What is required in the communication of key audit matters (KAMs)?

The communication of key audit matters (KAMs) is essential in providing stakeholders with an understanding of significant issues encountered during the audit. The correct choice involves a description of each KAM and how it was addressed. This requirement stems from the need for transparency in the audit process, allowing users of the financial statements to comprehend the areas that were particularly challenging or complex for the auditor.

By detailing each KAM, the auditor gives stakeholders insights into the audit's focus areas, including the rationale for why certain matters were deemed significant and the audit procedures undertaken to address them. This information enhances the credibility of the audit report and helps to build trust in the financial statements.

Other options do not align with the specific requirements for KAM communication. Summarizing the company's financial health is too broad and does not focus on audit-specific issues. A list of all auditor's previous clients or an overview of the auditor's career is irrelevant to the audit of the current period's financial statements and does not provide insights into the audit process or findings. Thus, the emphasis on effectively communicating KAMs serves to inform stakeholders about critical concerns that had a substantial impact on the audit’s outcome.