David H.

The key audit matters section of the Independent Auditor’s Report has been introduced. Australian Auditing Standard ASA 701 Communicating Key Audit Matters in the Independent Auditor’s Report1 aims to improve communication about significant areas of audit work and judgement.

We choose the key audit matters from the matters of higher risk we identified as part of our audit plan and communicated to those charged with governance. For the public sector, those charged with governance can range from the director-general for departments, the council for local governments, and board of directors for other agencies and government-owned corporations.

QAO, as the main auditor of Queensland’s public sector entities, has voluntarily included key audit matters for government entities we classify as ‘significant public sector entities’, and other entities at the discretion of the relevant sector director or the Auditor-General. In 2016–17, we publicly reported 61 key audit matters for 44 Queensland state government entities2. In 2017–18, we reported 74 key audit matters for 49 Queensland state entities3. We also issued key audit matters for the seven universities for the December 2017 and 2018 financial year ends, and for four local governments for the June 2018 year end.

We are planning to include another summary as part of our report to parliament to be published later this year. For 30 June 2019, we published key audit matters for broadly the same entities as last year, and broadly for the same topics.

What did the key audit matters cover?

Key audit matters are those of higher risk of material misstatement, involve professional judgement or relate to significant events4. Table 1 summarises the key audit matters reported for the 49 Queensland state entities for 2018. Most of the key audit matters we reported relate to asset valuation and depreciation. This should not be a surprise given that infrastructure assets and specialised buildings are the most significant portion of the financial statements of many public sector entities. The key audit matters for the universities and local governments were also predominately for infrastructure assets and specialised buildings.

But why do we bother?

Key audit matters should provide greater transparency. Our aim at QAO is to provide ‘better public services’, and key audit matters are a way of better communicating what we do.

Key audit matters are not a substitute for other audit report requirements. They are not opinions in and of themselves; neither do they add anything new to what has been disclosed in the financial statements or is publicly available elsewhere5.

In the 2017–18 financial year, 97.1 per cent of our audit opinions were unmodified6. Communicating key audit matters provides greater transparency about the work done during the audit, particularly where we issue an unmodified opinion. We believe that it is good for readers of financial statements to be aware of areas in the audit we considered higher risk and areas where we spent more time, even if the opinion is unmodified and ‘clean’. Awareness of key audit matters helps users of the financial report to understand our focus and to help ensure safeguards are in place regarding transactions and balances that we assess as being of a higher risk of misstatement.

Want to drill down?

Interested in which entities we have issued key audit matters for? We commented on the use of key audit matters in our reports to parliament on the results of financial audits for 2016–17 and 2017–18 for the Queensland state government, and provided a list of entities. We also commented on key audit matters in various sector-based reports for each of those financial years, including our reports on the energy, health, transport (titled ‘rail and ports’ for 2016–17) and water sectors. You can view these reports on our website7. The four local governments were Brisbane City Council, Council of the City of Gold Coast, Ipswich City Council and Sunshine Coast Regional Council.


Communicating key audit matters showcases, in less technical language, the focus we took with transactions and balances that we assess as being of a higher risk of misstatement. In summary, they help to increase our audit report’s value to our clients and the users of those financial statements.

This year will be our third year of providing key audit matters. What is your experience? Has it changed your understanding of what we do? Key audit matters in practice are very similar from year to year; should we continue providing them? Should we expand or reduce the number of entities covered? Let us know by contacting us through our website:

Table 1 summarises the key audit matters reported for the 49 state public sector entities for 2018.

Table 1—Queensland state entities: types of key audit matters 2018

Key audit matter Departments and controlled entities Government owned corporations and controlled entities Statutory bodies and controlled entities Total
Valuation and depreciation of non-current assets 20 16 24 60
Measurement of provisions 1 2 1 4
Classification and measurement of financial instruments 1 3 4
Impairment of financial assets 1 1
Measurement of land inventories 1 1
Completeness of revenue 1 1
Recognition and measurement of revenue 2 2
Valuation, presentation, and disclosure of investment in long-term assets 1 1
Total 25 23 26 74

Source: Figure 2D, Queensland state government: 2017–18 results of financial audits (Report 14: 2018–19), Queensland Audit Office.


1. ASA 701 Communicating Key Audit Matters in the Independent Auditor’s Report

2. Report 11: Queensland state government 2016–17 results of financial audits, Queensland Audit Office

3. Report 14: Queensland state government 2017–18 results of financial audits, Queensland Audit Office.

4. ASA 701 Communicating Key Audit Matters in the Independent Auditor’s Report paragraph 9

5. ASA 701 Communicating Key Audit Matters in the Independent Auditor’s Report paragraphs 12, 14, A35

6. Report 14: Queensland state government 2017–18 results of financial audits, Queensland Audit Office.