Which of the following statements is not true?Group of answer choicescommunication of KAMs is a substitute for disclosures that management are required to make as part of the financial reportKAMS are a fairly recent innovationthe auditor does not have to report KAMs in the audit reportwhere the auditor decides to modify the audit report, they do not include this matter in the KAM section
Question
Which of the following statements is not true?Group of answer choicescommunication of KAMs is a substitute for disclosures that management are required to make as part of the financial reportKAMS are a fairly recent innovationthe auditor does not have to report KAMs in the audit reportwhere the auditor decides to modify the audit report, they do not include this matter in the KAM section
Solution
The statement that is not true is: "communication of KAMs is a substitute for disclosures that management are required to make as part of the financial report".
Explanation:
Key Audit Matters (KAMs) are those matters that, in the auditor's professional judgment, were of most significance in the audit of the financial statements. They are selected from matters communicated with those charged with governance.
While KAMs provide additional information to the users of the financial report, they do not substitute the disclosures that management is required to make as part of the financial report. The management's disclosures are based on the accounting standards and regulations, while KAMs are based on the auditor's judgment. Therefore, KAMs cannot replace management's disclosures.
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