Month End Glossary

Key Audit Matters (KAM)

Key Audit Matters (KAM) are the areas of an audit that, in the auditor's judgment, were of most significance.

Key Audit Matters (KAM) represent the critical aspects of the audit that required the most significant attention from the auditor during the course of their audit work. These matters are selected from those communicated to the individuals charged with governance, such as the company's Board of Directors or Audit Committee. They are typically matters that involve a high degree of complexity, require significant judgment, or involve substantial risk. Auditors report these matters in their independent auditor's report as per the relevant auditing standards, such as ISA 701. For example, a KAM may involve areas like revenue recognition, impairment testing of goodwill, or complex valuation of financial instruments. Highlighting KAMs provides greater transparency to users of financial statements about the areas of focus during the audit process. It also enhances the information value of the auditor's report.

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