ACCA Advanced Audit and Assurance (AAA) Practice Exam

What are key audit matters according to an auditor's professional judgement?

1. Inconsequential aspects of the audit process

2. Matters discussed solely among the audit team

3. Significant matters relevant to the financial statements audit

4. Common issues that rarely affect financial statements

The correct answer is: Significant matters relevant to the financial statements audit

Key audit matters are those that, based on the auditor's professional judgment, are of significant importance in the audit of the financial statements. They reflect the areas of most concern during the audit process, providing insights into the critical judgments and estimates made by management, as well as understanding the complexity and potential risk of material misstatement in these areas. Significant matters relevant to the financial statements audit are highlighted in the auditor's report to inform users about which areas required special attention due to their complexity, the degree of uncertainty involved, or their significance to the financial statements as a whole. This enhances transparency and provides valuable information to stakeholders by allowing them to focus on the potential areas of risk. The other options present scenarios that do not align with the definition of key audit matters. Inconsequential aspects, matters only for internal discussion, and common issues that rarely impact the financial statements do not typically warrant the attention that key audit matters receive, as they lack the necessary significance and relevance that the concept embodies. Focusing on significant matters encourages a thorough consideration of issues that could materially affect the financial statements, thereby enhancing the overall quality of the audit and its contribution to the financial reporting process.