Important definitions
The emphasis of matter paragraph—This is a paragraph in the audit report that emphasizes or refers to the matter appropriately described, presented/disclosed in the financial statement. The auditor believes this presentation/disclosure is fundamental to the user’s understanding of the audit report and financial statement.
Other matter paragraph—This paragraph contains additional information or information not presented or disclosed in the financial statement. However, the auditor believes this matter is relevant to the user’s understanding of the financial statement. So, they include this information in the audit report only.
Scope of ISA 706
This ISA defines auditor responsibility with respect to additional requirements in the audit report when the auditor considers it necessary to,
- Draw user attention towards important matters presented/disclosed in the financial statement.
- Draw user attention toward matters not presented/disclosed in the financial statement but relevant to user understanding of financial statement.
This ISA is only about paragraphs and ISA 700 and ISA 701 deal with audit opinion formation and modification respectively.
Requirements of ISA 706
When including an emphasis of matter paragraph in the audit report, the auditor must make appropriate references where relevant disclosure was made in the financial statement. It’s also important to state that the auditor’s opinion is not modified in the matter emphasized.
Similarly, the auditor must include an “other matter” paragraph in the audit report when additional information is relevant to the user’s understanding of the financial statement.
Wrap up
ISA 706 defines the auditor’s responsibility to emphasize the matter paragraph and other matter paragraph. The emphasis of matter paragraph is included when the auditor wants to emphasize some information presented/disclosed in the financial statement, and the auditor wants to emphasize the information disclosed in the financial statement. On the other hand, other matter paragraph is when the auditor decides to include additional information in the audit report relevant to the user’s understanding of the financial statement.
Daniyal Khatri, ACCA, is a seasoned bookkeeping specialist with over a decade of experience in designing precise, compliant financial systems. His expertise spans daily transaction tracking, ledger management, and financial record accuracy, ensuring businesses maintain organized, audit-ready books. Daniyal excels at aligning processes with evolving compliance standards, integrating user-friendly tools to automate workflows, and translating regulatory complexities into actionable steps. By combining technical proficiency with a focus on clarity, he empowers organizations to achieve error-free bookkeeping, minimize risk, and build a foundation for informed financial decisions.
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