Travel pass: Pros may outweigh cons
IATA’s mobile application will allow travellers to store and manage certifications for Covid-19 tests or ...
After a few stops and starts, a new feature of audit reports will kick in from the current fiscal. Auditors will now have to spell out ‘Key Audit Matters’ or KAM in their report to shareholders whichspecific procedures used in the audit of companies and explain how they arrived at the conclusions.
The new section will explain to the readers or users (like investors, credit rating agencies etc.) the kind of work that has been put in by the auditors to arrive at conclusions. This is expected to reflect in audit reports from Q1FY20 onwards for listed companies.
“Let’s say a company has made certain investments and there is a stress in those investments,” explains Jamil Khatri, head of audit at BSR & Co LLP. “And therefore, the auditor spent a lot of time auditing to see if they have been correctly reflected and to make sure provisioning is made appropriately on those investments. The auditor may look at valuation reports that have been produced by the management… do some sensitivity testing around it.”
In the KAM section, the auditor will communicate all the procedures that were undertaken to arrive at the conclusions.
This will help users of financial statements, specifically investors, to take a call on the matters that are highlighted in the KAM section. Till now, an audit was almost like a black box for investors — they only had the audit report to take a call, and never knew the procedures employed by the auditor.
“The auditor will have to explain important decisions taken as part of the audit and the associated considerations and risks,” says R. Narayanaswamy, professor of finance at Indian Institute of Management, Bangalore. “These would include scope, materiality, revenue, goodwill and other intangible assets, impairment, internal controls, litigations and deferred taxes.”
Essentially, KAM is an additional communication mechanism for the auditors, which they can use to explain to investors the kind of assumptions that have been made, and the discussions held with the management before signing the audit report. This is expected to help investors understand what went behind the scenes between the auditor, audit committee and the management.
However, key audit matters should not be confused with a concern area that has been highlighted through an emphasis or a qualification, Khatri adds.
It’s not a substitution for a qualification in audit reports, which specifically mentions the disagreement that the auditors have with the management’s conclusions on the financial statements. It is also different from the emphasis of matter section of the audit report that draws the reader’s attention to matters that are uncertain like a result of a pending litigation that might have a significant impact on the company’s financial position.
KAM is equally an opportunity for the auditor to communicate with the investor and to the world at large.
“If implemented properly, KAM has the potential to reduce the expectations gap between auditors and investors,” adds Narayanaswamy.
IATA’s mobile application will allow travellers to store and manage certifications for Covid-19 tests or ...
A 2010 Act to regulate the medical sector flounders in implementation, even as healthcare remains ...
The scheme to boost local medtech manufacturing is timely, especially given the raging pandemic. But ...
Do pilots sleep on their job?
Fiscal stimulus, friendly monetary policy and firm commodity prices point towards normalcy, says the MD and ...
Price correction is a good opportunity for long-term investors to take the plunge
Q4 earnings, along with progress in controlling Covid-19 spread, will be in focus
Do keep in mind that premium may go up in case one of the members has a pre-existing condition
Inside Narayan Chandra Sinha’s universe house, metal and nature’s footprints are churned into an organic whole
It starts with the lack of new email messages: A sudden silence from my personal world. It’s a mellow Saturday ...
Love for food sparks an unusual friendship between a visitor and an auto driver in Hyderabad’s colourful lanes
In an age of falling female workforce participation, worsened by the Covid-19 pandemic, policy makers and ...
Monotype’s 2021 type trends report points to a return to hand and the familiar
As ‘ear-points’ between a company and a customer grow, we are witnessing a rise in audio assets
‘Desi Twitter challenger’ Koo on connecting like-minded folks
Coca-Cola has just introduced an oat milk line in the US under its Simply brand. Smart move, say industry ...
Three years after its inception, compliance with GST procedures remains a headache for exporters, job workers ...
Corporate social responsibility (CSR) initiatives of companies are altering the prospects for wooden toys of ...
Aequs Aerospace to create space for large-scale manufacture of toys at Koppal
And it has every reason to smile. Covid-19 has triggered a consumer shift towards branded products as ...
Please Email the Editor