Choosing and writing key audit matters
How an auditor selects key audit matters under ISA 701, when they are required in Nigeria, Kenya and South Africa, and how to describe each one well.
By Achekam · · 5 min read · For Accountants & audit firms in South Africa, Nigeria, Kenya
Read a handful of auditor's reports from the same market and the key audit matters start to blur: revenue recognition, impairment of goodwill, valuation of inventory, each followed by the same list of procedures in the same words. Readers learn to skip them. That defeats the purpose of ISA 701, which is to tell users what mattered most in this audit of this entity, and how the auditor dealt with it.
Key audit matters are no longer only a listed-company concern. In Nigeria, the FRC requires them for a much wider group of entities, and firms that rarely wrote them now need to. This article covers how to select them, when they are required in each country, and how to describe them so they are worth reading.
From matters communicated to key audit matters
ISA 701 sets out a funnel. The starting point is the matters communicated with those charged with governance. From those, the auditor determines the matters that required significant auditor attention, taking into account:
- areas of higher assessed risk of material misstatement, or significant risks;
- significant auditor judgements about areas of the statements that involved significant management judgement, including estimates with high estimation uncertainty;
- the effect on the audit of significant events or transactions during the period.
From those, the auditor determines which were of most significance in the audit of the current period. Those are the key audit matters.
Two consequences follow. A matter never discussed with governance cannot be a key audit matter, so the governance communication must come first. And the selection is a judgement for each year: a matter that was key last year need not be key this year, and should not be carried forward out of habit.
A matter giving rise to a modified opinion, or a material uncertainty related to going concern, is by its nature a key audit matter, but it is reported in its own section, not in the key audit matters section. The key audit matters section refers to those sections instead.
When key audit matters are required in each country
| Country | Requirement |
|---|---|
| South Africa | ISA 701 applies to audits of listed entities, and wherever law or regulation requires it or the auditor decides to communicate them |
| Nigeria | FRC Rule 9 requires key audit matters in reports on listed entities, public companies, banks other than microfinance banks, insurers other than HMOs, mutual funds, pension funds and private holding companies of any of these |
| Kenya | Kenya applies the ISAs as issued, and key audit matters are required for listed entities; no Kenyan extension to other public interest entities was found |
Nigeria's Rule 9 was issued on 15 November 2016 and reaffirmed on 24 June 2025. If no key audit matter is communicated in a report on an entity in a Rule 9 category, the auditor notifies the FRC in writing before the audit concludes. The interaction with Rule 14 is covered in FRC Rule 14 and Rule 9, and the Kenyan position in key audit matters for Kenyan listed entities.
On a Nigerian or Kenyan engagement in Achekam, the engagement page shows an Audit Control Tower, and Achekam works out whether key audit matters are required: for Nigeria using the FRC Rule 9 categories, for Kenya for listed entities. For a Nigerian audit in a Rule 9 category that communicates no key audit matter, Achekam requires the written notice to the FRC to be recorded with evidence before signing.
Describing the matter and the audit response
Each key audit matter is described under its own subheading, with a reference to the related disclosures. The description explains why the matter was considered one of most significance and how it was addressed. ISA 701 allows the auditor to describe aspects of the response most relevant to the matter, give a brief overview of procedures, indicate the outcome, and give key observations.
A useful structure for each one:
- The matter, in this entity's terms. Not "valuation of inventory" but "the client holds slow-moving spare parts for discontinued equipment, and the write-down depends on management's estimate of future demand".
- Why it mattered. The judgement involved, the size, the uncertainty.
- What the auditor did. The procedures that address the specific concern, not a generic programme.
- Where to read more. The note reference.
Avoid language that suggests a separate opinion on the matter. "We found the assumptions to be reasonable" can be read as one; a description of the work and observations, framed within the opinion on the statements as a whole, is safer.
Avoiding original information about the client
ISA 701 cautions against the auditor providing original information about the entity, meaning information not already made public by the entity. The description should draw on what the statements disclose. If the auditor believes something important is missing from the disclosures, the right response is to ask management to disclose it, not to put it in the key audit matter instead.
Where the description cannot be written without original information, that is a signal the disclosure is inadequate, which may be a matter for the opinion rather than for the key audit matters section.
Approving the wording
In Achekam, the engagement team drafts the auditor's report on standard ISA 700, 705, 706 and 701 wording, approval is refused while any bracketed placeholder remains, and only the engagement partner approves. The standard wording supplies the section's frame; the matters themselves must be written for the client, and an unfilled placeholder in a key audit matter will stop approval.
Selection is often debated: whether a matter rises to "most significance", or whether a sensitive description goes too far. Staff can take a technical consultation from question to conclusion and closure, and record a difference of opinion with each party's position, escalation and resolution. Close it before the report is approved, and share the draft key audit matters with those charged with governance before the report is final.
The IAASB's page on ISA 701 describes the standard, which requires key audit matters to be communicated for listed entities and wherever law or regulation requires.
A test before approval
Cover the client's name and read the key audit matters. If they could belong to any company in the same industry, rewrite them until they could only belong to this one.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
