Annual statement of Qantas Airways

Running head: AUDIT
Audit
Name of the student
Name of the university
Student ID
Author note

AUDIT1
Executive summary
Purpose of the task is to focus on the auditing standard ASA 701 for conversing key audit
matters. In context of the same the report will analyse the financial report of Qantas Airways for
the year closed on 30th June 2018 and will find out how the entity’s auditors have focussed on the
KAM. Auditor shall conclude which matters as per auditing standards were noteworthy in audit
of the financial statement for present period and hence considered as key audit matter. Annual
statement of Qantas Airways Limited for the period closed on 30th June 2018 has been audited by
KPMG. They highlighted various matters as KAM which are regarding recognition of passenger
revenue, revenue recognition for frequent flyer and accounting for derivative financial
instrument.

AUDIT2
Table of Contents
Introduction......................................................................................................................................3
Rational for new auditing standard ASA 701..................................................................................3
Determination of KAM....................................................................................................................4
Background of Qantas Airline.........................................................................................................5
Details regarding the audit report....................................................................................................5
Key audit matters highlighted by the auditors.................................................................................5
Manners in which the above mentioned matters have been addressed...........................................7
Conclusion.......................................................................................................................................8
Reference.........................................................................................................................................9

AUDIT3
Introduction
The term key audit matter (KAM) is depicted as matters those in view with the auditor’s
professional judgments were most noteworthy in audit of financial statement for present period.
KAM are chosen from the matters those are informed with the persons engaged as governance.
Intended purpose of ASA 701 is to address both judgments of the auditors regarding the
requirement for communication under audit report and form as well as content of such
communication (Motahary & Emami, 2016). Major purposes of communicating the KAM are –
(i) enhancement of the value of communicating the report of auditor through offering better
transparency regarding the executed audit (ii) it provides the supplementary information to the
financial statement users to help them in gaining knowledge of those matters which as per the
professional judgments of the auditors are of critical importance in audit of annual statements for
the concerned period (iii) it may support the users of annual statement in gaining knowledge the
firm as well as understanding the areas of crucial management judgment for the audit of financial
statements (Cordoş & Fülöp, 2015).
Rational for new auditing standard ASA 701
ASA 701 on conversing the KAM has been issued by AUASB in context of
independence of the auditor’s report required as per legislative provisions along with strategic
direction. AUASB is the statutory committee which is of independent nature under Australian
government and is established as per section 227A of ASIC Act 2001 (Auasb.gov.au, 2019). As
per the strategic direction provided to AUASB by FRC (financial reporting council), AUASB
required developing auditing standards the auditing standards that is clearly focussed on public
interest and are considered to have highest quality. The auditing standards are of legislative
instruments in accordance with the Legislative Instruments Act 2003. (Sirois, Bédard & Bera,
2018).
It represents equivalent of Australian ISA 701 communicating the KAM under
independent report of auditors. It includes deviations from ISA 701 that have been made in
accordance with the Australian legislation and maintaining audit quality under which AUASB
has considered that there are some compelling reasons for doing the same (Auasb.gov.au, 2019).
Auditing standards established the requirement and provides the application along with other
explanatory material in context of informing of KAM under the independent report of the
auditors (Bédard, Gonthier-Besacier & Schatt, 2014). Introduction of ASA 701 replicates
commitment of AUASB in conformity with latest enhancements to the auditors reporting that is
developed by IAASB. Major features of the new standard involve –
 Mandating KAM communication in auditor’s report for the listed audit entities
 Allowing the auditors of other firms in deciding whether to include the KM under
auditor’s reports (Auasb.gov.au, 2019)
 Manner in which the auditor determined KAM while –
 Identifying the matters informed with those the persons engaged in a position of
governance, those matters which are required noteworthy attention from the auditors.
 Determining most noteworthy matters for considering the same in the auditor’s report
(Christensen, et al., 2014)