Significant matters are such matters that give risk to special audit consideration, treatment, conclusion or opinion.
What is significant matter is not clearly defined in International Standards on Auditing (ISAs) and therefore what amounts to significant matter while conducting audit engagement is left over the auditor to decide by exercising his professional judgement.
While deciding on significance of a matter, auditor is required to take an objective approach in analysing the circumstances surrounding the matter in consideration. Examples of significant matters include:
- Matters that give rise to significant risks
- Results of audit procedures indicating:
- that the financial statements could be materially misstated, or
- a need to revise the auditor’s previous assessment of the risks of material misstatement and the auditor’s responses to those risks.
- Circumstances that cause the auditor significant difficulty in applying necessary audit procedures.
- Findings that could result in a modification to the audit opinion or the inclusion of an Emphasis of Matter paragraph in the auditor’s report.
Due to their significance auditor has to ensure that they are resolved on timely basis. In addition to that such matters are required to be discussed with reasonable authority inside an entity like management or those charge with governance as the case may be.
Such matters are also required to be documented and make an essential part of audit file which includes the discussion about the judgement exercised, what steps were taken to consider such significant matters and how the matter is stand resolved the eyes of auditor. This helps subsequent reviewer to analyse the quality of the judgement exercised and its effects on overall quality of the audit engagement and whether auditor’s overall objectives have been achieved or not.
Although it is left on the auditor to decide what amounts to significant matter, however, only professional judgement is not enough to justify existence of significant matters as there must be some factual grounds on which such judgement was made which can be later reviewed whether judgement was appropriate or not given the circumstances.