This standard required additional communication in the auditor’s report (AR) when the auditor considers it needed to draw users’ observance to matters that are presented/disclosed in the FS that is of such importance that they are fundamental to users’ comprehension of the FS, or matters other than those shown or published in the FS that is necessary to users’ understanding of the audit/auditor’s responsibilities/auditor’s report (AR).
Definitions
The emphasis of matter paragraph(EMP) A paragraph included in the auditor’s report (AR) refers to a matter properly presented or disclosed in FS that, in the auditor’s perception, is important to the Fundamental to users’ understanding of FS.
Other matter paragraphs (OMP) A paragraph included in the auditor’s report (AR) refers to a matter other than those presented/disclosed in the FS that in the auditor’s judgment is appropriate to users’ understanding of the audit/auditor’s responsibilities/auditor’s report (AR).
Requirements The following requirements of SA 706 are:
The emphasis of matter paragraphs (EOM) in the auditor’s report When the auditor includes an EOM in the auditor’s report, the auditor shall consist of:
The paragraph within an unrelated section of the AR with a suitable heading which consists of the term “Emphasis of Matter”;
The paragraph that provides an apparent recommendation to the matter being emphasised and where relevant disclosures that express the matter can be found in the FS. The paragraph shall refer only to information dispensed/disclosed in the FS; and
The auditor’s opinion is not modified concerning the matter is emphasised.
Other matter paragraphs in the auditor’s report If the auditor considers it requisite to communicate a matter other than those that are presented/ disclosed in the FS that, in the auditor’s judgment, is relevant to users’ understanding of the audit/auditor’s responsibilities/auditor’s report, the auditor shall include the other matter paragraph (OMP) in the auditor’s report, provided:
It is not prohibited by law/ regulation; and
When SA 701 Communicating Key Audit Matters applies, the matter has not been determined to be a critical audit matter to be communicated in the auditor’s report (AR).
When the auditor includes an OMP in the AR, the auditor shall consist of the paragraph within a separate section with the heading “Other Matter” or another appropriate title in the auditor’s report.
Communication with those charged with governance If the auditor expects to include an EOM or an OMP in the auditor’s report, the auditor shall convey with those charged with governance (TCWG).
Circumstances where the auditor may examine it necessary to include SA 706 Emphases of matter paragraph are:
Uncertainty combined with the future outcome of exceptional litigation or regulatory actions
Early application of a new accounting standard that has a pervasive effect. Reports don’t affect the auditor’s opinion, emphasizing matter paragraphs in auditors. However, the power of matter paragraph is not a substitute for either.
Providing qualified, unfavorable or disallowing the audit opinion.
Disclosure in the financial statements that the relevant financial reporting framework needed management to make situations where emphasis on matter paragraph may be compulsory.
SA 706 EOM is not a replacement for: A modified opinion in accordance with SA 705
Disclosures in FS that the applicable financial reporting framework requires the management to make
Reporting in accordance with SA 570
Circumstances in which other matter paragraphs may be necessarily pertinent to users understanding of audit in the rare cases where the auditor is inadequate to resign from an engagement even though the possible effects of unable to obtain due to limitation imposed by management in the scope of the audit.
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