Can Key Audit Matters relate to comparative information?

ISA 701 explicitly states that KAM are limited to matters of most significance in the audit of the current period, even when comparative financial statements are presented. However, a matter affecting the comparatives could be a KAM for the current period if it required significant auditor attention.

ISA 710: Comparatives and Corresponding Figures in Audits

Q: Does the auditor need to re-audit the prior period?

No. For corresponding figures, the auditor doesn't perform a full re-audit of the prior period. The auditor evaluates whether the comparatives are properly presented, agree to prior amounts, and reflect consistent policies. However, the auditor must obtain sufficient evidence on opening balances (ISA 510), which may require specific procedures.

Q: Does a restatement of comparatives always require an Emphasis of Matter paragraph?

Not automatically, but it is common practice. If the prior period has been restated and appropriate disclosures are made, the auditor may include an EOM paragraph drawing attention to the restatement and the related note disclosure. This is a matter of auditor judgment.

Half the comparatives files I’ve reviewed have the same problem. The senior ticked prior-year figures to the signed PY financial statements (FS), agreed the totals, and moved on. Nobody checked whether the framework required corresponding figures or comparative FS, and nobody looked at whether the PY audit opinion carried anything forward. The review notes always ask the same two questions, and the file never answers them.

Under ISA 710, the auditor evaluates whether comparative information (corresponding figures or comparative financial statements) is properly presented, agrees to prior-period amounts, and reflects appropriate accounting policies, with specific reporting requirements when prior-period issues or predecessor auditors are involved.

The comparatives review is the section of the file every senior does last and every reviewer checks first.

Key Takeaways

ISA 710 deals with the auditor’s responsibilities regarding comparative information: the amounts and disclosures from one or more prior periods included in the current financial statements.
There are two fundamentally different approaches, determined by the applicable financial reporting framework: corresponding figures (prior period as integral part of current period statements, auditor opines only on current period) and comparative financial statements (each period presented separately, auditor opines on each period).
Most IFRS-reporting jurisdictions use the corresponding figures approach. In this approach, the auditor’s opinion refers only to the current period, but the auditor must still evaluate whether the comparatives are properly presented, agree to prior-period amounts, and reflect consistent accounting policies.
When a prior-period modification is unresolved, the auditor must modify the current period opinion on the corresponding figures, even if the current period itself is clean.
When a material misstatement is discovered in prior-period figures on which an unmodified opinion was previously issued, the auditor must evaluate whether the comparatives have been properly restated and disclosed.
When a predecessor auditor audited the prior period, specific reporting requirements apply, including an Other Matter paragraph identifying the predecessor, or (for comparative financial statements) the predecessor’s report being reissued or the current auditor reporting on the prior period.
When the prior period was not audited, the auditor states this in an Other Matter paragraph, but must still obtain sufficient evidence on opening balances (ISA 510).

Table of contents

What is ISA 710?
Two approaches to comparative information
Audit procedures on comparative information
Impact of prior-period issues
Predecessor auditor situations
Written representations
ISA 710 in your jurisdiction
Frequently asked questions
Further reading and source references

What is ISA 710?

ISA 710, titled “Comparative Information—Corresponding Figures and Comparative Financial Statements,” addresses a practical reality of financial reporting. FS almost always include prior-period (PY) comparative information for comparison. The auditor’s responsibilities for that PY information depend on the approach prescribed by the applicable framework.

The standard becomes load-bearing in four situations. Changes of auditor, restatements, PY errors, and initial audits. Each one creates complications around how comparative information is handled in the report.

Two approaches to comparative information

Corresponding figures

Corresponding figures are comparative information where amounts and disclosures for the prior period are included as an integral part of the current period’s FS, intended to be read in relation to the current period.

The auditor’s opinion refers only to the current period. The auditor does not express a separate opinion on the corresponding figures.

This is the approach most common under IFRS (IAS 1 requires at least one comparative period as corresponding figures), Dutch GAAP, German HGB (for the balance sheet), and most European frameworks.

Comparative financial statements

Comparative FS are comparative information where amounts and disclosures for the prior period are presented as separate financial statements for each period, each standing on its own.

The auditor’s opinion refers to each period for which FS are presented. The auditor expresses an opinion on each set.

This is the approach most common under US GAAP and Canadian GAAP. Some jurisdictions allow or require it for certain types of entities.

Audit procedures on comparative information

In our experience, most teams just roll it forward. They tick the PY column to the signed PY financial statements and call it done. ISA 710 asks for three specific evaluations regardless of approach:

The comparative information agrees with the amounts and disclosures in the PY (or, if restated, the restated amounts are appropriate).
The accounting policies reflected in the comparative information are consistent with those applied in the current period, or any changes have been properly accounted for and disclosed.
The comparative information is appropriately classified, matching the current period’s presentation.

These procedures link to ISA 510 (Initial Audit Engagements: Opening Balances) when the auditor did not audit the PY.

Impact of prior-period issues

Unresolved prior-period modification

If the auditor’s report on the PY included a qualified, adverse, or disclaimer of opinion, and the matter remains unresolved, the treatment depends on the approach.

With corresponding figures, the auditor must modify the opinion on the current period FS. The modification relates to the corresponding figures. An example would be a qualified opinion stating “except for the possible effects of the matter described... on the corresponding figures.”

With comparative FS, the auditor’s opinion on the PY would reflect the unresolved modification. A new opinion on the current period may be unmodified (if the current period itself is clean) while the PY opinion remains modified.

Prior-period misstatement discovered during current audit

If the auditor discovers a material misstatement in the PY figures on which an unmodified opinion was previously expressed, two outcomes follow.

If the corresponding figures have been properly restated and appropriate disclosures made → the auditor may include an EOM paragraph describing the circumstances.
If the corresponding figures have not been properly restated or disclosures are inadequate → the auditor must express a qualified or adverse opinion on the current period financial statements, modified in respect of the corresponding figures.

The “prior-period ghost” effect

A common source of confusion. With corresponding figures, a PY problem can haunt the current period’s audit report even when the current period is entirely clean. If the PY opinion was qualified for, say, an inability to observe inventory, and the matter is unresolved (the entity cannot restate or provide alternative evidence), the current period’s report must be qualified in respect of the corresponding figures, even though the current period’s inventory is fine. This “ghost” effect persists until the matter is resolved through proper restatement or until the affected period is no longer presented as corresponding figures.

Predecessor auditor situations

Corresponding figures when a predecessor audited the prior period

If the PY was audited by a predecessor auditor, the current auditor may (where permitted by law or regulation) include an Other Matter paragraph stating three things.

That the PY financial statements were audited by the predecessor auditor.
The type of opinion expressed by the predecessor (and reasons for any modification).
The date of the predecessor’s report.

The current auditor does not express an opinion on the corresponding figures, but must still obtain sufficient evidence on opening balances under ISA 510.

Comparative financial statements when a predecessor audited the prior period

Two options exist. The predecessor auditor’s report may be reissued alongside the current auditor’s report, or the current auditor may audit the PY financial statements and issue a new opinion. If the current auditor’s opinion on the PY differs from the predecessor’s previously expressed opinion, the auditor must disclose the reasons in an Other Matter paragraph.

Prior period not audited

If the PY was not audited, the auditor includes an Other Matter paragraph stating that the corresponding figures are unaudited. This does not relieve the auditor from obtaining sufficient evidence on opening balances (ISA 510). If such evidence cannot be obtained, a modified opinion on the current period may be necessary (qualified or disclaimer, depending on pervasiveness).

Written representations

For comparative financial statements, written representations cover all periods referred to in the auditor’s report. Management must reaffirm that PY representations remain appropriate.

For corresponding figures, representations cover only the current period, but the auditor may determine that specific representations regarding PY amendments or restatements are necessary.

ISA 710 in your jurisdiction

Netherlands. COS 710 follows ISA 710. Dutch statutory FS under Title 9, Book 2 BW use the corresponding figures approach. Changes of auditor are relatively common in the Netherlands (particularly since mandatory audit firm rotation for OOBs), making the predecessor auditor provisions practically significant. The NBA has issued guidance on how to handle transitions between audit firms, including communication about PY matters.

Germany. IDW PS 710 adapts ISA 710. German FS under HGB present a comparative balance sheet (Vorjahres-Bilanz) but not always a comparative income statement in the statutory accounts. The corresponding figures approach applies. Changes of auditor in Germany require careful coordination, particularly where the Prüfungsbericht contains detailed discussion of PY matters.

United Kingdom. ISA (UK) 710 is substantively aligned with ISA 710. UK practice primarily uses corresponding figures under IFRS and UK GAAP (FRS 102). The UK’s extended auditor reporting requirements mean that PY KAM are often discussed in context, even though the formal KAM determination is limited to the current period. The FRC expects clear disclosure when there has been a change of auditor.

France. NEP 710 implements ISA 710. French statutory accounts under the PCG use corresponding figures. The French system of co-commissariat (joint audit) creates specific dynamics. When one commissaire aux comptes changes but the other continues, the transition may be smoother than a full auditor change. The H3C examines whether auditors properly address PY matters in their reports.

Frequently asked questions

Does the auditor need to re-audit the prior period?

No. For corresponding figures, the auditor does not perform a full re-audit of the PY. The auditor evaluates whether the comparatives are properly presented, agree to prior amounts, and reflect consistent policies. However, the auditor must obtain sufficient evidence on opening balances (ISA 510), which may require specific procedures.

Can KAM relate to comparative information?

ISA 701 explicitly states that KAM are limited to matters of most significance in the audit of the current period, even when comparative financial statements are presented. A matter affecting the comparatives could still be a KAM for the current period if it required significant auditor attention.

What if the predecessor auditor refuses to cooperate?

If the predecessor is unable or unwilling to reissue their report, provide documentation, or cooperate, the current auditor must still obtain sufficient evidence on opening balances. If this cannot be achieved, a modified opinion may be necessary. The current auditor cannot simply rely on the predecessor’s opinion. They must form their own conclusion.

Does a restatement of comparatives always require an EOM paragraph?

Not automatically, but it is common practice. If the PY has been restated and appropriate disclosures are made, the auditor may include an EOM paragraph drawing attention to the restatement and the related note disclosure. This is a matter of auditor judgment.