Standard on Auditing (SA) 706: Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor’s Report
An Emphasis of Matter paragraph is a paragraph included in the auditor's report that refers to a matter that has been appropriately presented or disclosed in the financial statements that, in the auditor's judgment, is of such importance that it is fundamental to financial statement users' understanding of the financial statements. While the Other Matter paragraph is a paragraph contained in the auditor's report that refers to a matter other than what has been presented or disclosed in the financial statements that, in the auditor's judgment, are relevant to the financial statement user's understanding of the audit, the auditor's responsibilities, or the auditor's report.
The purpose of the auditor to formulate an opinion on the financial statements is to attract the attention of users of financial statements. When the auditor deems it necessary, through additional clear communication in the auditor's report, on:
- A matter, even if properly presented or disclosed in the financial statements, that is of such importance that it is fundamental to users' understanding of the financial statements, or
- Where relevant, matters relevant to the financial statement user's understanding of the audit, the auditor's responsibilities, or the auditor's report.
An Emphasis of Matter paragraph is a paragraph included in the auditor's report that refers to a matter that has been appropriately presented or disclosed in the financial statements that, in the auditor's judgment, is of such importance that it is fundamental to financial statement users' understanding of the financial statements. While the Other Matter paragraph is a paragraph contained in the auditor's report that refers to a matter other than those presented or disclosed in the financial statements that, in the auditor's judgment, are relevant to the financial statement user's understanding of the audit, the auditor's responsibilities, or the auditor's report.
There is a requirement that the auditor must apply when the auditor includes an emphasis of matter paragraph in his report, the auditor must place the paragraph immediately after the opinion paragraph in the auditor's report, using the heading "emphasis of matter or other appropriate heading", including in the paragraph an appropriate reference. is clear about the matter emphasized and the reference to the notes to the financial statements, and indicates that the auditor's opinion has not been modified with respect to the emphasized matter.
While the other matters paragraph in the auditor's report if the auditor considers it necessary to disclose something other than that which has been presented or disclosed in the financial statements is relevant to the financial statement users' understanding of the audit, the auditor's responsibilities, or the auditor's report, and this is not prohibited by law or regulation. the applicable law, the auditor shall include a paragraph in the auditor's report with the heading “other matters” or another appropriate title. The auditor shall include the paragraph immediately after the opinion paragraph and the emphasis on matter paragraph, or elsewhere in the auditor's report if the content of the Other Matter paragraph is relevant to the other reporting responsibilities paragraph.
In including an emphasis of matter or other matter paragraph, it is necessary to communicate with those charged with governance. the auditor shall communicate these expedations and related wording in the auditor's report with those charged with governance.
In the Emphasis of Matter Paragraph in the auditor's report there are examples of circumstances in which the auditor should consider including an Emphasis of Matter paragraph at least when there is an uncertainty regarding the future outcome of an unusual litigation case or action to be taken by a regulator, early application ( where permitted) a new accounting standard (for example, a statement of a new Financial Accounting Standard) that has a pervasive effect on the financial statements prior to its effective date, a major natural disaster that has been or is continuing that has a significant impact on the entity's financial position.
Use of an Emphasis on a matter that is too broad reduces the effectiveness of the auditor's communication on the matter. In addition, to include more information in an Emphasis of Matter paragraph than has been presented or disclosed may imply that it has not been presented or disclosed in the financial statements: therefore, paragraph 5 limits the use of the Emphasis of Matter paragraph to matters that have been presented or disclosed in the financial statements.
The inclusion of an emphasis of matter paragraph in the auditor's report does not affect the auditor's opinion. An assertion paragraph is not a substitute for the auditor in expressing an opinion. Illustration of the auditor's report in an Emphasis of Matter paragraph in the auditor's report containing a qualified opinion. Examples relate to business combinations, early adoption of voluntary Accounting standards, etc.
Recommendad Article.
The inclusion of a paragraph of other matters in the auditor's report clearly reflects that these other matters are not required to be presented and disclosed in the financial statements, do not include information that is prohibited by law, regulation or other professional standards to be included by the auditor. If the other matters paragraph is included to attract the attention of financial statement users and is relevant to financial statement users' understanding of the audit, it is placed after the opinion paragraph and the emphasis on one matter paragraph.
However, if it relates to other reporting responsibilities included in the auditor's report, a separate section may be included after the report on the financial statements and the report on the provisions of laws and regulations. For example Number of branches or subsidiaries audited by other auditors, additional information not audited, etc.
Recommendad Article.