ISA 701 standard - Mazars points out impact on audit reports
Mazars has analyzed the results of the implementation of Standard ISA 701, which has changed the process of preparing the audit report in various geographies. The changes to this process are intended to bring a better understanding and more information to support organizational management.
Lisbon, May 03, 2019 - The study "A Benchmark of Key Audit Matters", developed by Mazars, analyzed the results of the application of standard ISA 701 and its influence on the reports made by auditing professionals. The standard designed by the International Federation of Accountants (IFAC) defines a new audit report format, applicable to listed entities, which allows the auditor to present the rationale behind the work carried out more effectively. Communicating the matters considered most relevant by the auditor enables a better understanding of the assessment carried out, provides additional information to the recipients of the financial statements and assists management in the organization.
The application of ISA 701 in 2016 had a wide-ranging impact on audit work, since in order to meet the proposed final objective - communicating relevant audit matters in the auditor's report - it became necessary to review, update and think through all the stages of the audit process itself.
Relevant audit matters (Key Audit Matters or KAM) are the matters that the auditor, based on his professional judgment, considered to be most significant within the scope of the audit carried out on the financial statements and which he selected from the set of elements that were communicated to those responsible for management.
Based on the results of the study conducted, the standard appears to have been applied consistently and the goals of the standards have been met overall.
For Luís Gaspar, Managing Partner of Mazars in Portugal, "the role of the auditor necessarily involves protecting the public interest. This is a key principle of the profession, which involves transparency and information. It is an integral part of the responsibilities of audit professionals to be able to explain the concepts associated with their practice and to make considerations. We believe that sharing the results of this study demonstrates the transparent nature of Mazars' work and our commitment to this challenge, contributing to the creation and sharing of knowledge and a better understanding of the processes among stakeholders and the community directly involved in this context.".
Since the publication of the latest Mazars study on this subject - "Mazars Benchmark on Key Audit Matters", as recently as 2016 - the context has changed. There is now a wider range of countries that include KAM in their audit reports since the implementation of ISA 701. As a result, this new study has approached KAM from a new angle, with the purpose of comparing results in 12 markets - South Africa, Brazil, Cyprus, the United Arab Emirates, France, the Netherlands, Nigeria, Oman, Kenya, the United Kingdom, Romania and Zimbabwe.