ISA 706 (Emphasis of Matter Paragraph)

Question 1

What is an emphasis of matter paragraph?

Answer 1

Paragraph included in the auditor’s report that refers to a matter appropriately presented or disclosed in FSs, that in auditor’s judgement, is of such important that is fundamental to users’ understanding of FSs

Question 2

Examples of curcumstances where auditor may include an emphasis of matter paragraph? (Uncertainty outcome litigation)

Answer 2

An uncertainty relating to future outcome of exceptional litigation or regulatory action

Question 3

Examples of curcumstances where auditor may include an emphasis of matter paragraph? (Subsequent date FSs report)

Answer 3

A significant subsequent event that occurs between the date of FSs and date of auditor’s report

Question 4

Examples of curcumstances where auditor may include an emphasis of matter paragraph? (Application accounting standard material FS)

Answer 4

Early application (where permitted) of a new accounting standard that has a material effect on FSs

Question 5

Examples of curcumstances where auditor may include an emphasis of matter paragraph? (catastrophe position)

Answer 5

A major catastrophe that has had, or continues to have, a significant effect on entity’s financial position

Question 6

What is an emphasis of matter paragraph not used for?

Answer 6

To highlight any going concern issues. Such issues would be disclosed in a “material uncertainty related to going concern” paragraph

Question 7

What happens for listed entity audits?

Answer 7

Same issue would not be included within the emphasis of matter paragraph and KAM paragraph

Question 8

When should it be disclosed as a key audit matter?

Answer 8

If issue is fundamental to users’ understanding and has required significant audit attention

Question 9

When should it be disclosed within the emphasis of matter paragraph?

Answer 9

if issue is fundamental to users’ understanding but has not required significant audit attention (e.g. a subsequent event)