Summary SA-706: Emphasis of Matter and Other Matter:

Meaning of Emphasis of Matter: A Para included in the auditor report that

  • That refers to a matter disclosed/presented in the financial statement that
  • In the auditors judgment is of such importance that it is fundamental to users of financial statement.

Meaning of other Matter: A Para included in the auditor report that

  • That refers to a matter other than those disclosed/present in the financial statement that [MEANS NOT DISCLOSED IN FS]
  • In the auditor judgment is relevant to users understanding the auditor, auditor’s responsibility, auditor’s report.

Requirement wrt EOM :

Auditor includes the emphasis of matter paragraph in the AR provided:

The auditor would not be required to modified its opinion as a result of such matter. (Means could not modified (qualified/disclaimer) the opinion as per SA 706.

When SA 701 applies, the matter has not been determined to be a key audit matter to be communicated in the auditor report (Means same could not be a represented as EOM +key audit matter).

The auditor shall:

  • Include in the paragraph a clear reference to the matter being emphasized and to where relevant disclosures that fully describe the matter can be found in the financial statements. The paragraph shall refer only to information presented or disclosed in the financial statements; and
  • Indicate that the auditor’s opinion is not modified in respect of the matter emphasized

Requirement wrt OM:

Auditor includes the other matter paragraph in the AR provided:

  • This is not prohibited by law or regulation; and
  • When SA 701 applies, the matter has not been determined to be a key audit matter to be communicated in the auditor’s report.

The auditor shall:

When the auditor includes an Other Matter paragraph in the auditor’s report, the auditor shall include the paragraph within a separate section with the heading “Other Matter,” or other appropriate heading.

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