Audit and Assurance Practice Exam

Which factor is NOT considered when identifying CAMs during an audit?

1. Indication as to whether management agreed on the issue

2. Complexity of the audit matter

3. Significance of auditor judgment required

4. Subjectivity in relevant estimates

The correct answer is: Indication as to whether management agreed on the issue

When determining Critical Audit Matters (CAMs) during an audit, the factors considered primarily revolve around the complexity, significance, and subjectivity involved in audit matters. Each of these elements plays a crucial role in assessing which issues require special attention in the audit report. The complexity of the audit matter relates to how intricate or difficult an issue may be, which can influence how it is evaluated and reported. Similarly, the significance of auditor judgment required highlights how much subjective decision-making was necessary during the audit, indicating potential areas that could significantly affect the financial statements. Subjectivity in relevant estimates points to the level of estimation involved in the financial statements, often leading to varying interpretations and necessitating a deeper examination by auditors. In contrast, the agreement or disagreement of management on the issue is not a primary factor in identifying CAMs. While management's stance might provide some context or insights, it does not fundamentally change the characteristics of the audit matters themselves regarding complexity, judgment, or subjectivity. Thus, understanding that the identification of CAMs is shaped more by the inherent nature of the audit issues rather than management's agreement is essential in grasping the audit process.