Key Audit Matters: Auditor’s report snapshot 31 August 2016

Auditor’s report snapshot August 2016

The auditor’s report snapshot provides an overview of the current state of play[1] of enhanced auditor reporting in Australia. From 15 December 2016[2] all listed entities auditor’s reports will be required to provide information about Key Audit Matters (KAMs)[3]. Ahead of the effective date some enhanced auditor’s reports have been released. Here we share our insight and observations to date.

Partner, Audit and Assurance

KPMG Australia


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Key observations

As at 31 August 2016 sixteen audit reports have been released with Key Audit Matters (KAMs), across entities in a range of industries. All Big 4 firms are represented.

  • 37.5 percent of the reports are for ASX top 100 entities, four are ASX top 50.
  • There is a large range in the number of KAMs reported, from a low of one to a high of seven.
  • The nature of KAMs reported are diverse and bespoke to each entity and its industry. For example, CI500 Product recall provision[4], and Measurement of outstanding claims liabilities and related assets arising from reinsurance contracts and other recoveries[5].
  • Complex accounting matters, such as financial instruments, hedging and AASB 10 Consolidated Financial Statements, have been recorded in three key audit matters. Although it is early days, we interpret this as a positive indicator of auditors’ selecting KAMs based on their relative audit effort, which may not equate directly to matters of traditional accounting complexity. This new world of enhanced audit reporting is, after all, about key audit matters and not key accounting matters.
  • Three KAMs on taxation have been recorded. Is this unusual – given the complexity in the Australian taxation system and recent calls for transparency?
  • Valuation of other assets is the largest category of KAMs. Upon further disaggregation, 50 percent of these are valuation of financial assets, with tangible and intangible assets (other than goodwill) the remaining. We expect the proportion of KAMs relating to valuation of other assets to continue to remain high given the audit effort necessary to address these risks.

The Key Audit Matters: Auditor’s report snapshot series provides Audit Committees with the current state of play of enhanced auditor’s reports published in Australia.


[1] Based on Australian auditor’s reports KPMG viewed between 1 July and 31 August 2016.
[2] The new auditing standard requiring the inclusion of Key Audit Matters (KAMs) is released and operative for listed entities with years ending on or after 15 December 2016.
[3] Key Audit Matters (KAMs) are those matters that required significant auditor attention in performing the audit, ASA 701Communicating Key Audit Matters in the Independent Auditor’s Report issued by the Australian Auditing and Assurance Standards Board.
[4] Cochlear Limited Independent Auditor’s Report on 30 June 2016 financial report.
[5] Suncorp Group Limited Independent Auditor’s Report on 30 June 2016 financial report.

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