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The Key Audit Matters as an Element of the Independent Auditor's Report – a Booster to the Corporate Governance

In 2009 the International Auditing and Assurance Standards Board (IAASB) initiated a project entitles ‘Auditor reporting’ with an objective to appropriately enhance the communicative value and relevance of the auditor’s report. This act of the IAASB can be considered as a starting point in the revision of the International Standards on Auditing related to the structure and content of the auditor’s report. After perennial consultations, dialogs, numerous comments received, on January 2015, the IAASB issued six revised and one new Standard related to the auditors reporting. Revised and new Standards become effective for audits of financial statements for periods ending on or after December 15, 2016. The most significant content change relates to the new Standard ISA 701 Communicating Key Audit Matters in the Independent Auditor’s Report. The intention of including new paragraph(s) in the report, related to the key audit matters (KAMs), was to enhance its communication value by providing greater transparency on performed audits, and to give insights to stakeholders to the matters that, in the auditor’s professional judgement, were of the most significance. The subject of the paper is to analyse changes in the structure and content of the new audit report, with a focus to the new element - KAMs. Related to the research problem, the objective of the paper will be to investigate improvements of the new audit reports, research an average number of KAMs included in one report, and make conclusions about differences between Croatian statutory auditors in preparing the auditor’s report. The research covers auditor’s reports of Croatian listed companies (public interest entities - PIEs) for 2016 and 2017. Research methodology includes using appropriate statistical methods as descriptive statistics, non-parametric tests, principal component analysis, and clustering.

financial statement audit ; the International Standards on Auditing ; audit report ; key audit matters ; materiality ; listed companies ; public interest entities ; the IAASB ; communication gap ; information gap

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