms Implementing KAM Communications on Audits of TSX Listed Entities – Identifying and Communicating KAMs in the Auditor’s Report
Read about considerations for a practitioner when identifying and communicating KAMs in the auditor’s report, including lessons learned in describing KAMs in the auditor’s report.
Download Lessons Learned
Key Audit Matters: Lessons Learned from Firms Implementing KAM Communications on Audits of TSX Listed Entities – Roadmap to Developing a Successful KAM Implementation Process
Use this roadmap, designed for small and medium-sized audit firms, to develop a successful KAM implementation process. It addresses what types of processes to establish and considerations for practice runs.
Download Roadmap
Key Audit Matters: Insights for Stakeholders – Frequently Asked Questions
This helpful FAQ is for users of the auditor’s report, including audit committee members, management, and other stakeholders who rely on the financial statements and the accompanying auditor’s report in their decision making.
Download FAQ