(a) Intended Benefits of the IAASB’s New Auditor Reporting Project (5 Marks)

The new auditor reporting project by the IAASB aims to improve the value and transparency of the audit report for users. The intended benefits include:

1. Enhanced Communication: Improves the relevance of the auditor’s communication by aligning the report more closely with user needs.
2. Increased Transparency: Provides more insight into the audit process, including areas of higher assessed risks and significant judgments.
3. Reinforced Credibility: Strengthens public confidence in the audit process by clearly articulating the auditor’s responsibilities.
4. Global Consistency: Establishes a consistent reporting framework across jurisdictions, enhancing comparability.
5. Encouraging Dialogue: Facilitates communication between the auditor, management, and those charged with governance regarding key audit issues.

(b) Sections of the New Auditor’s Report per ISA 700 (Revised) (20 Marks)

The auditor’s report under ISA 700 (Revised) includes the following key sections:

1. Title:
   The report must have a title clearly indicating it is the “Independent Auditor’s Report.”
2. Addressee:
   Specifies to whom the report is addressed, usually the shareholders or those charged with governance.
3. Opinion:
   The auditor states their opinion on the financial statements, specifying whether they are presented fairly in accordance with the applicable financial reporting framework.
4. Basis for Opinion:
   Includes a reference to compliance with International Standards on Auditing (ISAs) and a summary of the audit’s scope.
5. Key Audit Matters (KAM):
   This section highlights matters of most significance in the audit, as required by ISA 701.
6. Responsibilities of Management and Those Charged with Governance:
   Outlines management’s responsibilities for preparing the financial statements and maintaining internal controls.
7. Auditor’s Responsibilities:
   Details the auditor’s responsibility for conducting the audit, including ethical requirements and professional skepticism.
8. Other Information (if applicable):
   Addresses the auditor’s responsibilities concerning other information included with the financial statements, as per ISA 720 (Revised).
9. Report on Other Legal and Regulatory Requirements (if applicable):
   Covers additional requirements prescribed by local laws or regulations.
10. Name of the Engagement Partner (for listed entities):
    Disclosure of the name of the engagement partner, as required for increased accountability.
11. Auditor’s Signature:
    The auditor signs the report, either personally or in the firm’s name.
12. Auditor’s Address:
    The location of the audit firm is stated.
13. Date of the Report:
    Specifies when the report was signed, indicating the completion of the audit process.

(c) Explanation of Key Audit Matters (KAM) and Determination Criteria (5 Marks)

Key Audit Matters (KAM):
KAM are matters that, in the auditor’s judgment, were of most significance in the audit of the financial statements of the current period. They are selected from matters communicated to those charged with governance.

Criteria for Determining KAM (Two Examples):

1. Significant Risks: Matters that involve areas of higher assessed risk of material misstatement, including those requiring significant auditor judgment.
2. Significant Auditor Judgments: Matters that required significant attention, including involving complex or subjective auditor judgments or estimates.