ACCA · Question 14 · Review and reporting
CASE 3: AQUAGRID UTILITIES PLC
AquaGrid Utilities PLC is a listed public water utility company. The audit for the year ended 31 March 2026 is nearing completion. In April 2026, a major water main burst, causing significant flooding and resulting in a pending lawsuit against AquaGrid. Furthermore, the company is struggling to meet its debt covenants due to a regulatory cap on water tariffs. The audit partner is reviewing the draft financial statements and considering the implications for the auditor's report.
Because AquaGrid is a listed entity, the auditor must communicate Key Audit Matters (KAM) in the audit report. Which of the following best describes a Key Audit Matter?
Answer options:
Any matter that resulted in a modification of the audit opinion.
Matters that, in the auditor's professional judgment, were of most significance in the audit of the financial statements of the current period.
All internal control deficiencies identified during the audit.
Only matters related to fraud or suspected fraud.
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