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Key Audit Matters: Auditor’s report snapshot 28 March 2017

KAM: Auditor’s report snapshot – March 2017

Our third auditor's report snapshot[1], provides insights and observations on Key Audit Matters from 56 entities in the ASX 500[2] with 31 December 2016 year ends. Key Audit Matters (KAMs) are those matters that required significant auditor attention in performing the audit, and are communicated in auditor’s reports of listed entities[3].

Carolyn Ralph

Partner, Audit, Assurance & Risk Consulting

KPMG Australia


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Our analysis highlights the top four KAM topics, representing over 40 percent of all KAMs communicated. It provides industry specific observations and deep-dive analysis, sharing patterns you may not have expected. Read the full report for our full analysis.

Goodwill and Intangibles

  • The most common KAM relates to carrying value assessments or impairment of Goodwill and Intangibles.
  • Over 70 percent of entities present it as the first KAM, giving it prominence and significance.
  • Technology, Media and Telecommunications (TMT) and Corporate sector entities are almost twice as likely as Financial Services (FS) entities to include this KAM, with an approximate 80 percent inclusion rate.


  • Over half of all Acquisition KAMs arise in the TMT sector, and in 54 percent of all TMT audit reports reviewed. Second is the Corporates sector, making up nearly a quarter of all acquisition KAMs, and figuring in 43 percent of Corporates audit reports.
  • This is likely reflective of the increasing consolidation and globalisation activity, combined with rapid innovation, impacting these sectors. We note the link to the prior observation, in these same sectors, of KAMs for impairment of Goodwill and Intangibles from previous acquisitions.


  • 42 percent of entities in the FS sector reported a KAM on Revenue, primarily resulting from the audit effort applied to assessing stage of completion estimations common in real estate industry revenue recognition policies.
  • We expect Revenue KAMs to increase as entities adopt AASB 15 Revenue from contracts with customers. Incremental audit attention will be applied addressing the significant developments in entities accounting and reporting for revenue, and its pervasiveness to their financial report.


  • Half of all Taxation KAMs feature in the Energy and Natural Resources (ENR) sector. Specific auditor focus is assessing recognition and recoverability of deferred tax assets, featuring in 42 percent of Taxation KAMs. Other reasons cited by auditors are foreign tax jurisdictional matters and the operation of the petroleum resources rent tax. Tax specialist assistance is often sought by auditors in these circumstances.

Including Key Audit Matters in audit reports of listed entities results from a new auditing standard, adopted for 31 December 2016 year-ends and onwards. It is the biggest change auditors have seen to the auditing standards since the introduction of the clarity standards in 2004. The platform for change was to provide insights to shareholders on the performance of the audit, previously only viewed by those in the boardroom. We analysed those entities in the ASX 500 with 31 December 2016 year-ends.


  1. Series 1 Auditor’s Report Snapshot issued on 31 August 2016 highlighted our observations from 16 enhanced audit reports published for 30 June 2016 audits, adopting early the requirements of ASA 701Communicating Key Audit Matters in the Independent Auditor’s Report. Series 2 Auditor’s Report Snapshot issued on 30 September 2016 updated Series 1 for further early adopters and trends exhibited thereon.
  2. Based on auditor’s reports KPMG viewed between 1 January and 28 March 2017 of ASX 500 with 31 December 2016 year ends applying exclusively the Australian auditing standards.
  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, as issued by the Australian Auditing and Assurance Standards Board. ASA 701 is operative for the audits of general purpose financial reports of listed entities with years ended on or after 15 December 2016.

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