Critical audit matter

An area that required especially challenging or subjective auditor judgement, described in a US audit report; international standards call it a key audit matter. It shows where the estimation risk sits.

Where you will meet it

Critical audit matter appears in 2 learning outcomes on the CFA syllabus. A few of them:

• Explain the auditor's report and the kinds of opinion an auditor may give
  CFA Level I · Financial Statement Analysis

  “Key or critical audit matters identify the areas that required the most auditor judgement, and they are the fastest route to where the estimation risk in a set of accounts actually sits.”

• Set out where information about risk can be found
  CFA Level II · Financial Statement Analysis

  “The auditor's report states the opinion, flags material uncertainty about going concern and describes key audit matters under International Standards on Auditing (ISAs) or critical audit matters in the US, which are the matters of most significance in the audit, often the hardest judgements or the areas of higher assessed risk.”

Practise it

• Today's practice question One question, with every wrong option explained.
• Free Level I diagnostic test Twelve questions that show which topics to start with.
• Free finance calculators Check your arithmetic on the exam's core formulas.

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