Acca aa s21 Notes

matters communicated with those charged with governance
, we determine those matters that were of 
most significance in the audit of the financial statements of the current period and are therefore the 
key audit 
matters
. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure 
about the matter or when, in extremely rare circumstances, we determine that a matter should not be 
communicated in our report because the adverse consequences of doing so would reasonably be expected to 
outweigh the public interest benefits of such communication. 
The engagement partner on the audit resulting in this independent auditor’s report is [name]. 
[Signature in the name of the audit firm, the personal name of the auditor, or both, as appropriate for the 
particular jurisdiction]
[Auditor Address]
[Date]
September 2021 to June 2022 exams
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6. What is meant by ‘true and fair’?
'True and fair' is a widely used descriptor of financial reporting (e.g. in UK company legislation since 
1948). As near as probably matters, the word ‘true’ means that the information is factually correct and 
not materially misstated (see next section). 
‘Fair’ is a more difficult concept. You can have information which is accurate but which is nevertheless 
presented in a way which is unfair, and which perhaps conceals or does not reflect the commercial 
substance of transactions. For example, it would not be fair to present a bank loan as a non-current 
liability if, in fact, it is repayable in the next 12 months (i.e. a current liability). This would distort the 
financial position presented because the bank loan would not be included in assessing the company's 
liquidity as shown, for example, by the current ratio.
The IAASB prefers the equivalent phrase 'present fairly, in all material respect'. 
7. Materiality
Again, we emphasise the point that an audit gives only a reasonable assurance that the financial 
statements are free from material misstatement.
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A matter is material if it omission or misstatement would reasonably influence the economic 
decisions by a user of the auditor’s report
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It is affected by the size and nature of the misstatement
The auditor’s judgment flows all the way through the audit process, from planning and deciding the 
amount of work that should be done, to deciding what action should be taken should errors be found 
in the accounts.
We are looking for material misstatements, and a material misstatement is defined through its effect 
on decisions made by a user of the report. For example, if a misstatement would cause an investor to 
keep those shares rather than selling those shares, there has been a real effect on that investor and 
the misstatement would be material.
If misstatements are so small that they don’t really spark any reaction in the members, then they are 
rather superficial. That’s not to say that auditors don’t want to get things right, but errors only really 
matter when they trigger incorrect action.
Materiality has to be decided for the financial statements as a whole and it is the audit partner’s 
judgements about whether or not a misstatement is material.