Document ID: chunk:federal_register_of_legislation:F2023C01136:reg:9:p6
Version: federal_register_of_legislation:F2023C01136
Segment Type: reg
Provision Reference: reg 9 (pt 6/24)
Character Range: 20469–23551

Para. 2)

A1.             Significance can be described as the relative importance of a matter, taken in context.  The significance of a matter is judged by the auditor in the context in which it is being considered.  Significance can be considered in the context of quantitative and qualitative factors, such as relative magnitude, the nature and effect on the subject matter and the expressed interests of intended users or recipients.  This involves an objective analysis of the facts and circumstances, including the nature and extent of communication with those charged with governance.

A2.             Users of financial reports have expressed an interest in those matters about which the auditor had the most robust dialogue with those charged with governance as part of the two‑way communication required by ASA 260[7] and have called for additional transparency about those communications.  For example, users have expressed particular interest in understanding significant judgements made by the auditor in forming the opinion on the financial report as a whole, because they are often related to the areas of significant management judgement in preparing the financial report.

A3.             Requiring auditors to communicate key audit matters in the auditor's report may also enhance communications between the auditor and those charged with governance about those matters, and may increase attention by management and those charged with governance to the disclosures in the financial report to which reference is made in the auditor's report.

A4.             ASA 320[8] explains that it is reasonable for the auditor to assume that users of the financial report:

(a)                Have a reasonable knowledge of business and economic activities and accounting and a willingness to study the information in the financial report with reasonable diligence;

(b)                Understand that the financial report is prepared, presented and audited to levels of materiality;

(c)                Recognise the uncertainties inherent in the measurement of amounts based on the use of estimates, judgement and the consideration of future events; and

(d)                Make reasonable economic decisions on the basis of the information in the financial report.

    Because the auditor's report accompanies the audited financial report, the users of the auditor's report are considered to be the same as the intended users of the financial report.

Relationship between Key Audit Matters, the Auditor's Opinion and Other Elements of the Auditor's Report (Ref: Para. 4, 12, 15)

A5.             ASA 700 establishes requirements and provides guidance on forming an opinion on the financial report.[9] Communicating key audit matters is not a substitute for disclosures in the financial report that the applicable financial reporting framework requires management to make, or that are otherwise necessary to achieve fair presentation.  ASA 705 addresses circumstances in which the auditor concludes that there is a material misstatement relating to the appropriateness or