Reporting key audit matters voluntarily
Whether a firm should report key audit matters for a client that is not listed, what ISA 701 then requires, and how to choose and describe the matters.
By Achekam · · 4 min read · For Accountants & audit firms in South Africa, Nigeria, Kenya
A family-owned group with outside lenders asks why its audit report is so short when the reports of listed companies run to several pages about the audit itself. A school board wants donors to see that the auditor looked hard at the bursary fund. A partner thinks a particular client's revenue judgements deserve more than a clean opinion and a list of responsibilities.
All three are asking, in different words, about key audit matters for an entity that does not have to have them. ISA 701 allows it. It also attaches conditions that firms sometimes overlook. This article covers when the standard applies, what choosing to apply it commits the firm to, and how to decide whether it is worth doing.
When ISA 701 applies
ISA 701 applies to audits of complete sets of general purpose financial statements of listed entities. It also applies when law or regulation requires the auditor to communicate key audit matters for other entities, and when the auditor decides to communicate them voluntarily. The IAASB's page for ISA 701 gives access to the standard and its application material.
The scope of the first route is changing. The IAASB's 2026 Handbook page states that narrow-scope amendments arising from revised definitions of listed and public interest entities take effect in December 2026, so check the amended scope before deciding that a client is outside the mandatory requirement. A client that was voluntary last year may be mandatory next year, or the reverse.
Voluntary use means applying the whole standard
The words "on a voluntary basis" describe how the auditor came to use ISA 701, not how much of it applies. Once the auditor decides to communicate key audit matters, ISA 701 applies, which means its requirements for determining, communicating and describing those matters apply too. There is no lighter version for private companies.
In practice, a firm cannot pick one flattering matter, add a paragraph and call it a key audit matter. If the report uses that heading, the work behind it must meet the standard: the matters determined in the way ISA 701 requires, and each described in the way it requires.
Benefits and costs for a private company
Voluntary key audit matters can help:
- lenders, donors, members or minority shareholders get a clearer view of where the audit concentrated;
- the report shows the work behind the opinion, which can strengthen confidence in it;
- the discussion with the board about which matters to include often improves governance in its own right.
They also cost something:
- more partner and manager time to determine, draft and review the matters;
- more discussion with management, who may be uneasy about public descriptions of judgemental areas;
- an expectation that the report will look the same next year, so stopping later needs an explanation;
- the risk that a poorly drafted matter confuses readers or reads like a warning.
The decision is the firm's, made with the client. Record why it was taken.
Choosing and describing the matters
ACCA explains that in determining key audit matters, ISA 701 requires the auditor to take into account areas of higher assessed risk of material misstatement or significant risks, significant auditor judgements about areas involving significant management judgement, and the effect on the audit of significant events or transactions during the period. ACCA notes that the second may include accounting estimates with a high degree of estimation uncertainty.
For a private company, typical candidates are revenue with complex terms, inventory valuation, impairment of receivables or goodwill, a major acquisition or disposal, and going concern judgements that fell short of a material uncertainty. The detailed selection process is covered in selecting key audit matters.
ACCA explains that each key audit matter must be described in the report, including why it was determined to be of most significance and how it was addressed in the audit. ACCA notes that the description of how it was addressed may include the auditor's approach, a brief overview of procedures with an indication of their outcome, and key observations. Write for the reader who will actually use the report: specific to this entity, free of boilerplate, and clear that a key audit matter is not a qualification. Where a matter belongs instead in an emphasis of matter or other matter paragraph, see emphasis of matter and other matter paragraphs.
Drafting and previewing the report in Achekam
In Achekam, the engagement team drafts the auditor's report on standard ISA 700, 705, 706 and 701 wording, and only the engagement partner approves it. Approval is refused while any bracketed placeholder remains, which is a useful guard when key audit matter descriptions start from a template: an unfinished "[describe procedures]" cannot slip through.
Before the report is signed, the partner can send the client a read-and-comment preview link. The client opens it without signing in, and the link expires and can be revoked. For a first set of voluntary key audit matters, this preview is the right moment for the board to read the wording in context and raise concerns. Once approved, the report can be sent for e-signature and recorded as issued, which binds the statements' fingerprint and starts the file-assembly clock.
Discussing it with those charged with governance
Raise the idea early, at planning rather than at completion, and explain:
- what key audit matters are, and that they do not change the opinion;
- that the firm will apply ISA 701 in full if it reports them;
- which areas are likely candidates, and why;
- that the board will see the wording before the report is signed;
- that the decision is expected to hold for future years unless circumstances change.
Record the discussion and the decision. A board that has agreed to voluntary key audit matters at planning is far more comfortable reading them at completion than one meeting them for the first time in a draft report.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
