ACCA Advanced Audit and Assurance (AAA) Practice Exam

Which of the following best describes the content of ISA 701?

1. Requirements for assessing audit risks

2. Responsibilities to communicate key audit matters in the auditor's report

3. Guidance on the auditor's reporting frequency

4. Identifying significant accounting policies

The correct answer is: Responsibilities to communicate key audit matters in the auditor's report

The content of ISA 701 primarily focuses on the auditor's responsibilities to communicate key audit matters (KAM) in the auditor's report. This standard emphasizes the importance of transparency and informs users of the audit report about the matters that were of most significance in the audit process. Key audit matters are those that, in the auditor's professional judgment, were of most significance in the audit of the financial statements. The standard requires auditors to provide sufficient context around these matters, which promotes better understanding by users about the nature of the audit and key areas where judgment was applied or significant effort was required. This enhances the overall quality and relevance of the audit report. The other options do not align with the primary focus of ISA 701. While assessing audit risks is a significant part of the overall audit process, it is covered in other standards rather than ISA 701 specifically. Similarly, reporting frequency is governed by other regulations and guidelines but not directly addressed by ISA 701. Identifying significant accounting policies, while essential to the audit, falls under different auditing and reporting standards rather than being the core focus of ISA 701.