Key Audit Matters: En undersøgelse af, om nytteværdien af årsrapporten øges for regnskabsbrugerne, når der gives større indsigt i revisors arbejde

Christine Lund & Kirstine Juhl Mikkelsen

Student thesis: Master thesis


The auditor’s report is the primary communication the auditors have with the users regarding the findings and results of the audit. The users value the auditor’s report, but they often have greater expectations to the content than the informational value that is actually conveyed. This results in a reduced credibility of the auditor’s report and lower confidence in the auditors and the extent to which they act in the public’s interest. In 2009, The International Auditing and Assurance Standards Board (IAASB) started a new project in order to enhance the auditor’s reports for investors and other users of financial statements. The intended benefits from the project are enhanced communication between auditors and investors, as well as those in charge of corporate governance. Also the project aims at increasing the user’s confidence in the audit report and the financial statements. After several research programmes, field-testing and comment letters, they have revised six auditing Standards and implemented a new standard: ISA 701 Key Audit Matters. The introduction of Key Audit Matters is the project’s most significant innovation. This section will shed light on those matters that, based on the auditor’s judgement, were of most significance during the audit of the financial statements of the current period. This thesis deals with this new innovative standard – the ISA 701. Based on commentaries obtained by IAASB from investors, auditors and companies and interviews, this thesis examines, how the introduction of Key Audit Matters in the auditor’s report will enhance the usefulness of the information conveyed to the users of the financial statements. By comparing ISA 701 with the reactions from respondents, nine hypotheses were established. By either accepting or rejecting these hypotheses, the thesis is able to shed light on how the standard will affect the different stakeholders of the financial statement. Results from this analysis showed that, with the right implementation of ISA 701, the usefulness of the financial statements would be enhanced for the users. But in order to get the best results, IAASB should include more examples on how to choose Key Audit Matters and subsequently how to describe them in an appropriate manner. Additional examples and guidance are important as the definition of Key Audit Matters relies heavily on the auditor’s subjective judgement. Additionally, the thesis concludes that it would strengthen the credibility of the auditor’s report if the users were given more insight into the auditors’ assessment of materiality. By providing the users with materiality levels, it will create a greater transparency in relation to, how the auditor reached the conclusion that the financial statement with reasonable assurance is without material misstatement. Thus, an indication of the materiality levels may help to reduce the expectation gab between the users and the auditors, because of increased information about the audit. Furthermore, we believe, it will be a good supplement to the information the auditor provides about the audit with: Key Audit Matters. Finally, a key conclusion of the thesis is that the conveyance of Key Audit Matters should not include communication of original information, i.e. information that has not already been communicated by management. Since the auditors primary task is to ensure validity and accuracy of the information provided by management, including original information in Key Audit Matters would likely lead to confusion and loss of credibility amongst the users. By bringing new information forward, the auditor would risk blurring the distinction between the roles and responsibilities of the auditor and the executive management team.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2016
Number of pages175