The auditor shall determine, from the matters communicated with those charged with governance, those matters that required significant auditor attention in performing the audit. In making this determination, the auditor shall take into account the following: (Ref: Para. A9–A18)

1. Areas of higher assessed risk of material misstatement, or significant risks identified in accordance with ASA 315.^[5] (Ref: Para. A19–A22)
2. Significant auditor judgements relating to areas in the financial report that involved significant management judgement, including accounting estimates that are subject to a high degree of estimation uncertainty. (Ref: Para. A23–A24)
3. The effect on the audit of significant events or transactions that occurred during the period. (Ref: Para. A25–A26)

The auditor shall determine which of the matters determined in accordance with paragraph 9 of this Auditing Standard were of most significance in the audit of the financial report of the current period and therefore are the key audit matters.  (Ref: Para. A9–A11, A27–A30)

The auditor shall describe each key audit matter, using an appropriate subheading, in a separate section of the auditor’s report under the heading “Key Audit Matters,” unless the circumstances in paragraphs 14 or 15 of this Auditing Standard apply. The introductory language in this section of the auditor’s report shall state that:

1. Key audit matters are those matters that, in the auditor’s professional judgement, were of most significance in the audit of the financial report [of the current period]; and
2. These matters were addressed in the context of the audit of the financial report as a whole, and in forming the auditor’s opinion thereon, and the auditor does not provide a separate opinion on these matters. (Ref: Para. A31–A33)

Key Audit Matters Not a Substitute for Expressing a Modified Opinion

The auditor shall not communicate a matter in the Key Audit Matters section of the auditor’s report when the auditor would be required to modify the opinion in accordance with ASA 705 as a result of the matter.  (Ref: Para. A5)

Descriptions of Individual Key Audit Matters

The description of each key audit matter in the Key Audit Matters section of the auditor’s report shall include a reference to the related disclosure(s), if any, in the financial report and shall address: (Ref: Para. A34–A41)

1. Why the matter was considered to be one of most significance in the audit and therefore determined to be a key audit matter; and (Ref: Para. A42–A45)
2. How the matter was addressed in the audit. (Ref: Para. A46–A51)

Circumstances in Which a Matter Determined to Be a Key Audit Matter Is Not Communicated in the Auditor’s Report

The auditor shall describe each key audit matter in the auditor’s report unless: (Ref: Para. A53–A56)

1. Law or regulation precludes public disclosure about the matter; or (Ref: Para. A52)
2. In extremely rare circumstances, the auditor determines that the matter should not be communicated in the auditor’s report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. This shall not apply if the entity has publicly disclosed information about the matter.

Interaction between Descriptions of Key Audit Matters and Other Elements Required to Be Included in the Auditor’s Report

A matter giving rise to a modified opinion in accordance with ASA 705, or a material uncertainty related to events or conditions that may cast significant doubt on the entity’s ability to continue as a going concern in accordance with ASA 570, are by their nature key audit matters. However, in such circumstances, these matters shall not be described in the Key Audit Matters section of the auditor’s report and the requirements in paragraphs 13–14 of this Auditing Standard do not apply. Rather, the auditor shall:

1. Report on these matter(s) in accordance with the applicable Australian Auditing Standards; and
2. Include a reference to the Basis for Qualified (Adverse) Opinion or the Material Uncertainty Related to Going Concern section(s) in the Key Audit Matters section. (Ref: Para. A6–A7)

Form and Content of the Key Audit Matters Section in Other Circumstances

If the auditor determines, depending on the facts and circumstances of the entity and the audit, that there are no key audit matters to communicate or that the only key audit matters communicated are those matters addressed by paragraph 15 of this Auditing Standard, the auditor shall include a statement to this effect in a separate section of the auditor’s report under the heading “Key Audit Matters.” (Ref: Para. A57–A59)

The auditor shall communicate with those charged with governance:

1. Those matters the auditor has determined to be the key audit matters; or
2. If applicable, depending on the facts and circumstances of the entity and the audit, the auditor’s determination that there are no key audit matters to communicate in the auditor’s report. (Ref: Para. A60–A63)

The auditor shall include in the audit documentation:^[6] (Ref: Para. A64)

1. The matters that required significant auditor attention as determined in accordance with paragraph 9 of this Auditing Standard, and the rationale for the auditor’s determination as to whether or not each of these matters is a key audit matter in accordance with paragraph 10 of this Auditing Standard;
2. Where applicable, the rationale for the auditor’s determination that there are no key audit matters to communicate in the auditor’s report or that the only key audit matters to communicate are those matters addressed by paragraph 15 of this Auditing Standard; and
3. Where applicable, the rationale for the auditor’s determination not to communicate in the auditor’s report a matter determined to be a key audit matter.