What is a Key Audit Matter (KAM) and how is it determined?
A core Audit & Assurance interview question — asked in analyst and associate interviews across IB, PE, and the Big 4.
THE SHORT ANSWER
A KAM is a matter that, in the auditor's professional judgment, was of most significance in the audit of the financial statements of the current period. It is selected from matters communicated with those charged with governance. Factors include areas of higher assessed risk of material misstatement, significant auditor judgments, and significant transactions or events. KAMs are included in the audit report to enhance transparency.
WHAT INTERVIEWERS LISTEN FOR
- ✓Most significant matters in the audit.
- ✓Selected from governance communications.
- ✓Factors: risk, judgment, significant transactions.
COMMON MISTAKES
- ✗Saying KAMs are required for all audits (not for non-PIE audits in some jurisdictions).
- ✗Confusing KAMs with emphasis of matter paragraphs.
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