Critically Analyze and Evaluate Key Audit Matters in the Independent Auditor's Report

Running head: CRITICALLY ANALYZE AND EVALUATE KEY AUDIT MATTERS IN
THE INDEPENDENT AUDITORS REPORT
Critically analyze and evaluate key audit matters in the independent auditors report
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CRITICALLY ANALYZE AND EVALUATE KEY AUDIT MATTERS IN THE
INDEPENDENT AUDITORS REPORT
Executive summary:
The paper intends to conduct an in depth analysis of the ASA 701 that was introduced in the
wake of financial crisis and several corporate collapse. One such corporate collapse is the
case of Lehman brothers that have been analyzed and evaluated in respect of ASA 701. In
addition to this, the paper also focuses on ASA 570 that seeks auditors to take into account
the going concern issue when forming the judgment on the entity’s financial performance.
The later section of the report conducts an analysis and evaluation of (KAM) key audit
matters of the banking organizations such as Commonwealth bank of Australia, Queensland
bank, Westapc bank, ANZ bank and National bank of Australia and Macquarie group limited.
From the analysis it is ascertained that the disclosure of key audit matters have served the
purpose in the industry.

CRITICALLY ANALYZE AND EVALUATE KEY AUDIT MATTERS IN THE
INDEPENDENT AUDITORS REPORT
Table of Contents
Introduction:...............................................................................................................................4
Discussion:.................................................................................................................................4
Rationale and objectives of key audit matters:..........................................................................4
Application and requirement of key audit matter:.....................................................................4
Lehman brother case issue:........................................................................................................4
What did auditors do wrong?.....................................................................................................4
How key audit matters address the case:....................................................................................4
Revision of ASA 570:................................................................................................................4
Importance of going concern in auditor’s report:......................................................................4
Evaluating the efficiency of key audit matters in the financial report of the chosen banks:.....4
Does key audit matters achieved the purpose in the industry:...................................................4
Conclusion:................................................................................................................................4
References list:...........................................................................................................................5

CRITICALLY ANALYZE AND EVALUATE KEY AUDIT MATTERS IN THE
INDEPENDENT AUDITORS REPORT
Introduction:
The report elucidates the evaluatio of the key audit matters of the banking
organizations listed on the ASX (Australian stock exchange). Such analysis is done to
contribute to the importance of understanding the key audit matters and it presentation in the
independent auditor’s report. The facts presented under ASA 701 “ASA 701 for
communicating the key audit matters in the independent auditors report” is essential to
take into account for assessment of the key audit matters of different companies. In the
aftermath of the financial crisis and the failure of several corporate organizations, the
standard board has introduced the revised auditing standard for enhancing the communication
value of the auditor report. The objective of introducing this new auditing standard is to
augmenting the financial information transparency that is presented in the annual report and
assist the investors in making strategic investment decision. The detailed investigation into
the auditing standard has been done by presenting the case of Lehman brother and how did
the auditors went wrong on disclosing the accounting defects and issued fair view on the
financial statements. The revision of ASA 570 concerning the importance that is placed on
the issue of going concern of entity has also been evaluated.
The matters that are considered noteworthy by the auditors as per their professional
judgment in the auditing of the financial report are regarded as key audit matters (Christensen
et al. 2016). All such matters in the respective financial report of the entities have been
addressed by auditors for forming view on the financial report.
Discussion:
Rationale and objectives of key audit matters:
The auditors are responsible for communication the identified key audit matters along
with the form and content of the communication and the judgment that they have used in
evaluating the identified matters. Investors and users are provided with greater transparency
when seeking the financial information with the help of presentation of key audit matters and
thereby contribute to enhance the value of the prepared auditors report. It is indented by such
matter to assist the users in assessing making the significant judgment made by the
management of organization (Ahmed and Anifowose 2016). Moreover, it also contributes to
the engagement of the users with the management and personnel who are changed with
governance in an organization.
Requirement of key audit matter:
Since the key audit matters are considered to be relevant in the decision making
process of investors, it is essential for the reporting entity to make a presentation of such
matters in their financial report as per the new auditing standard. The importance of
presentation of such matters is attributable to the fact that they helps in determining the
existence of materiality in such accounts and how they would contribute to material
misstatement existence in the financial statements (Auasb.gov.au 2019). Therefore, it is of
utmost importance for the auditors to identify the key audit matters.
The auditing process is provided with several benefits due to the incorporation of the key
audit matter and its identification in the report. In this regard, it can be inferred that some of
the specific areas in reporting would improved due to identification of such matters and