Key Audit Matter in Banking Industry

AUDITING
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Key audit matter
Executive Summary
As per ASIC 2001, the company must ensure that it release the financial statements together
with the notes and disclosures. This means that the financial statements should be explanatory
in nature so that a clear cut understanding of the company can be done. further, the presence
of auditor report and director report must be present that helps in knowing the authenticity of
the company. In this, we will try to understand what is Key Audit matter and why it should be
reported. The Auditors has the responsibility to report his opinion to its shareholders about
the working and operations of the Company. His work includes identifying areas of
importance and sample checking of the management work. So we have chosen the Banking
industry to understand its Key Audit matters by choosing Four major Banks of Australia.
Further, the key audit matter of the company is discussed in an elaborated manner where it
comes to the forefront that disclosure of the information is appropriate.
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Key audit matter
Contents
Introduction........................................................................................................... 4
Case of Lehman Brothers & Relevance of ASA 701 in the case............................5
Key Audit Matter projected in the Banking Industry..............................................6
Westpac banking corporation................................................................................6
National Australia bank (NAB)............................................................................... 7
Commonwealth Bank of Australia- CBA.................................................................7
Bank of Queensland Limited (BOQ).......................................................................8
Conclusion........................................................................................................... 10
References........................................................................................................... 11
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Key audit matter
Introduction
As per the standard, the Key Audit Matters (KAM) are defined as those matters which are to
be given significant attention by the auditor while auditing the financial statements and
related reports. For finding out such matters, the auditors need to focus on those transactions
which have high risks of material misstatements and such misstatements could have affected
the financial accounts during the audit period (AUASB, 2018).
The main object of this standard is that the key matters should be assessed and once such
matters are assessed, the same should be conveyed to the management along with the opinion
of the auditor. The key matters are of huge importance as these help the users of the financial
statements to know such transactions which can affect the company and such users in the
near future (Baldwin, 2010). The audited financial statements should be transparent enough
for its stakeholders to know the actual financial position of the company at large. Hence the
KAM should be disclosed in the audit report (Moroney & Trotman, 2016). It is now the
responsibility of the auditors to disclose the key audit matters in the audit report (Cappelleto,
2010). They should also mention therein that which of the matters were disclosed to the
auditor prior to the completion of an audit and which were disclosed after the audit was
completed.
This standard explains how an auditor should make disclosures of Key Audit Matters while
preparing his audit report. It further has the following features:
• In the case of listed companies, this standard has mandated the communication of Key
Audit Matters by the auditors in their audit report (Ruhnke & Schmidt, 2014).
• In the case of other companies, the standard helps the auditors in deciding whether or not
to include KAMs in their audit report.
• As per the standard, the auditor can decide how to determine the key audit matters. It
depends on the judgment of auditors and management together and those transactions and
accounts are considered to be included in the auditor’s report as key matters which show high
risk and which can have huge effects on significant transactions and events (Christensen,
Kent, Routledge & Stewart, 2015).
• This standard defines the documentation required by the auditor in relation to KAMs.
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