Annual Audit Manual
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8014 Emphasis of matter and other matter paragraphs
Sep-2020
In This Section
Overview
This topic explains:
- Our objectives with regard to reporting an emphasis of matter and other matter paragraphs.
- Circumstances when it is appropriate to include an emphasis of matter and other matter paragraphs.
- The requirement to communicate with those charged with governance.
CAS Objective
The objective of the auditor, having formed an opinion on the financial statements, is to draw users’ attention, when in the auditor’s judgment it is necessary to do so, by way of clear additional communication in the auditor’s report, to (CAS 706.6):
(a) A matter, although appropriately presented or disclosed in the financial statements, that is of such importance that it is fundamental to users’ understanding of the financial statements; or
(b) As appropriate, any other matter that is relevant to users’ understanding of the audit, the auditor’s responsibilities or the auditor’s report.
CAS Requirement
If the auditor considers it necessary to draw users’ attention to a matter presented or disclosed in the financial statements that, in the auditor’s judgment, is of such importance that it is fundamental to users’ understanding of the financial statements, the auditor shall include an Emphasis of Matter paragraph in the auditor’s report provide (CAS 706.8):
(a) The auditor would not be required to modify the opinion in accordance with CAS 705 as a result of the matter; and
(b) When CAS 701 applies, the matter has not been determined to be a key audit matter to be communicated in the auditor’s report.
When the auditor includes an Emphasis of Matter paragraph in the auditor’s report, the auditor shall (CAS 706.9):
(a) Include the paragraph within a separate section of the auditor’s report with an appropriate heading that includes the term “Emphasis of Matter”;
(b) 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
(c) Indicate that the auditor’s opinion is not modified in respect of the matter emphasized.
OAG Policy
Audit teams shall consult Audit Services when proposing a modified opinion on the financial statements or financial information, emphasis of matter paragraphs, or other matter paragraphs. [Sep-2020]
CAS Requirement
If the auditor considers it necessary to communicate a matter other than those that are presented or disclosed in the financial statements that, in the auditor’s judgment, is relevant to users’ understanding of the audit, the auditor’s responsibilities or the auditor’s report, the auditor shall include an Other Matter paragraph in the auditor’s report, provided (CAS 706.10):
(a) This is not prohibited by law or regulation; and
(b) When CAS 701 applies, the matter has not been determined to be a key audit matter to be communicated in the auditor's report.
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 (CAS 706.11).
OAG Policy
Audit teams shall consult Audit Services when proposing a modified opinion on the financial statements or financial information, emphasis of matter paragraphs, or other matter paragraphs. [Sep-2020]
OAG Guidance
For detailed guidance, refer to CAS 706 and use the latest CAS 700 Auditor’s Report template.
CAS Requirement
If the auditor expects to include an Emphasis of Matter or an Other Matter paragraph in the auditor’s report, the auditor shall communicate with those charged with governance regarding this expectation and the wording of this paragraph (CAS 706.12).
CAS Guidance
The communication required by paragraph 12 enables those charged with governance to be made aware of the nature of any specific matters that the auditor intends to highlight in the auditor’s report, and provides them with an opportunity to obtain further clarification from the auditor where necessary. Where the inclusion of an Other Matter paragraph on a particular matter in the auditor’s report recurs on each successive engagement, the auditor may determine that it is unnecessary to repeat the communication on each engagement, unless otherwise required to do so by law or regulation (CAS 706.A18).
OAG Guidance
For guidance on communicating with those charged with governance refer to OAG Audit 2210.