ASA 706 - Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor's Report - December 2015
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legislative instrument
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This Auditing Standard (ASA 706) tells auditors when and how to add "Emphasis of Matter" or "Other Matter" paragraphs to the independent auditor’s report. It applies to audits of financial reports under the Corporations Act and other audits (Aus 0.1). The Standard sets the tests for including those paragraphs, required wording and placement, interaction with key audit matters, and requires the auditor to notify those charged with governance of any expected paragraph (paras 8–12, A16–A18). It changes auditors’ reporting practices and the compliance steps for audited entities.
This instrument is Auditing Standard ASA 706 Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor’s Report (as amended to 15 March 2023). Mechanically, it sets out when and how an auditor must include two specific types of additional paragraphs in the auditor’s report: Emphasis of Matter paragraphs (which refer to matters appropriately presented or disclosed within the financial report) and Other Matter paragraphs (which refer to matters other than those presented or disclosed in the financial report). The standard specifies its application (Aus 0.1), operative date (Aus 0.3), definitions, mandatory requirements (see paras 8-12), and related application / explanatory material (paras A1-A18 and Appendices 1-4). It is to be read with ASA 101 (preamble), ASA 200 (overall objectives) and other Australian Auditing Standards identified in the text (for example ASA 701, ASA 705, ASA 570, ASA 720 and ASA 102). The AUASB made ASA 706 under section 227B of the Australian Securities and Investments Commission Act 2001 and section 336 of the Corporations Act 2001 (authority statement).
The official rationale stated in the standard is to enable auditors, after forming an opinion, to draw users’ attention to matters that are fundamental to understanding the financial report or to matters relevant to understanding the audit, the auditor’s responsibilities or the auditor’s report (Objective, para 6; Scope paras 1-4). The standard explicitly links to ASA 701 on Key Audit Matters and instructs auditors on the relationship between KAMs and Emphasis/Other Matter paragraphs (see paras 2 and A1-A3). It also prescribes form and placement rules: Emphasis of Matter paragraphs must be in a separate section with an “Emphasis of Matter” heading and must refer only to information presented or disclosed in the financial report; the auditor must state that the opinion is not modified in respect of the matter (paras 9.2.1-9.2.3). Other Matter paragraphs must similarly appear in a separate section with an appropriate heading and must not include information the auditor is prohibited from providing (paras 10-11, A9-A15). The standard also requires the auditor to communicate with those charged with governance if the auditor expects to include an Emphasis of Matter or Other Matter paragraph (para 12; Aus A18).
Current sections
Direct links to the current provisions in ASA 706 - Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor's Report - December 2015.
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Obtaining a Copy of this Auditing Standa
Obtaining a Copy of this Auditing Standard
Obtaining a Copy of this Auditing Standard
The most recently compiled versions of Auditing Standards, original Standards and amending Standards (see Compilation Details) are available on the AUASB website: www.auasb.gov.au
Contact Details
Contact Details
Contact Details
Auditing and Assurance Standards BoardLevel 20, 500 Collins StreetMelbourne Victoria 3000AUSTRALIA
Phone: (03) 8080 7400E‑mail: enquiries@auasb.gov.auPostal Address:PO Box 204Collins Street WestMelbourne Victoria 8007AUSTRALIA
Requests and enquiries concerning reproduction and rights for commercial purposes within Australia should be addressed to the Technical Director, Auditing and Assurance Standards Board, PO Box 204, Collins Street West, Melbourne, Victoria 8007 or sent to enquiries@auasb.gov.au. Otherwise, no part of this Auditing Standard may be reproduced, stored or transmitted in any form or by any means without the prior written permission of the AUASB except as permitted by law.
This Auditing Standard reproduces substantial parts of the corresponding International Standard on Auditing issued by the International Auditing and Assurance Standards Board (IAASB) and published by the International Federation of Accountants (IFAC), in the manner described in the statement on Conformity with International Standards on Auditing. The AUASB acknowledges that IFAC is the owner of copyright in the International Standard on Auditing incorporated in this Auditing Standard throughout the world.
All existing rights in this material are reserved outside Australia. Reproduction outside Australia in unaltered form (retaining this notice) is permitted for personal and non‑commercial use only.
Further information and requests for authorisation to reproduce this Auditing Standard for commercial purposes outside Australia should be addressed to the Technical Director, Auditing and Assurance Standards Board, PO Box 204, Collins Street West, Melbourne, Victoria 8007 or sent to enquiries@auasb.gov.au. Any decision to approve a request may also require the agreement of IFAC.
ISSN 1833‑4393
CONTENTS
CONTENTS
CONTENTS
COMPILATION DETAILS
AUTHORITY STATEMENT
CONFORMITY WITH INTERNATIONAL STANDARDS ON AUDITING
Emphasis of Matter Paragraphs in the Auditor’s Report................................8-9
Other Matter Paragraphs in the Auditor’s Report...................................10-11
Communication with Those Charged with Governance.................................12
Application and Other Explanatory Material
The Relationship between Emphasis of Matter Paragraphs and Key Audit Matters in the Auditor’s Report A1-A3
Circumstances in Which an Emphasis of Matter Paragraph May Be Necessary.............A4-A6
Including an Emphasis of Matter Paragraph in the Auditor’s Report................A7-Aus A8.1
Other Matter Paragraphs in the Auditor’s Report.................................A9-A15
Placement of Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Auditor’s ReportA16-A17
Communication with Those Charged with Governance................................A18
Appendix 1: List of Australian Auditing Standards Containing Requirements for Emphasis of Matter Paragraphs
Appendix 2: List of Australian Auditing Standards Containing Requirements for Other Matter Paragraphs
Appendix 3: Illustration of an Auditor’s Report that Includes a Key Audit Matters Section, an Emphasis of Matter Paragraph, and an Other Matter Paragraph
Appendix 4: Illustration of an Auditor’s Report Containing a Qualified Opinion Due to a Departure from the Applicable Financial Reporting Framework and that Includes an Emphasis of Matter Paragraph
COMPILATION DETAILS
COMPILATION DETAILS
Obtaining a Copy of this Auditing Standard
The most recently compiled versions of Auditing Standards, original Standards and amending Standards (see Compilation Details) are available on the AUASB website: www.auasb.gov.au
Contact Details
Auditing and Assurance Standards BoardLevel 20, 500 Collins StreetMelbourne Victoria 3000AUSTRALIA
Phone: (03) 8080 7400E‑mail: enquiries@auasb.gov.auPostal Address:PO Box 204Collins Street WestMelbourne Victoria 8007AUSTRALIA
Requests and enquiries concerning reproduction and rights for commercial purposes within Australia should be addressed to the Technical Director, Auditing and Assurance Standards Board, PO Box 204, Collins Street West, Melbourne, Victoria 8007 or sent to enquiries@auasb.gov.au. Otherwise, no part of this Auditing Standard may be reproduced, stored or transmitted in any form or by any means without the prior written permission of the AUASB except as permitted by law.
This Auditing Standard reproduces substantial parts of the corresponding International Standard on Auditing issued by the International Auditing and Assurance Standards Board (IAASB) and published by the International Federation of Accountants (IFAC), in the manner described in the statement on Conformity with International Standards on Auditing. The AUASB acknowledges that IFAC is the owner of copyright in the International Standard on Auditing incorporated in this Auditing Standard throughout the world.
All existing rights in this material are reserved outside Australia. Reproduction outside Australia in unaltered form (retaining this notice) is permitted for personal and non‑commercial use only.
Further information and requests for authorisation to reproduce this Auditing Standard for commercial purposes outside Australia should be addressed to the Technical Director, Auditing and Assurance Standards Board, PO Box 204, Collins Street West, Melbourne, Victoria 8007 or sent to enquiries@auasb.gov.au. Any decision to approve a request may also require the agreement of IFAC.
ISSN 1833‑4393
CONTENTS
COMPILATION DETAILS
AUTHORITY STATEMENT
CONFORMITY WITH INTERNATIONAL STANDARDS ON AUDITING
Emphasis of Matter Paragraphs in the Auditor’s Report................................8-9
Other Matter Paragraphs in the Auditor’s Report...................................10-11
Communication with Those Charged with Governance.................................12
Application and Other Explanatory Material
The Relationship between Emphasis of Matter Paragraphs and Key Audit Matters in the Auditor’s Report A1-A3
Circumstances in Which an Emphasis of Matter Paragraph May Be Necessary.............A4-A6
Including an Emphasis of Matter Paragraph in the Auditor’s Report................A7-Aus A8.1
Other Matter Paragraphs in the Auditor’s Report.................................A9-A15
Placement of Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Auditor’s ReportA16-A17
Communication with Those Charged with Governance................................A18
Appendix 1: List of Australian Auditing Standards Containing Requirements for Emphasis of Matter Paragraphs
Appendix 2: List of Australian Auditing Standards Containing Requirements for Other Matter Paragraphs
Appendix 3: Illustration of an Auditor’s Report that Includes a Key Audit Matters Section, an Emphasis of Matter Paragraph, and an Other Matter Paragraph
Appendix 4: Illustration of an Auditor’s Report Containing a Qualified Opinion Due to a Departure from the Applicable Financial Reporting Framework and that Includes an Emphasis of Matter Paragraph
COMPILATION DETAILS
Auditing Standard ASA 706 Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor's Report (as Amended)
This compilation takes into account amendments made up to and including 15 March 2023 and was prepared on 22 March 2023 by the Auditing and Assurance Standards Board (AUASB).
This compilation is not a separate Auditing Standard made by the AUASB. Instead, it is a representation of ASA 706 (December 2015) as amended by other Auditing Standards which are listed in the Table below.
Table of Standards
Standard
Date made
Operative Date
ASA 706 [A]
1 December 2015
Financial reporting periods ending on or after 15 December 2016
ASA 2020-2 [B]
30 June 2020
Financial reporting periods ending on or after 15 July 2020
ASA 2023-1 [C]
15 March 2023
Financial reporting periods commencing on or after 1 January 2023
[A] Federal Register of Legislation – registration number F2015L02037, 16 December 2015
[B] Federal Register of Legislation – registration number F2020L00885, 7 July 2020
[C] Federal Register of Legislation – registration number F2023L00295, 21 March 2023
Table of Amendments
Paragraph affected
How affected
By … [paragraph]
Appendix 3
Amended
ASA 2020‑2 [62] and [63]
Appendix 4
Amended
ASA 2020-2 [64] and [65]
Appendix 3
Amended
ASA 2023-1 [36]
Appendix 4
Amended
ASA 2023-1 [37]
AUTHORITY STATEMENT
Auditing Standard ASA 706 Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor's Report (as amended to 15 March 2023) is set out in paragraphs Aus 0.1 to A18 and Appendices 1 to 4.
This Auditing Standard is to be read in conjunction with ASA 101 Preamble to AUASB Standards, which sets out how AUASB Standards are to be understood, interpreted and applied. This Auditing Standard is to be read also in conjunction with ASA 200 Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with Australian Auditing Standards.
Conformity with International Standards on Auditing
This Auditing Standard conforms with International Standard on Auditing ISA 706 Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor's Report issued by the International Auditing and Assurance Standards Board (IAASB), an independent standard‑setting board of the International Federation of Accountants (IFAC).
Paragraphs that have been added to this Auditing Standard (and do not appear in the text of the equivalent ISA) are identified with the prefix “Aus”.
The following application and other explanatory material is additional to ISA 706:
Paragraph Aus A8.1 refers to requirements under the Corporations Act 2001.
Appendix 3 comprises [Aus] Illustration 1A Example auditor’s report that conforms with the requirements of the Corporations Act 2001.
Appendix 4 comprises [Aus] Illustration 2A Example auditor’s report on a financial report that is not prepared under the Corporations Act 2001.
This Auditing Standard incorporates terminology and definitions used in Australia.
The equivalent requirements and related application and other explanatory material included in ISA 706 in respect of “relevant ethical requirements”, have been included in Auditing Standard, ASA 102 Compliance with Ethical Requirements when Performing Audits, Reviews and Other Assurance Engagements. There is no international equivalent to ASA 102.
Compliance with this Auditing Standard enables compliance with ISA 706.
Auditing Standard ASA 706 Emphasis of Ma
Auditing Standard ASA 706 Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor's Report (as Amended)
Auditing Standard ASA 706 Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor's Report (as Amended)
This compilation takes into account amendments made up to and including 15 March 2023 and was prepared on 22 March 2023 by the Auditing and Assurance Standards Board (AUASB).
This compilation is not a separate Auditing Standard made by the AUASB. Instead, it is a representation of ASA 706 (December 2015) as amended by other Auditing Standards which are listed in the Table below.
Table of Standards
Table of Standards
Table of Standards
Standard
Date made
Operative Date
ASA 706 [A]
1 December 2015
Financial reporting periods ending on or after 15 December 2016
ASA 2020-2 [B]
30 June 2020
Financial reporting periods ending on or after 15 July 2020
ASA 2023-1 [C]
15 March 2023
Financial reporting periods commencing on or after 1 January 2023
[A] Federal Register of Legislation – registration number F2015L02037, 16 December 2015
[B] Federal Register of Legislation – registration number F2020L00885, 7 July 2020
[C] Federal Register of Legislation – registration number F2023L00295, 21 March 2023
Table of Amendments
Table of Amendments
Table of Amendments
Paragraph affected
How affected
By … [paragraph]
Appendix 3
Amended
ASA 2020‑2 [62] and [63]
Appendix 4
Amended
ASA 2020-2 [64] and [65]
Appendix 3
Amended
ASA 2023-1 [36]
Appendix 4
Amended
ASA 2023-1 [37]
AUTHORITY STATEMENT
Auditing Standard ASA 706 Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor's Report (as amended to 15 March 2023) is set out in paragraphs Aus 0.1 to A18 and Appendices 1 to 4.
This Auditing Standard is to be read in conjunction with ASA 101 Preamble to AUASB Standards, which sets out how AUASB Standards are to be understood, interpreted and applied. This Auditing Standard is to be read also in conjunction with ASA 200 Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with Australian Auditing Standards.
Conformity with International Standards on Auditing
This Auditing Standard conforms with International Standard on Auditing ISA 706 Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor's Report issued by the International Auditing and Assurance Standards Board (IAASB), an independent standard‑setting board of the International Federation of Accountants (IFAC).
Paragraphs that have been added to this Auditing Standard (and do not appear in the text of the equivalent ISA) are identified with the prefix “Aus”.
The following application and other explanatory material is additional to ISA 706:
Paragraph Aus A8.1 refers to requirements under the Corporations Act 2001.
Appendix 3 comprises [Aus] Illustration 1A Example auditor’s report that conforms with the requirements of the Corporations Act 2001.
Appendix 4 comprises [Aus] Illustration 2A Example auditor’s report on a financial report that is not prepared under the Corporations Act 2001.
This Auditing Standard incorporates terminology and definitions used in Australia.
The equivalent requirements and related application and other explanatory material included in ISA 706 in respect of “relevant ethical requirements”, have been included in Auditing Standard, ASA 102 Compliance with Ethical Requirements when Performing Audits, Reviews and Other Assurance Engagements. There is no international equivalent to ASA 102.
Compliance with this Auditing Standard enables compliance with ISA 706.
AUTHORITY STATEMENT
AUTHORITY STATEMENT
AUTHORITY STATEMENT
Auditing Standard ASA 706 Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor's Report (as amended to 15 March 2023) is set out in paragraphs Aus 0.1 to A18 and Appendices 1 to 4.
This Auditing Standard is to be read in conjunction with ASA 101 Preamble to AUASB Standards, which sets out how AUASB Standards are to be understood, interpreted and applied. This Auditing Standard is to be read also in conjunction with ASA 200 Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with Australian Auditing Standards.
Conformity with International Standards
Conformity with International Standards on Auditing
Conformity with International Standards on Auditing
This Auditing Standard conforms with International Standard on Auditing ISA 706 Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor's Report issued by the International Auditing and Assurance Standards Board (IAASB), an independent standard‑setting board of the International Federation of Accountants (IFAC).
Paragraphs that have been added to this Auditing Standard (and do not appear in the text of the equivalent ISA) are identified with the prefix “Aus”.
The following application and other explanatory material is additional to ISA 706:
Paragraph Aus A8.1 refers to requirements under the Corporations Act 2001.
Appendix 3 comprises [Aus] Illustration 1A Example auditor’s report that conforms with the requirements of the Corporations Act 2001.
Appendix 4 comprises [Aus] Illustration 2A Example auditor’s report on a financial report that is not prepared under the Corporations Act 2001.
This Auditing Standard incorporates terminology and definitions used in Australia.
The equivalent requirements and related application and other explanatory material included in ISA 706 in respect of “relevant ethical requirements”, have been included in Auditing Standard, ASA 102 Compliance with Ethical Requirements when Performing Audits, Reviews and Other Assurance Engagements. There is no international equivalent to ASA 102.
Compliance with this Auditing Standard enables compliance with ISA 706.
Auditing Standard ASA 706
Auditing Standard ASA 706
Auditing Standard ASA 706
The Auditing and Assurance Standards Board (AUASB) made Auditing Standard ASA 706 Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor's Report pursuant to section 227B of the Australian Securities and Investments Commission Act 2001 and section 336 of the Corporations Act 2001, on 1 December 2015.
This compiled version of ASA 706 incorporates subsequent amendments contained in other Auditing Standards made by the AUASB up to and including 15 March 2023 (see Compilation Details).
Auditing Standard ASA 706
Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor's Report
Application
Aus 0.1 This Auditing Standard applies to:
(a) an audit of a financial report for a financial year, or an audit of a financial report for a half‑year, in accordance with the Corporations Act 2001; and
(b) an audit of a financial report, or a complete set of financial statements, for any other purpose.
Aus 0.2 This Auditing Standard also applies, as appropriate, to an audit of other historical financial information.
Operative Date
Aus 0.3 This Auditing Standard is operative for financial reporting periods ending on or after 15 December 2016. [Note: For operative dates of paragraphs changed or added by an Amending Standard, see Compilations Details.]
Introduction
Scope of this Auditing Standard
This Auditing Standard deals with additional communication in the auditor’s report when the auditor considers it necessary to:
Draw users’ attention to a matter or matters presented or disclosed in the financial report that are of such importance that they are fundamental to users’ understanding of the financial report; or
Draw users’ attention to any matter or matters other than those presented or disclosed in the financial report that are relevant to users’ understanding of the audit, the auditor’s responsibilities or the auditor’s report.
ASA 701[1] establishes requirements and provides guidance when the auditor determines key audit matters and communicates them in the auditor’s report. When the auditor includes a Key Audit Matters section in the auditor’s report, this Auditing Standard addresses the relationship between key audit matters and any additional communication in the auditor’s report in accordance with this Auditing Standard. (Ref: Para. A1–A3)
ASA 570[2] and ASA 720[3] establish requirements and provides guidance about communication in the auditor’s report relating to going concern and other information, respectively.
Appendices 1 and 2 of this Auditing Standard identify Australian Auditing Standards that contain specific requirements for the auditor to include Emphasis of Matter paragraphs or Other Matter paragraphs in the auditor’s report. In those circumstances, the requirements in this Auditing Standard regarding the form of such paragraphs apply. (Ref: Para. A4)
Effective Date
[Deleted by the AUASB. Refer Aus 0.3]
Objective
The objective of the auditor, having formed an opinion on the financial report, is to draw users’ attention, when in the auditor’s judgement it is necessary to do so, by way of clear additional communication in the auditor’s report, to:
A matter, although appropriately presented or disclosed in the financial report, that is of such importance that it is fundamental to users’ understanding of the financial report; or
As appropriate, any other matter that is relevant to users’ understanding of the audit, the auditor’s responsibilities or the auditor’s report.
Definitions
For the purposes of this Auditing Standard, the following terms have the meanings attributed below:
Emphasis of Matter paragraph – A paragraph included in the auditor’s report that refers to a matter appropriately presented or disclosed in the financial report that, in the auditor’s judgement, is of such importance that it is fundamental to users’ understanding of the financial report.
Other Matter paragraph – A paragraph included in the auditor’s report that refers to a matter other than those presented or disclosed in the financial report that, in the auditor’s judgement, is relevant to users’ understanding of the audit, the auditor’s responsibilities or the auditor’s report.
Requirements
Emphasis of Matter Paragraphs in the Auditor’s Report
If the auditor considers it necessary to draw users’ attention to a matter presented or disclosed in the financial report that, in the auditor’s judgement, is of such importance that it is fundamental to users’ understanding of the financial report, the auditor shall include an Emphasis of Matter paragraph in the auditor’s report provided: (Ref: Para. A5–A6)
The auditor would not be required to modify the opinion in accordance with ASA 705[4] as a result of the matter; and
When ASA 701 applies, the matter has not been determined to be a key audit matter to be communicated in the auditor’s report. (Ref: Para. A1–A3)
When the auditor includes an Emphasis of Matter paragraph in the auditor’s report, the auditor shall:
Include the paragraph within a separate section of the auditor’s report with an appropriate heading that includes the term “Emphasis of Matter”;
Include in the paragraph a clear reference to the matter being emphasised and to where relevant disclosures that fully describe the matter can be found in the financial report. The paragraph shall refer only to information presented or disclosed in the financial report; and
Indicate that the auditor’s opinion is not modified in respect of the matter emphasised. (Ref: Para. A7–Aus A8.1, A16–A17)
Other Matter Paragraphs in the Auditor’s Report
If the auditor considers it necessary to communicate a matter other than those that are presented or disclosed in the financial report that, in the auditor’s judgement, 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:
This is not prohibited by law or regulation; and
When ASA 701 applies, the matter has not been determined to be a key audit matter to be communicated in the auditor’s report. (Ref: Para. A9–A14)
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. (Ref: Para. A15–A17)
Communication with Those Charged with Governance
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. (Ref: Para. A18)
***
Application and Other Explanatory Material
The Relationship between Emphasis of Matter Paragraphs and Key Audit Matters in the Auditor’s Report (Ref: Para. 2, 8(b))
Key audit matters are defined in ASA 701 as those matters that, in the auditor’s professional judgement, were of most significance in the audit of the financial report of the current period. Key audit matters are selected from matters communicated with those charged with governance, which include significant findings from the audit of the financial report of the current period.[5] Communicating key audit matters provides additional information to intended users of the financial report to assist them in understanding those matters that, in the auditor’s professional judgement, were of most significance in the audit and may also assist them in understanding the entity and areas of significant management judgement in the audited the financial report. When ASA 701 applies, the use of Emphasis of Matter paragraphs is not a substitute for a description of individual key audit matters.
Matters that are determined to be key audit matters in accordance with ASA 701 may also be, in the auditor’s judgement, fundamental to users’ understanding of the financial report. In such cases, in communicating the matter as a key audit matter in accordance with ASA 701, the auditor may wish to highlight or draw further attention to its relative importance. The auditor may do so by presenting the matter more prominently than other matters in the Key Audit Matters section (e.g., as the first matter) or by including additional information in the description of the key audit matter to indicate the importance of the matter to users’ understanding of the financial report.
There may be a matter that is not determined to be a key audit matter in accordance with ASA 701 (i.e., because it did not require significant auditor attention), but which, in the auditor’s judgement, is fundamental to users’ understanding of the financial report (e.g., a subsequent event). If the auditor considers it necessary to draw users’ attention to such a matter, the matter is included in an Emphasis of Matter paragraph in the auditor’s report in accordance with this ASA.
Circumstances in Which an Emphasis of Matter Paragraph May Be Necessary (Ref: Para. 4, 8)
Appendix 1 identifies Australian Auditing Standards that contain specific requirements for the auditor to include Emphasis of Matter paragraphs in the auditor’s report in certain circumstances. These circumstances include:
When the financial reporting framework prescribed by law or regulation would be unacceptable but for the fact that it is prescribed by law or regulation.
To alert users that the financial report is prepared in accordance with a special purpose framework.
When facts become known to the auditor after the date of the auditor’s report and the auditor provides a new or amended auditor’s report (i.e., subsequent events).[6]
Examples of circumstances where the auditor may consider it necessary to include an Emphasis of Matter paragraph are:
An uncertainty relating to the future outcome of exceptional litigation or regulatory action.
A significant subsequent event that occurs between the date of the financial report and the date of the auditor’s report.[7]
Early application (where permitted) of a new accounting standard that has a material effect on the financial report.
A major catastrophe that has had, or continues to have, a significant effect on the entity’s financial position.
However, a widespread use of Emphasis of Matter paragraphs may diminish the effectiveness of the auditor’s communication about such matters.
Including an Emphasis of Matter Paragraph in the Auditor’s Report (Ref: Para. 9)
The inclusion of an Emphasis of Matter paragraph in the auditor’s report does not affect the auditor’s opinion. An Emphasis of Matter paragraph is not a substitute for:
A modified opinion in accordance with ASA 705 when required by the circumstances of a specific audit engagement;
Disclosures in the financial report that the applicable financial reporting framework requires management to make, or that are otherwise necessary to achieve fair presentation; or
Reporting in accordance with ASA 570[8] when a material uncertainty exists relating to events or conditions that may cast significant doubt on an entity’s ability to continue as a going concern.
Paragraphs A16–A17 provide further guidance on the placement of Emphasis of Matter paragraphs in particular circumstances.
Aus A8.1 When an auditor’s report is prepared on a financial report prepared under the Corporations Act 2001 (the Act), section 308(3B) of the Act requires that if the financial report includes additional information under paragraph 295(3)(c) (additional information included to give a true and fair view of the entity’s financial position and performance), the auditor’s report includes the auditor’s opinion on whether the additional information was necessary to give a true and fair view.
Other Matter Paragraphs in the Auditor’s Report (Ref: Para. 10–11)
Circumstances in Which an Other Matter Paragraph May Be Necessary
Relevant to Users’ Understanding of the Audit
ASA 260 requires the auditor to communicate with those charged with governance about the planned scope and timing of the audit, which includes communication about the significant risks identified by the auditor.[9] Although matters relating to significant risks may be determined to be key audit matters, other planning and scoping matters (e.g., the planned scope of the audit, or the application of materiality in the context of the audit) are unlikely to be key audit matters because of how key audit matters are defined in ASA 701. However, law or regulation may require the auditor to communicate about planning and scoping matters in the auditor’s report, or the auditor may consider it necessary to communicate about such matters in an Other Matter paragraph.
In the rare circumstance where the auditor is unable to withdraw from an engagement even though the possible effect of an inability to obtain sufficient appropriate audit evidence due to a limitation on the scope of the audit imposed by management is pervasive,[10] the auditor may consider it necessary to include an Other Matter paragraph in the auditor’s report to explain why it is not possible for the auditor to withdraw from the engagement.
Relevant to Users’ Understanding of the Auditor’s Responsibilities or the Auditor’s Report
Law, regulation or generally accepted practice in a jurisdiction may require or permit the auditor to elaborate on matters that provide further explanation of the auditor’s responsibilities in the audit of the financial report or of the auditor’s report thereon. When the Other Matter section includes more than one matter that, in the auditor’s judgement, is relevant to users’ understanding of the audit, the auditor’s responsibilities or the auditor’s report, it may be helpful to use different sub‑headings for each matter.
An Other Matter paragraph does not deal with circumstances where the auditor has other reporting responsibilities that are in addition to the auditor’s responsibility under the Australian Auditing Standards (see Other Reporting Responsibilities section in ASA 700[11]), or where the auditor has been asked to perform and report on additional specified procedures, or to express an opinion on specific matters.
Reporting on more than one financial report
An entity may prepare one financial report in accordance with a general purpose framework and another financial report in accordance with another general purpose framework (e.g., Australian Accounting Standards), and engage the auditor to report on both sets of the financial report. If the auditor has determined that the frameworks are acceptable in the respective circumstances, the auditor may include an Other Matter paragraph in the auditor’s report, referring to the fact that another financial report has been prepared by the same entity in accordance with another general purpose framework and that the auditor has issued a report on that financial report.
Restriction on distribution or use of the auditor’s report
A financial report prepared for a specific purpose may be prepared in accordance with a general purpose framework because the intended users have determined that such a general purpose financial report meets their financial information needs. Since the auditor’s report is intended for specific users, the auditor may consider it necessary in the circumstances to include an Other Matter paragraph, stating that the auditor’s report is intended solely for the intended users, and should not be distributed to or used by other parties.
Including an Other Matter Paragraph in the Auditor’s Report
The content of an Other Matter paragraph reflects clearly that such other matter is not required to be presented and disclosed in the financial report. An Other Matter paragraph does not include information that the auditor is prohibited from providing by law, regulation or other professional standards, for example, relevant ethical standards relating to confidentiality of information. An Other Matter paragraph also does not include information that is required to be provided by management.
Placement of Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Auditor’s Report (Ref: Para. 9, 11)
The placement of an Emphasis of Matter paragraph or Other Matter paragraph in the auditor’s report depends on the nature of the information to be communicated, and the auditor’s judgement as to the relative significance of such information to intended users compared to other elements required to be reported in accordance with ASA 700. For example:
Emphasis of Matter Paragraphs
When the Emphasis of Matter paragraph relates to the applicable financial reporting framework, including circumstances where the auditor determines that the financial reporting framework prescribed by law or regulation would otherwise be unacceptable,[12] the auditor may consider it necessary to place the paragraph immediately following the Basis of Opinion section to provide appropriate context to the auditor’s opinion.
When a Key Audit Matters section is presented in the auditor’s report, an Emphasis of Matter paragraph may be presented either directly before or after the Key Audit Matters section, based on the auditor’s judgement as to the relative significance of the information included in the Emphasis of Matter paragraph. The auditor may also add further context to the heading “Emphasis of Matter”, such as “Emphasis of Matter–Subsequent Event”, to differentiate the Emphasis of Matter paragraph from the individual matters described in the Key Audit Matters section.
Other Matter Paragraphs
When a Key Audit Matters section is presented in the auditor’s report and an Other Matter paragraph is also considered necessary, the auditor may add further context to the heading “Other Matter”, such as “Other Matter – Scope of the Audit”, to differentiate the Other Matter paragraph from the individual matters described in the Key Audit Matters section.
When an Other Matter paragraph is included to draw users’ attention to a matter relating to Other Reporting Responsibilities addressed in the auditor’s report, the paragraph may be included in the Report on Other Legal and Regulatory Requirements section.
When relevant to all the auditor’s responsibilities or users’ understanding of the auditor’s report, the Other Matter paragraph may be included as a separate section following the Report on the Audit of the Financial Report and the Report on Other Legal and Regulatory Requirements.
Appendix 3 is an illustration of the interaction between the Key Audit Matters section, an Emphasis of Matter paragraph and an Other Matter paragraph when all are presented in the auditor’s report. The illustrative report in Appendix 4 includes an Emphasis of Matter paragraph in an auditor’s report for an entity other than a listed entity that contains a qualified opinion and for which key audit matters have not been communicated.
Communication with Those Charged with Governance (Ref: Para. 12)
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.
Emphasis of Matter Paragraphs and Other
Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor's Report
Auditing Standard ASA 706
The Auditing and Assurance Standards Board (AUASB) made Auditing Standard ASA 706 Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor's Report pursuant to section 227B of the Australian Securities and Investments Commission Act 2001 and section 336 of the Corporations Act 2001, on 1 December 2015.
This compiled version of ASA 706 incorporates subsequent amendments contained in other Auditing Standards made by the AUASB up to and including 15 March 2023 (see Compilation Details).
Auditing Standard ASA 706
Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor's Report
Application
Aus 0.1 This Auditing Standard applies to:
(a) an audit of a financial report for a financial year, or an audit of a financial report for a half‑year, in accordance with the Corporations Act 2001; and
(b) an audit of a financial report, or a complete set of financial statements, for any other purpose.
Aus 0.2 This Auditing Standard also applies, as appropriate, to an audit of other historical financial information.
Operative Date
Aus 0.3 This Auditing Standard is operative for financial reporting periods ending on or after 15 December 2016. [Note: For operative dates of paragraphs changed or added by an Amending Standard, see Compilations Details.]
Introduction
Scope of this Auditing Standard
This Auditing Standard deals with additional communication in the auditor’s report when the auditor considers it necessary to:
Draw users’ attention to a matter or matters presented or disclosed in the financial report that are of such importance that they are fundamental to users’ understanding of the financial report; or
Draw users’ attention to any matter or matters other than those presented or disclosed in the financial report that are relevant to users’ understanding of the audit, the auditor’s responsibilities or the auditor’s report.
ASA 701[1] establishes requirements and provides guidance when the auditor determines key audit matters and communicates them in the auditor’s report. When the auditor includes a Key Audit Matters section in the auditor’s report, this Auditing Standard addresses the relationship between key audit matters and any additional communication in the auditor’s report in accordance with this Auditing Standard. (Ref: Para. A1–A3)
ASA 570[2] and ASA 720[3] establish requirements and provides guidance about communication in the auditor’s report relating to going concern and other information, respectively.
Appendices 1 and 2 of this Auditing Standard identify Australian Auditing Standards that contain specific requirements for the auditor to include Emphasis of Matter paragraphs or Other Matter paragraphs in the auditor’s report. In those circumstances, the requirements in this Auditing Standard regarding the form of such paragraphs apply. (Ref: Para. A4)
Effective Date
[Deleted by the AUASB. Refer Aus 0.3]
Objective
The objective of the auditor, having formed an opinion on the financial report, is to draw users’ attention, when in the auditor’s judgement it is necessary to do so, by way of clear additional communication in the auditor’s report, to:
A matter, although appropriately presented or disclosed in the financial report, that is of such importance that it is fundamental to users’ understanding of the financial report; or
As appropriate, any other matter that is relevant to users’ understanding of the audit, the auditor’s responsibilities or the auditor’s report.
Definitions
For the purposes of this Auditing Standard, the following terms have the meanings attributed below:
Emphasis of Matter paragraph – A paragraph included in the auditor’s report that refers to a matter appropriately presented or disclosed in the financial report that, in the auditor’s judgement, is of such importance that it is fundamental to users’ understanding of the financial report.
Other Matter paragraph – A paragraph included in the auditor’s report that refers to a matter other than those presented or disclosed in the financial report that, in the auditor’s judgement, is relevant to users’ understanding of the audit, the auditor’s responsibilities or the auditor’s report.
Requirements
Emphasis of Matter Paragraphs in the Auditor’s Report
If the auditor considers it necessary to draw users’ attention to a matter presented or disclosed in the financial report that, in the auditor’s judgement, is of such importance that it is fundamental to users’ understanding of the financial report, the auditor shall include an Emphasis of Matter paragraph in the auditor’s report provided: (Ref: Para. A5–A6)
The auditor would not be required to modify the opinion in accordance with ASA 705[4] as a result of the matter; and
When ASA 701 applies, the matter has not been determined to be a key audit matter to be communicated in the auditor’s report. (Ref: Para. A1–A3)
When the auditor includes an Emphasis of Matter paragraph in the auditor’s report, the auditor shall:
Include the paragraph within a separate section of the auditor’s report with an appropriate heading that includes the term “Emphasis of Matter”;
Include in the paragraph a clear reference to the matter being emphasised and to where relevant disclosures that fully describe the matter can be found in the financial report. The paragraph shall refer only to information presented or disclosed in the financial report; and
Indicate that the auditor’s opinion is not modified in respect of the matter emphasised. (Ref: Para. A7–Aus A8.1, A16–A17)
Other Matter Paragraphs in the Auditor’s Report
If the auditor considers it necessary to communicate a matter other than those that are presented or disclosed in the financial report that, in the auditor’s judgement, 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:
This is not prohibited by law or regulation; and
When ASA 701 applies, the matter has not been determined to be a key audit matter to be communicated in the auditor’s report. (Ref: Para. A9–A14)
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. (Ref: Para. A15–A17)
Communication with Those Charged with Governance
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. (Ref: Para. A18)
***
Application and Other Explanatory Material
The Relationship between Emphasis of Matter Paragraphs and Key Audit Matters in the Auditor’s Report (Ref: Para. 2, 8(b))
Key audit matters are defined in ASA 701 as those matters that, in the auditor’s professional judgement, were of most significance in the audit of the financial report of the current period. Key audit matters are selected from matters communicated with those charged with governance, which include significant findings from the audit of the financial report of the current period.[5] Communicating key audit matters provides additional information to intended users of the financial report to assist them in understanding those matters that, in the auditor’s professional judgement, were of most significance in the audit and may also assist them in understanding the entity and areas of significant management judgement in the audited the financial report. When ASA 701 applies, the use of Emphasis of Matter paragraphs is not a substitute for a description of individual key audit matters.
Matters that are determined to be key audit matters in accordance with ASA 701 may also be, in the auditor’s judgement, fundamental to users’ understanding of the financial report. In such cases, in communicating the matter as a key audit matter in accordance with ASA 701, the auditor may wish to highlight or draw further attention to its relative importance. The auditor may do so by presenting the matter more prominently than other matters in the Key Audit Matters section (e.g., as the first matter) or by including additional information in the description of the key audit matter to indicate the importance of the matter to users’ understanding of the financial report.
There may be a matter that is not determined to be a key audit matter in accordance with ASA 701 (i.e., because it did not require significant auditor attention), but which, in the auditor’s judgement, is fundamental to users’ understanding of the financial report (e.g., a subsequent event). If the auditor considers it necessary to draw users’ attention to such a matter, the matter is included in an Emphasis of Matter paragraph in the auditor’s report in accordance with this ASA.
Circumstances in Which an Emphasis of Matter Paragraph May Be Necessary (Ref: Para. 4, 8)
Appendix 1 identifies Australian Auditing Standards that contain specific requirements for the auditor to include Emphasis of Matter paragraphs in the auditor’s report in certain circumstances. These circumstances include:
When the financial reporting framework prescribed by law or regulation would be unacceptable but for the fact that it is prescribed by law or regulation.
To alert users that the financial report is prepared in accordance with a special purpose framework.
When facts become known to the auditor after the date of the auditor’s report and the auditor provides a new or amended auditor’s report (i.e., subsequent events).[6]
Examples of circumstances where the auditor may consider it necessary to include an Emphasis of Matter paragraph are:
An uncertainty relating to the future outcome of exceptional litigation or regulatory action.
A significant subsequent event that occurs between the date of the financial report and the date of the auditor’s report.[7]
Early application (where permitted) of a new accounting standard that has a material effect on the financial report.
A major catastrophe that has had, or continues to have, a significant effect on the entity’s financial position.
However, a widespread use of Emphasis of Matter paragraphs may diminish the effectiveness of the auditor’s communication about such matters.
Including an Emphasis of Matter Paragraph in the Auditor’s Report (Ref: Para. 9)
The inclusion of an Emphasis of Matter paragraph in the auditor’s report does not affect the auditor’s opinion. An Emphasis of Matter paragraph is not a substitute for:
A modified opinion in accordance with ASA 705 when required by the circumstances of a specific audit engagement;
Disclosures in the financial report that the applicable financial reporting framework requires management to make, or that are otherwise necessary to achieve fair presentation; or
Reporting in accordance with ASA 570[8] when a material uncertainty exists relating to events or conditions that may cast significant doubt on an entity’s ability to continue as a going concern.
Paragraphs A16–A17 provide further guidance on the placement of Emphasis of Matter paragraphs in particular circumstances.
Aus A8.1 When an auditor’s report is prepared on a financial report prepared under the Corporations Act 2001 (the Act), section 308(3B) of the Act requires that if the financial report includes additional information under paragraph 295(3)(c) (additional information included to give a true and fair view of the entity’s financial position and performance), the auditor’s report includes the auditor’s opinion on whether the additional information was necessary to give a true and fair view.
Other Matter Paragraphs in the Auditor’s Report (Ref: Para. 10–11)
Circumstances in Which an Other Matter Paragraph May Be Necessary
Relevant to Users’ Understanding of the Audit
ASA 260 requires the auditor to communicate with those charged with governance about the planned scope and timing of the audit, which includes communication about the significant risks identified by the auditor.[9] Although matters relating to significant risks may be determined to be key audit matters, other planning and scoping matters (e.g., the planned scope of the audit, or the application of materiality in the context of the audit) are unlikely to be key audit matters because of how key audit matters are defined in ASA 701. However, law or regulation may require the auditor to communicate about planning and scoping matters in the auditor’s report, or the auditor may consider it necessary to communicate about such matters in an Other Matter paragraph.
In the rare circumstance where the auditor is unable to withdraw from an engagement even though the possible effect of an inability to obtain sufficient appropriate audit evidence due to a limitation on the scope of the audit imposed by management is pervasive,[10] the auditor may consider it necessary to include an Other Matter paragraph in the auditor’s report to explain why it is not possible for the auditor to withdraw from the engagement.
Relevant to Users’ Understanding of the Auditor’s Responsibilities or the Auditor’s Report
Law, regulation or generally accepted practice in a jurisdiction may require or permit the auditor to elaborate on matters that provide further explanation of the auditor’s responsibilities in the audit of the financial report or of the auditor’s report thereon. When the Other Matter section includes more than one matter that, in the auditor’s judgement, is relevant to users’ understanding of the audit, the auditor’s responsibilities or the auditor’s report, it may be helpful to use different sub‑headings for each matter.
An Other Matter paragraph does not deal with circumstances where the auditor has other reporting responsibilities that are in addition to the auditor’s responsibility under the Australian Auditing Standards (see Other Reporting Responsibilities section in ASA 700[11]), or where the auditor has been asked to perform and report on additional specified procedures, or to express an opinion on specific matters.
Reporting on more than one financial report
An entity may prepare one financial report in accordance with a general purpose framework and another financial report in accordance with another general purpose framework (e.g., Australian Accounting Standards), and engage the auditor to report on both sets of the financial report. If the auditor has determined that the frameworks are acceptable in the respective circumstances, the auditor may include an Other Matter paragraph in the auditor’s report, referring to the fact that another financial report has been prepared by the same entity in accordance with another general purpose framework and that the auditor has issued a report on that financial report.
Restriction on distribution or use of the auditor’s report
A financial report prepared for a specific purpose may be prepared in accordance with a general purpose framework because the intended users have determined that such a general purpose financial report meets their financial information needs. Since the auditor’s report is intended for specific users, the auditor may consider it necessary in the circumstances to include an Other Matter paragraph, stating that the auditor’s report is intended solely for the intended users, and should not be distributed to or used by other parties.
Including an Other Matter Paragraph in the Auditor’s Report
The content of an Other Matter paragraph reflects clearly that such other matter is not required to be presented and disclosed in the financial report. An Other Matter paragraph does not include information that the auditor is prohibited from providing by law, regulation or other professional standards, for example, relevant ethical standards relating to confidentiality of information. An Other Matter paragraph also does not include information that is required to be provided by management.
Placement of Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Auditor’s Report (Ref: Para. 9, 11)
The placement of an Emphasis of Matter paragraph or Other Matter paragraph in the auditor’s report depends on the nature of the information to be communicated, and the auditor’s judgement as to the relative significance of such information to intended users compared to other elements required to be reported in accordance with ASA 700. For example:
Emphasis of Matter Paragraphs
When the Emphasis of Matter paragraph relates to the applicable financial reporting framework, including circumstances where the auditor determines that the financial reporting framework prescribed by law or regulation would otherwise be unacceptable,[12] the auditor may consider it necessary to place the paragraph immediately following the Basis of Opinion section to provide appropriate context to the auditor’s opinion.
When a Key Audit Matters section is presented in the auditor’s report, an Emphasis of Matter paragraph may be presented either directly before or after the Key Audit Matters section, based on the auditor’s judgement as to the relative significance of the information included in the Emphasis of Matter paragraph. The auditor may also add further context to the heading “Emphasis of Matter”, such as “Emphasis of Matter–Subsequent Event”, to differentiate the Emphasis of Matter paragraph from the individual matters described in the Key Audit Matters section.
Other Matter Paragraphs
When a Key Audit Matters section is presented in the auditor’s report and an Other Matter paragraph is also considered necessary, the auditor may add further context to the heading “Other Matter”, such as “Other Matter – Scope of the Audit”, to differentiate the Other Matter paragraph from the individual matters described in the Key Audit Matters section.
When an Other Matter paragraph is included to draw users’ attention to a matter relating to Other Reporting Responsibilities addressed in the auditor’s report, the paragraph may be included in the Report on Other Legal and Regulatory Requirements section.
When relevant to all the auditor’s responsibilities or users’ understanding of the auditor’s report, the Other Matter paragraph may be included as a separate section following the Report on the Audit of the Financial Report and the Report on Other Legal and Regulatory Requirements.
Appendix 3 is an illustration of the interaction between the Key Audit Matters section, an Emphasis of Matter paragraph and an Other Matter paragraph when all are presented in the auditor’s report. The illustrative report in Appendix 4 includes an Emphasis of Matter paragraph in an auditor’s report for an entity other than a listed entity that contains a qualified opinion and for which key audit matters have not been communicated.
Communication with Those Charged with Governance (Ref: Para. 12)
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.
Application
Application
Application
Aus 0.1 This Auditing Standard applies to:
(a) an audit of a financial report for a financial year, or an audit of a financial report for a half‑year, in accordance with the Corporations Act 2001; and
(b) an audit of a financial report, or a complete set of financial statements, for any other purpose.
Aus 0.2 This Auditing Standard also applies, as appropriate, to an audit of other historical financial information.
Operative Date
Operative Date
Operative Date
Aus 0.3 This Auditing Standard is operative for financial reporting periods ending on or after 15 December 2016. [Note: For operative dates of paragraphs changed or added by an Amending Standard, see Compilations Details.]
Introduction
Introduction
Auditing Standard ASA 706
The Auditing and Assurance Standards Board (AUASB) made Auditing Standard ASA 706 Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor's Report pursuant to section 227B of the Australian Securities and Investments Commission Act 2001 and section 336 of the Corporations Act 2001, on 1 December 2015.
This compiled version of ASA 706 incorporates subsequent amendments contained in other Auditing Standards made by the AUASB up to and including 15 March 2023 (see Compilation Details).
Auditing Standard ASA 706
Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor's Report
Application
Aus 0.1 This Auditing Standard applies to:
(a) an audit of a financial report for a financial year, or an audit of a financial report for a half‑year, in accordance with the Corporations Act 2001; and
(b) an audit of a financial report, or a complete set of financial statements, for any other purpose.
Aus 0.2 This Auditing Standard also applies, as appropriate, to an audit of other historical financial information.
Operative Date
Aus 0.3 This Auditing Standard is operative for financial reporting periods ending on or after 15 December 2016. [Note: For operative dates of paragraphs changed or added by an Amending Standard, see Compilations Details.]
Introduction
Scope of this Auditing Standard
This Auditing Standard deals with additional communication in the auditor’s report when the auditor considers it necessary to:
Draw users’ attention to a matter or matters presented or disclosed in the financial report that are of such importance that they are fundamental to users’ understanding of the financial report; or
Draw users’ attention to any matter or matters other than those presented or disclosed in the financial report that are relevant to users’ understanding of the audit, the auditor’s responsibilities or the auditor’s report.
ASA 701[1] establishes requirements and provides guidance when the auditor determines key audit matters and communicates them in the auditor’s report. When the auditor includes a Key Audit Matters section in the auditor’s report, this Auditing Standard addresses the relationship between key audit matters and any additional communication in the auditor’s report in accordance with this Auditing Standard. (Ref: Para. A1–A3)
ASA 570[2] and ASA 720[3] establish requirements and provides guidance about communication in the auditor’s report relating to going concern and other information, respectively.
Appendices 1 and 2 of this Auditing Standard identify Australian Auditing Standards that contain specific requirements for the auditor to include Emphasis of Matter paragraphs or Other Matter paragraphs in the auditor’s report. In those circumstances, the requirements in this Auditing Standard regarding the form of such paragraphs apply. (Ref: Para. A4)
Effective Date
[Deleted by the AUASB. Refer Aus 0.3]
Objective
The objective of the auditor, having formed an opinion on the financial report, is to draw users’ attention, when in the auditor’s judgement it is necessary to do so, by way of clear additional communication in the auditor’s report, to:
A matter, although appropriately presented or disclosed in the financial report, that is of such importance that it is fundamental to users’ understanding of the financial report; or
As appropriate, any other matter that is relevant to users’ understanding of the audit, the auditor’s responsibilities or the auditor’s report.
Definitions
For the purposes of this Auditing Standard, the following terms have the meanings attributed below:
Emphasis of Matter paragraph – A paragraph included in the auditor’s report that refers to a matter appropriately presented or disclosed in the financial report that, in the auditor’s judgement, is of such importance that it is fundamental to users’ understanding of the financial report.
Other Matter paragraph – A paragraph included in the auditor’s report that refers to a matter other than those presented or disclosed in the financial report that, in the auditor’s judgement, is relevant to users’ understanding of the audit, the auditor’s responsibilities or the auditor’s report.
Requirements
Emphasis of Matter Paragraphs in the Auditor’s Report
If the auditor considers it necessary to draw users’ attention to a matter presented or disclosed in the financial report that, in the auditor’s judgement, is of such importance that it is fundamental to users’ understanding of the financial report, the auditor shall include an Emphasis of Matter paragraph in the auditor’s report provided: (Ref: Para. A5–A6)
The auditor would not be required to modify the opinion in accordance with ASA 705[4] as a result of the matter; and
When ASA 701 applies, the matter has not been determined to be a key audit matter to be communicated in the auditor’s report. (Ref: Para. A1–A3)
When the auditor includes an Emphasis of Matter paragraph in the auditor’s report, the auditor shall:
Include the paragraph within a separate section of the auditor’s report with an appropriate heading that includes the term “Emphasis of Matter”;
Include in the paragraph a clear reference to the matter being emphasised and to where relevant disclosures that fully describe the matter can be found in the financial report. The paragraph shall refer only to information presented or disclosed in the financial report; and
Indicate that the auditor’s opinion is not modified in respect of the matter emphasised. (Ref: Para. A7–Aus A8.1, A16–A17)
Other Matter Paragraphs in the Auditor’s Report
If the auditor considers it necessary to communicate a matter other than those that are presented or disclosed in the financial report that, in the auditor’s judgement, 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:
This is not prohibited by law or regulation; and
When ASA 701 applies, the matter has not been determined to be a key audit matter to be communicated in the auditor’s report. (Ref: Para. A9–A14)
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. (Ref: Para. A15–A17)
Communication with Those Charged with Governance
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. (Ref: Para. A18)
***
Application and Other Explanatory Material
The Relationship between Emphasis of Matter Paragraphs and Key Audit Matters in the Auditor’s Report (Ref: Para. 2, 8(b))
Key audit matters are defined in ASA 701 as those matters that, in the auditor’s professional judgement, were of most significance in the audit of the financial report of the current period. Key audit matters are selected from matters communicated with those charged with governance, which include significant findings from the audit of the financial report of the current period.[5] Communicating key audit matters provides additional information to intended users of the financial report to assist them in understanding those matters that, in the auditor’s professional judgement, were of most significance in the audit and may also assist them in understanding the entity and areas of significant management judgement in the audited the financial report. When ASA 701 applies, the use of Emphasis of Matter paragraphs is not a substitute for a description of individual key audit matters.
Matters that are determined to be key audit matters in accordance with ASA 701 may also be, in the auditor’s judgement, fundamental to users’ understanding of the financial report. In such cases, in communicating the matter as a key audit matter in accordance with ASA 701, the auditor may wish to highlight or draw further attention to its relative importance. The auditor may do so by presenting the matter more prominently than other matters in the Key Audit Matters section (e.g., as the first matter) or by including additional information in the description of the key audit matter to indicate the importance of the matter to users’ understanding of the financial report.
There may be a matter that is not determined to be a key audit matter in accordance with ASA 701 (i.e., because it did not require significant auditor attention), but which, in the auditor’s judgement, is fundamental to users’ understanding of the financial report (e.g., a subsequent event). If the auditor considers it necessary to draw users’ attention to such a matter, the matter is included in an Emphasis of Matter paragraph in the auditor’s report in accordance with this ASA.
Circumstances in Which an Emphasis of Matter Paragraph May Be Necessary (Ref: Para. 4, 8)
Appendix 1 identifies Australian Auditing Standards that contain specific requirements for the auditor to include Emphasis of Matter paragraphs in the auditor’s report in certain circumstances. These circumstances include:
When the financial reporting framework prescribed by law or regulation would be unacceptable but for the fact that it is prescribed by law or regulation.
To alert users that the financial report is prepared in accordance with a special purpose framework.
When facts become known to the auditor after the date of the auditor’s report and the auditor provides a new or amended auditor’s report (i.e., subsequent events).[6]
Examples of circumstances where the auditor may consider it necessary to include an Emphasis of Matter paragraph are:
An uncertainty relating to the future outcome of exceptional litigation or regulatory action.
A significant subsequent event that occurs between the date of the financial report and the date of the auditor’s report.[7]
Early application (where permitted) of a new accounting standard that has a material effect on the financial report.
A major catastrophe that has had, or continues to have, a significant effect on the entity’s financial position.
However, a widespread use of Emphasis of Matter paragraphs may diminish the effectiveness of the auditor’s communication about such matters.
Including an Emphasis of Matter Paragraph in the Auditor’s Report (Ref: Para. 9)
The inclusion of an Emphasis of Matter paragraph in the auditor’s report does not affect the auditor’s opinion. An Emphasis of Matter paragraph is not a substitute for:
A modified opinion in accordance with ASA 705 when required by the circumstances of a specific audit engagement;
Disclosures in the financial report that the applicable financial reporting framework requires management to make, or that are otherwise necessary to achieve fair presentation; or
Reporting in accordance with ASA 570[8] when a material uncertainty exists relating to events or conditions that may cast significant doubt on an entity’s ability to continue as a going concern.
Paragraphs A16–A17 provide further guidance on the placement of Emphasis of Matter paragraphs in particular circumstances.
Aus A8.1 When an auditor’s report is prepared on a financial report prepared under the Corporations Act 2001 (the Act), section 308(3B) of the Act requires that if the financial report includes additional information under paragraph 295(3)(c) (additional information included to give a true and fair view of the entity’s financial position and performance), the auditor’s report includes the auditor’s opinion on whether the additional information was necessary to give a true and fair view.
Other Matter Paragraphs in the Auditor’s Report (Ref: Para. 10–11)
Circumstances in Which an Other Matter Paragraph May Be Necessary
Relevant to Users’ Understanding of the Audit
ASA 260 requires the auditor to communicate with those charged with governance about the planned scope and timing of the audit, which includes communication about the significant risks identified by the auditor.[9] Although matters relating to significant risks may be determined to be key audit matters, other planning and scoping matters (e.g., the planned scope of the audit, or the application of materiality in the context of the audit) are unlikely to be key audit matters because of how key audit matters are defined in ASA 701. However, law or regulation may require the auditor to communicate about planning and scoping matters in the auditor’s report, or the auditor may consider it necessary to communicate about such matters in an Other Matter paragraph.
In the rare circumstance where the auditor is unable to withdraw from an engagement even though the possible effect of an inability to obtain sufficient appropriate audit evidence due to a limitation on the scope of the audit imposed by management is pervasive,[10] the auditor may consider it necessary to include an Other Matter paragraph in the auditor’s report to explain why it is not possible for the auditor to withdraw from the engagement.
Relevant to Users’ Understanding of the Auditor’s Responsibilities or the Auditor’s Report
Law, regulation or generally accepted practice in a jurisdiction may require or permit the auditor to elaborate on matters that provide further explanation of the auditor’s responsibilities in the audit of the financial report or of the auditor’s report thereon. When the Other Matter section includes more than one matter that, in the auditor’s judgement, is relevant to users’ understanding of the audit, the auditor’s responsibilities or the auditor’s report, it may be helpful to use different sub‑headings for each matter.
An Other Matter paragraph does not deal with circumstances where the auditor has other reporting responsibilities that are in addition to the auditor’s responsibility under the Australian Auditing Standards (see Other Reporting Responsibilities section in ASA 700[11]), or where the auditor has been asked to perform and report on additional specified procedures, or to express an opinion on specific matters.
Reporting on more than one financial report
An entity may prepare one financial report in accordance with a general purpose framework and another financial report in accordance with another general purpose framework (e.g., Australian Accounting Standards), and engage the auditor to report on both sets of the financial report. If the auditor has determined that the frameworks are acceptable in the respective circumstances, the auditor may include an Other Matter paragraph in the auditor’s report, referring to the fact that another financial report has been prepared by the same entity in accordance with another general purpose framework and that the auditor has issued a report on that financial report.
Restriction on distribution or use of the auditor’s report
A financial report prepared for a specific purpose may be prepared in accordance with a general purpose framework because the intended users have determined that such a general purpose financial report meets their financial information needs. Since the auditor’s report is intended for specific users, the auditor may consider it necessary in the circumstances to include an Other Matter paragraph, stating that the auditor’s report is intended solely for the intended users, and should not be distributed to or used by other parties.
Including an Other Matter Paragraph in the Auditor’s Report
The content of an Other Matter paragraph reflects clearly that such other matter is not required to be presented and disclosed in the financial report. An Other Matter paragraph does not include information that the auditor is prohibited from providing by law, regulation or other professional standards, for example, relevant ethical standards relating to confidentiality of information. An Other Matter paragraph also does not include information that is required to be provided by management.
Placement of Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Auditor’s Report (Ref: Para. 9, 11)
The placement of an Emphasis of Matter paragraph or Other Matter paragraph in the auditor’s report depends on the nature of the information to be communicated, and the auditor’s judgement as to the relative significance of such information to intended users compared to other elements required to be reported in accordance with ASA 700. For example:
Emphasis of Matter Paragraphs
When the Emphasis of Matter paragraph relates to the applicable financial reporting framework, including circumstances where the auditor determines that the financial reporting framework prescribed by law or regulation would otherwise be unacceptable,[12] the auditor may consider it necessary to place the paragraph immediately following the Basis of Opinion section to provide appropriate context to the auditor’s opinion.
When a Key Audit Matters section is presented in the auditor’s report, an Emphasis of Matter paragraph may be presented either directly before or after the Key Audit Matters section, based on the auditor’s judgement as to the relative significance of the information included in the Emphasis of Matter paragraph. The auditor may also add further context to the heading “Emphasis of Matter”, such as “Emphasis of Matter–Subsequent Event”, to differentiate the Emphasis of Matter paragraph from the individual matters described in the Key Audit Matters section.
Other Matter Paragraphs
When a Key Audit Matters section is presented in the auditor’s report and an Other Matter paragraph is also considered necessary, the auditor may add further context to the heading “Other Matter”, such as “Other Matter – Scope of the Audit”, to differentiate the Other Matter paragraph from the individual matters described in the Key Audit Matters section.
When an Other Matter paragraph is included to draw users’ attention to a matter relating to Other Reporting Responsibilities addressed in the auditor’s report, the paragraph may be included in the Report on Other Legal and Regulatory Requirements section.
When relevant to all the auditor’s responsibilities or users’ understanding of the auditor’s report, the Other Matter paragraph may be included as a separate section following the Report on the Audit of the Financial Report and the Report on Other Legal and Regulatory Requirements.
Appendix 3 is an illustration of the interaction between the Key Audit Matters section, an Emphasis of Matter paragraph and an Other Matter paragraph when all are presented in the auditor’s report. The illustrative report in Appendix 4 includes an Emphasis of Matter paragraph in an auditor’s report for an entity other than a listed entity that contains a qualified opinion and for which key audit matters have not been communicated.
Communication with Those Charged with Governance (Ref: Para. 12)
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.
Scope of this Auditing Standard
Scope of this Auditing Standard
Scope of this Auditing Standard
This Auditing Standard deals with additional communication in the auditor’s report when the auditor considers it necessary to:
Draw users’ attention to a matter or matters presented or disclosed in the financial report that are of such importance that they are fundamental to users’ understanding of the financial report; or
Draw users’ attention to any matter or matters other than those presented or disclosed in the financial report that are relevant to users’ understanding of the audit, the auditor’s responsibilities or the auditor’s report.
ASA 701[1] establishes requirements and provides guidance when the auditor determines key audit matters and communicates them in the auditor’s report. When the auditor includes a Key Audit Matters section in the auditor’s report, this Auditing Standard addresses the relationship between key audit matters and any additional communication in the auditor’s report in accordance with this Auditing Standard. (Ref: Para. A1–A3)
ASA 570[2] and ASA 720[3] establish requirements and provides guidance about communication in the auditor’s report relating to going concern and other information, respectively.
Appendices 1 and 2 of this Auditing Standard identify Australian Auditing Standards that contain specific requirements for the auditor to include Emphasis of Matter paragraphs or Other Matter paragraphs in the auditor’s report. In those circumstances, the requirements in this Auditing Standard regarding the form of such paragraphs apply. (Ref: Para. A4)
Effective Date
Effective Date
Effective Date
[Deleted by the AUASB. Refer Aus 0.3]
Objective
Objective
Objective
The objective of the auditor, having formed an opinion on the financial report, is to draw users’ attention, when in the auditor’s judgement it is necessary to do so, by way of clear additional communication in the auditor’s report, to:
A matter, although appropriately presented or disclosed in the financial report, that is of such importance that it is fundamental to users’ understanding of the financial report; or
As appropriate, any other matter that is relevant to users’ understanding of the audit, the auditor’s responsibilities or the auditor’s report.
Definitions
Definitions
Definitions
For the purposes of this Auditing Standard, the following terms have the meanings attributed below:
Emphasis of Matter paragraph – A paragraph included in the auditor’s report that refers to a matter appropriately presented or disclosed in the financial report that, in the auditor’s judgement, is of such importance that it is fundamental to users’ understanding of the financial report.
Other Matter paragraph – A paragraph included in the auditor’s report that refers to a matter other than those presented or disclosed in the financial report that, in the auditor’s judgement, is relevant to users’ understanding of the audit, the auditor’s responsibilities or the auditor’s report.
Requirements
Requirements
Auditing Standard ASA 706
The Auditing and Assurance Standards Board (AUASB) made Auditing Standard ASA 706 Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor's Report pursuant to section 227B of the Australian Securities and Investments Commission Act 2001 and section 336 of the Corporations Act 2001, on 1 December 2015.
This compiled version of ASA 706 incorporates subsequent amendments contained in other Auditing Standards made by the AUASB up to and including 15 March 2023 (see Compilation Details).
Auditing Standard ASA 706
Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor's Report
Application
Aus 0.1 This Auditing Standard applies to:
(a) an audit of a financial report for a financial year, or an audit of a financial report for a half‑year, in accordance with the Corporations Act 2001; and
(b) an audit of a financial report, or a complete set of financial statements, for any other purpose.
Aus 0.2 This Auditing Standard also applies, as appropriate, to an audit of other historical financial information.
Operative Date
Aus 0.3 This Auditing Standard is operative for financial reporting periods ending on or after 15 December 2016. [Note: For operative dates of paragraphs changed or added by an Amending Standard, see Compilations Details.]
Introduction
Scope of this Auditing Standard
This Auditing Standard deals with additional communication in the auditor’s report when the auditor considers it necessary to:
Draw users’ attention to a matter or matters presented or disclosed in the financial report that are of such importance that they are fundamental to users’ understanding of the financial report; or
Draw users’ attention to any matter or matters other than those presented or disclosed in the financial report that are relevant to users’ understanding of the audit, the auditor’s responsibilities or the auditor’s report.
ASA 701[1] establishes requirements and provides guidance when the auditor determines key audit matters and communicates them in the auditor’s report. When the auditor includes a Key Audit Matters section in the auditor’s report, this Auditing Standard addresses the relationship between key audit matters and any additional communication in the auditor’s report in accordance with this Auditing Standard. (Ref: Para. A1–A3)
ASA 570[2] and ASA 720[3] establish requirements and provides guidance about communication in the auditor’s report relating to going concern and other information, respectively.
Appendices 1 and 2 of this Auditing Standard identify Australian Auditing Standards that contain specific requirements for the auditor to include Emphasis of Matter paragraphs or Other Matter paragraphs in the auditor’s report. In those circumstances, the requirements in this Auditing Standard regarding the form of such paragraphs apply. (Ref: Para. A4)
Effective Date
[Deleted by the AUASB. Refer Aus 0.3]
Objective
The objective of the auditor, having formed an opinion on the financial report, is to draw users’ attention, when in the auditor’s judgement it is necessary to do so, by way of clear additional communication in the auditor’s report, to:
A matter, although appropriately presented or disclosed in the financial report, that is of such importance that it is fundamental to users’ understanding of the financial report; or
As appropriate, any other matter that is relevant to users’ understanding of the audit, the auditor’s responsibilities or the auditor’s report.
Definitions
For the purposes of this Auditing Standard, the following terms have the meanings attributed below:
Emphasis of Matter paragraph – A paragraph included in the auditor’s report that refers to a matter appropriately presented or disclosed in the financial report that, in the auditor’s judgement, is of such importance that it is fundamental to users’ understanding of the financial report.
Other Matter paragraph – A paragraph included in the auditor’s report that refers to a matter other than those presented or disclosed in the financial report that, in the auditor’s judgement, is relevant to users’ understanding of the audit, the auditor’s responsibilities or the auditor’s report.
Requirements
Emphasis of Matter Paragraphs in the Auditor’s Report
If the auditor considers it necessary to draw users’ attention to a matter presented or disclosed in the financial report that, in the auditor’s judgement, is of such importance that it is fundamental to users’ understanding of the financial report, the auditor shall include an Emphasis of Matter paragraph in the auditor’s report provided: (Ref: Para. A5–A6)
The auditor would not be required to modify the opinion in accordance with ASA 705[4] as a result of the matter; and
When ASA 701 applies, the matter has not been determined to be a key audit matter to be communicated in the auditor’s report. (Ref: Para. A1–A3)
When the auditor includes an Emphasis of Matter paragraph in the auditor’s report, the auditor shall:
Include the paragraph within a separate section of the auditor’s report with an appropriate heading that includes the term “Emphasis of Matter”;
Include in the paragraph a clear reference to the matter being emphasised and to where relevant disclosures that fully describe the matter can be found in the financial report. The paragraph shall refer only to information presented or disclosed in the financial report; and
Indicate that the auditor’s opinion is not modified in respect of the matter emphasised. (Ref: Para. A7–Aus A8.1, A16–A17)
Other Matter Paragraphs in the Auditor’s Report
If the auditor considers it necessary to communicate a matter other than those that are presented or disclosed in the financial report that, in the auditor’s judgement, 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:
This is not prohibited by law or regulation; and
When ASA 701 applies, the matter has not been determined to be a key audit matter to be communicated in the auditor’s report. (Ref: Para. A9–A14)
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. (Ref: Para. A15–A17)
Communication with Those Charged with Governance
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. (Ref: Para. A18)
***
Application and Other Explanatory Material
The Relationship between Emphasis of Matter Paragraphs and Key Audit Matters in the Auditor’s Report (Ref: Para. 2, 8(b))
Key audit matters are defined in ASA 701 as those matters that, in the auditor’s professional judgement, were of most significance in the audit of the financial report of the current period. Key audit matters are selected from matters communicated with those charged with governance, which include significant findings from the audit of the financial report of the current period.[5] Communicating key audit matters provides additional information to intended users of the financial report to assist them in understanding those matters that, in the auditor’s professional judgement, were of most significance in the audit and may also assist them in understanding the entity and areas of significant management judgement in the audited the financial report. When ASA 701 applies, the use of Emphasis of Matter paragraphs is not a substitute for a description of individual key audit matters.
Matters that are determined to be key audit matters in accordance with ASA 701 may also be, in the auditor’s judgement, fundamental to users’ understanding of the financial report. In such cases, in communicating the matter as a key audit matter in accordance with ASA 701, the auditor may wish to highlight or draw further attention to its relative importance. The auditor may do so by presenting the matter more prominently than other matters in the Key Audit Matters section (e.g., as the first matter) or by including additional information in the description of the key audit matter to indicate the importance of the matter to users’ understanding of the financial report.
There may be a matter that is not determined to be a key audit matter in accordance with ASA 701 (i.e., because it did not require significant auditor attention), but which, in the auditor’s judgement, is fundamental to users’ understanding of the financial report (e.g., a subsequent event). If the auditor considers it necessary to draw users’ attention to such a matter, the matter is included in an Emphasis of Matter paragraph in the auditor’s report in accordance with this ASA.
Circumstances in Which an Emphasis of Matter Paragraph May Be Necessary (Ref: Para. 4, 8)
Appendix 1 identifies Australian Auditing Standards that contain specific requirements for the auditor to include Emphasis of Matter paragraphs in the auditor’s report in certain circumstances. These circumstances include:
When the financial reporting framework prescribed by law or regulation would be unacceptable but for the fact that it is prescribed by law or regulation.
To alert users that the financial report is prepared in accordance with a special purpose framework.
When facts become known to the auditor after the date of the auditor’s report and the auditor provides a new or amended auditor’s report (i.e., subsequent events).[6]
Examples of circumstances where the auditor may consider it necessary to include an Emphasis of Matter paragraph are:
An uncertainty relating to the future outcome of exceptional litigation or regulatory action.
A significant subsequent event that occurs between the date of the financial report and the date of the auditor’s report.[7]
Early application (where permitted) of a new accounting standard that has a material effect on the financial report.
A major catastrophe that has had, or continues to have, a significant effect on the entity’s financial position.
However, a widespread use of Emphasis of Matter paragraphs may diminish the effectiveness of the auditor’s communication about such matters.
Including an Emphasis of Matter Paragraph in the Auditor’s Report (Ref: Para. 9)
The inclusion of an Emphasis of Matter paragraph in the auditor’s report does not affect the auditor’s opinion. An Emphasis of Matter paragraph is not a substitute for:
A modified opinion in accordance with ASA 705 when required by the circumstances of a specific audit engagement;
Disclosures in the financial report that the applicable financial reporting framework requires management to make, or that are otherwise necessary to achieve fair presentation; or
Reporting in accordance with ASA 570[8] when a material uncertainty exists relating to events or conditions that may cast significant doubt on an entity’s ability to continue as a going concern.
Paragraphs A16–A17 provide further guidance on the placement of Emphasis of Matter paragraphs in particular circumstances.
Aus A8.1 When an auditor’s report is prepared on a financial report prepared under the Corporations Act 2001 (the Act), section 308(3B) of the Act requires that if the financial report includes additional information under paragraph 295(3)(c) (additional information included to give a true and fair view of the entity’s financial position and performance), the auditor’s report includes the auditor’s opinion on whether the additional information was necessary to give a true and fair view.
Other Matter Paragraphs in the Auditor’s Report (Ref: Para. 10–11)
Circumstances in Which an Other Matter Paragraph May Be Necessary
Relevant to Users’ Understanding of the Audit
ASA 260 requires the auditor to communicate with those charged with governance about the planned scope and timing of the audit, which includes communication about the significant risks identified by the auditor.[9] Although matters relating to significant risks may be determined to be key audit matters, other planning and scoping matters (e.g., the planned scope of the audit, or the application of materiality in the context of the audit) are unlikely to be key audit matters because of how key audit matters are defined in ASA 701. However, law or regulation may require the auditor to communicate about planning and scoping matters in the auditor’s report, or the auditor may consider it necessary to communicate about such matters in an Other Matter paragraph.
In the rare circumstance where the auditor is unable to withdraw from an engagement even though the possible effect of an inability to obtain sufficient appropriate audit evidence due to a limitation on the scope of the audit imposed by management is pervasive,[10] the auditor may consider it necessary to include an Other Matter paragraph in the auditor’s report to explain why it is not possible for the auditor to withdraw from the engagement.
Relevant to Users’ Understanding of the Auditor’s Responsibilities or the Auditor’s Report
Law, regulation or generally accepted practice in a jurisdiction may require or permit the auditor to elaborate on matters that provide further explanation of the auditor’s responsibilities in the audit of the financial report or of the auditor’s report thereon. When the Other Matter section includes more than one matter that, in the auditor’s judgement, is relevant to users’ understanding of the audit, the auditor’s responsibilities or the auditor’s report, it may be helpful to use different sub‑headings for each matter.
An Other Matter paragraph does not deal with circumstances where the auditor has other reporting responsibilities that are in addition to the auditor’s responsibility under the Australian Auditing Standards (see Other Reporting Responsibilities section in ASA 700[11]), or where the auditor has been asked to perform and report on additional specified procedures, or to express an opinion on specific matters.
Reporting on more than one financial report
An entity may prepare one financial report in accordance with a general purpose framework and another financial report in accordance with another general purpose framework (e.g., Australian Accounting Standards), and engage the auditor to report on both sets of the financial report. If the auditor has determined that the frameworks are acceptable in the respective circumstances, the auditor may include an Other Matter paragraph in the auditor’s report, referring to the fact that another financial report has been prepared by the same entity in accordance with another general purpose framework and that the auditor has issued a report on that financial report.
Restriction on distribution or use of the auditor’s report
A financial report prepared for a specific purpose may be prepared in accordance with a general purpose framework because the intended users have determined that such a general purpose financial report meets their financial information needs. Since the auditor’s report is intended for specific users, the auditor may consider it necessary in the circumstances to include an Other Matter paragraph, stating that the auditor’s report is intended solely for the intended users, and should not be distributed to or used by other parties.
Including an Other Matter Paragraph in the Auditor’s Report
The content of an Other Matter paragraph reflects clearly that such other matter is not required to be presented and disclosed in the financial report. An Other Matter paragraph does not include information that the auditor is prohibited from providing by law, regulation or other professional standards, for example, relevant ethical standards relating to confidentiality of information. An Other Matter paragraph also does not include information that is required to be provided by management.
Placement of Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Auditor’s Report (Ref: Para. 9, 11)
The placement of an Emphasis of Matter paragraph or Other Matter paragraph in the auditor’s report depends on the nature of the information to be communicated, and the auditor’s judgement as to the relative significance of such information to intended users compared to other elements required to be reported in accordance with ASA 700. For example:
Emphasis of Matter Paragraphs
When the Emphasis of Matter paragraph relates to the applicable financial reporting framework, including circumstances where the auditor determines that the financial reporting framework prescribed by law or regulation would otherwise be unacceptable,[12] the auditor may consider it necessary to place the paragraph immediately following the Basis of Opinion section to provide appropriate context to the auditor’s opinion.
When a Key Audit Matters section is presented in the auditor’s report, an Emphasis of Matter paragraph may be presented either directly before or after the Key Audit Matters section, based on the auditor’s judgement as to the relative significance of the information included in the Emphasis of Matter paragraph. The auditor may also add further context to the heading “Emphasis of Matter”, such as “Emphasis of Matter–Subsequent Event”, to differentiate the Emphasis of Matter paragraph from the individual matters described in the Key Audit Matters section.
Other Matter Paragraphs
When a Key Audit Matters section is presented in the auditor’s report and an Other Matter paragraph is also considered necessary, the auditor may add further context to the heading “Other Matter”, such as “Other Matter – Scope of the Audit”, to differentiate the Other Matter paragraph from the individual matters described in the Key Audit Matters section.
When an Other Matter paragraph is included to draw users’ attention to a matter relating to Other Reporting Responsibilities addressed in the auditor’s report, the paragraph may be included in the Report on Other Legal and Regulatory Requirements section.
When relevant to all the auditor’s responsibilities or users’ understanding of the auditor’s report, the Other Matter paragraph may be included as a separate section following the Report on the Audit of the Financial Report and the Report on Other Legal and Regulatory Requirements.
Appendix 3 is an illustration of the interaction between the Key Audit Matters section, an Emphasis of Matter paragraph and an Other Matter paragraph when all are presented in the auditor’s report. The illustrative report in Appendix 4 includes an Emphasis of Matter paragraph in an auditor’s report for an entity other than a listed entity that contains a qualified opinion and for which key audit matters have not been communicated.
Communication with Those Charged with Governance (Ref: Para. 12)
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.
Emphasis of Matter Paragraphs in the Aud
Emphasis of Matter Paragraphs in the Auditor’s Report
Emphasis of Matter Paragraphs in the Auditor’s Report
If the auditor considers it necessary to draw users’ attention to a matter presented or disclosed in the financial report that, in the auditor’s judgement, is of such importance that it is fundamental to users’ understanding of the financial report, the auditor shall include an Emphasis of Matter paragraph in the auditor’s report provided: (Ref: Para. A5–A6)
The auditor would not be required to modify the opinion in accordance with ASA 705[4] as a result of the matter; and
When ASA 701 applies, the matter has not been determined to be a key audit matter to be communicated in the auditor’s report. (Ref: Para. A1–A3)
When the auditor includes an Emphasis of Matter paragraph in the auditor’s report, the auditor shall:
Include the paragraph within a separate section of the auditor’s report with an appropriate heading that includes the term “Emphasis of Matter”;
Include in the paragraph a clear reference to the matter being emphasised and to where relevant disclosures that fully describe the matter can be found in the financial report. The paragraph shall refer only to information presented or disclosed in the financial report; and
Indicate that the auditor’s opinion is not modified in respect of the matter emphasised. (Ref: Para. A7–Aus A8.1, A16–A17)
Other Matter Paragraphs in the Auditor’s
Other Matter Paragraphs in the Auditor’s Report
Other Matter Paragraphs in the Auditor’s Report
If the auditor considers it necessary to communicate a matter other than those that are presented or disclosed in the financial report that, in the auditor’s judgement, 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:
This is not prohibited by law or regulation; and
When ASA 701 applies, the matter has not been determined to be a key audit matter to be communicated in the auditor’s report. (Ref: Para. A9–A14)
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. (Ref: Para. A15–A17)
Communication with Those Charged with Go
Communication with Those Charged with Governance
Communication with Those Charged with Governance
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. (Ref: Para. A18)
***
Application and Other Explanatory Materi
Application and Other Explanatory Material
Auditing Standard ASA 706
The Auditing and Assurance Standards Board (AUASB) made Auditing Standard ASA 706 Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor's Report pursuant to section 227B of the Australian Securities and Investments Commission Act 2001 and section 336 of the Corporations Act 2001, on 1 December 2015.
This compiled version of ASA 706 incorporates subsequent amendments contained in other Auditing Standards made by the AUASB up to and including 15 March 2023 (see Compilation Details).
Auditing Standard ASA 706
Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor's Report
Application
Aus 0.1 This Auditing Standard applies to:
(a) an audit of a financial report for a financial year, or an audit of a financial report for a half‑year, in accordance with the Corporations Act 2001; and
(b) an audit of a financial report, or a complete set of financial statements, for any other purpose.
Aus 0.2 This Auditing Standard also applies, as appropriate, to an audit of other historical financial information.
Operative Date
Aus 0.3 This Auditing Standard is operative for financial reporting periods ending on or after 15 December 2016. [Note: For operative dates of paragraphs changed or added by an Amending Standard, see Compilations Details.]
Introduction
Scope of this Auditing Standard
This Auditing Standard deals with additional communication in the auditor’s report when the auditor considers it necessary to:
Draw users’ attention to a matter or matters presented or disclosed in the financial report that are of such importance that they are fundamental to users’ understanding of the financial report; or
Draw users’ attention to any matter or matters other than those presented or disclosed in the financial report that are relevant to users’ understanding of the audit, the auditor’s responsibilities or the auditor’s report.
ASA 701[1] establishes requirements and provides guidance when the auditor determines key audit matters and communicates them in the auditor’s report. When the auditor includes a Key Audit Matters section in the auditor’s report, this Auditing Standard addresses the relationship between key audit matters and any additional communication in the auditor’s report in accordance with this Auditing Standard. (Ref: Para. A1–A3)
ASA 570[2] and ASA 720[3] establish requirements and provides guidance about communication in the auditor’s report relating to going concern and other information, respectively.
Appendices 1 and 2 of this Auditing Standard identify Australian Auditing Standards that contain specific requirements for the auditor to include Emphasis of Matter paragraphs or Other Matter paragraphs in the auditor’s report. In those circumstances, the requirements in this Auditing Standard regarding the form of such paragraphs apply. (Ref: Para. A4)
Effective Date
[Deleted by the AUASB. Refer Aus 0.3]
Objective
The objective of the auditor, having formed an opinion on the financial report, is to draw users’ attention, when in the auditor’s judgement it is necessary to do so, by way of clear additional communication in the auditor’s report, to:
A matter, although appropriately presented or disclosed in the financial report, that is of such importance that it is fundamental to users’ understanding of the financial report; or
As appropriate, any other matter that is relevant to users’ understanding of the audit, the auditor’s responsibilities or the auditor’s report.
Definitions
For the purposes of this Auditing Standard, the following terms have the meanings attributed below:
Emphasis of Matter paragraph – A paragraph included in the auditor’s report that refers to a matter appropriately presented or disclosed in the financial report that, in the auditor’s judgement, is of such importance that it is fundamental to users’ understanding of the financial report.
Other Matter paragraph – A paragraph included in the auditor’s report that refers to a matter other than those presented or disclosed in the financial report that, in the auditor’s judgement, is relevant to users’ understanding of the audit, the auditor’s responsibilities or the auditor’s report.
Requirements
Emphasis of Matter Paragraphs in the Auditor’s Report
If the auditor considers it necessary to draw users’ attention to a matter presented or disclosed in the financial report that, in the auditor’s judgement, is of such importance that it is fundamental to users’ understanding of the financial report, the auditor shall include an Emphasis of Matter paragraph in the auditor’s report provided: (Ref: Para. A5–A6)
The auditor would not be required to modify the opinion in accordance with ASA 705[4] as a result of the matter; and
When ASA 701 applies, the matter has not been determined to be a key audit matter to be communicated in the auditor’s report. (Ref: Para. A1–A3)
When the auditor includes an Emphasis of Matter paragraph in the auditor’s report, the auditor shall:
Include the paragraph within a separate section of the auditor’s report with an appropriate heading that includes the term “Emphasis of Matter”;
Include in the paragraph a clear reference to the matter being emphasised and to where relevant disclosures that fully describe the matter can be found in the financial report. The paragraph shall refer only to information presented or disclosed in the financial report; and
Indicate that the auditor’s opinion is not modified in respect of the matter emphasised. (Ref: Para. A7–Aus A8.1, A16–A17)
Other Matter Paragraphs in the Auditor’s Report
If the auditor considers it necessary to communicate a matter other than those that are presented or disclosed in the financial report that, in the auditor’s judgement, 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:
This is not prohibited by law or regulation; and
When ASA 701 applies, the matter has not been determined to be a key audit matter to be communicated in the auditor’s report. (Ref: Para. A9–A14)
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. (Ref: Para. A15–A17)
Communication with Those Charged with Governance
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. (Ref: Para. A18)
***
Application and Other Explanatory Material
The Relationship between Emphasis of Matter Paragraphs and Key Audit Matters in the Auditor’s Report (Ref: Para. 2, 8(b))
Key audit matters are defined in ASA 701 as those matters that, in the auditor’s professional judgement, were of most significance in the audit of the financial report of the current period. Key audit matters are selected from matters communicated with those charged with governance, which include significant findings from the audit of the financial report of the current period.[5] Communicating key audit matters provides additional information to intended users of the financial report to assist them in understanding those matters that, in the auditor’s professional judgement, were of most significance in the audit and may also assist them in understanding the entity and areas of significant management judgement in the audited the financial report. When ASA 701 applies, the use of Emphasis of Matter paragraphs is not a substitute for a description of individual key audit matters.
Matters that are determined to be key audit matters in accordance with ASA 701 may also be, in the auditor’s judgement, fundamental to users’ understanding of the financial report. In such cases, in communicating the matter as a key audit matter in accordance with ASA 701, the auditor may wish to highlight or draw further attention to its relative importance. The auditor may do so by presenting the matter more prominently than other matters in the Key Audit Matters section (e.g., as the first matter) or by including additional information in the description of the key audit matter to indicate the importance of the matter to users’ understanding of the financial report.
There may be a matter that is not determined to be a key audit matter in accordance with ASA 701 (i.e., because it did not require significant auditor attention), but which, in the auditor’s judgement, is fundamental to users’ understanding of the financial report (e.g., a subsequent event). If the auditor considers it necessary to draw users’ attention to such a matter, the matter is included in an Emphasis of Matter paragraph in the auditor’s report in accordance with this ASA.
Circumstances in Which an Emphasis of Matter Paragraph May Be Necessary (Ref: Para. 4, 8)
Appendix 1 identifies Australian Auditing Standards that contain specific requirements for the auditor to include Emphasis of Matter paragraphs in the auditor’s report in certain circumstances. These circumstances include:
When the financial reporting framework prescribed by law or regulation would be unacceptable but for the fact that it is prescribed by law or regulation.
To alert users that the financial report is prepared in accordance with a special purpose framework.
When facts become known to the auditor after the date of the auditor’s report and the auditor provides a new or amended auditor’s report (i.e., subsequent events).[6]
Examples of circumstances where the auditor may consider it necessary to include an Emphasis of Matter paragraph are:
An uncertainty relating to the future outcome of exceptional litigation or regulatory action.
A significant subsequent event that occurs between the date of the financial report and the date of the auditor’s report.[7]
Early application (where permitted) of a new accounting standard that has a material effect on the financial report.
A major catastrophe that has had, or continues to have, a significant effect on the entity’s financial position.
However, a widespread use of Emphasis of Matter paragraphs may diminish the effectiveness of the auditor’s communication about such matters.
Including an Emphasis of Matter Paragraph in the Auditor’s Report (Ref: Para. 9)
The inclusion of an Emphasis of Matter paragraph in the auditor’s report does not affect the auditor’s opinion. An Emphasis of Matter paragraph is not a substitute for:
A modified opinion in accordance with ASA 705 when required by the circumstances of a specific audit engagement;
Disclosures in the financial report that the applicable financial reporting framework requires management to make, or that are otherwise necessary to achieve fair presentation; or
Reporting in accordance with ASA 570[8] when a material uncertainty exists relating to events or conditions that may cast significant doubt on an entity’s ability to continue as a going concern.
Paragraphs A16–A17 provide further guidance on the placement of Emphasis of Matter paragraphs in particular circumstances.
Aus A8.1 When an auditor’s report is prepared on a financial report prepared under the Corporations Act 2001 (the Act), section 308(3B) of the Act requires that if the financial report includes additional information under paragraph 295(3)(c) (additional information included to give a true and fair view of the entity’s financial position and performance), the auditor’s report includes the auditor’s opinion on whether the additional information was necessary to give a true and fair view.
Other Matter Paragraphs in the Auditor’s Report (Ref: Para. 10–11)
Circumstances in Which an Other Matter Paragraph May Be Necessary
Relevant to Users’ Understanding of the Audit
ASA 260 requires the auditor to communicate with those charged with governance about the planned scope and timing of the audit, which includes communication about the significant risks identified by the auditor.[9] Although matters relating to significant risks may be determined to be key audit matters, other planning and scoping matters (e.g., the planned scope of the audit, or the application of materiality in the context of the audit) are unlikely to be key audit matters because of how key audit matters are defined in ASA 701. However, law or regulation may require the auditor to communicate about planning and scoping matters in the auditor’s report, or the auditor may consider it necessary to communicate about such matters in an Other Matter paragraph.
In the rare circumstance where the auditor is unable to withdraw from an engagement even though the possible effect of an inability to obtain sufficient appropriate audit evidence due to a limitation on the scope of the audit imposed by management is pervasive,[10] the auditor may consider it necessary to include an Other Matter paragraph in the auditor’s report to explain why it is not possible for the auditor to withdraw from the engagement.
Relevant to Users’ Understanding of the Auditor’s Responsibilities or the Auditor’s Report
Law, regulation or generally accepted practice in a jurisdiction may require or permit the auditor to elaborate on matters that provide further explanation of the auditor’s responsibilities in the audit of the financial report or of the auditor’s report thereon. When the Other Matter section includes more than one matter that, in the auditor’s judgement, is relevant to users’ understanding of the audit, the auditor’s responsibilities or the auditor’s report, it may be helpful to use different sub‑headings for each matter.
An Other Matter paragraph does not deal with circumstances where the auditor has other reporting responsibilities that are in addition to the auditor’s responsibility under the Australian Auditing Standards (see Other Reporting Responsibilities section in ASA 700[11]), or where the auditor has been asked to perform and report on additional specified procedures, or to express an opinion on specific matters.
Reporting on more than one financial report
An entity may prepare one financial report in accordance with a general purpose framework and another financial report in accordance with another general purpose framework (e.g., Australian Accounting Standards), and engage the auditor to report on both sets of the financial report. If the auditor has determined that the frameworks are acceptable in the respective circumstances, the auditor may include an Other Matter paragraph in the auditor’s report, referring to the fact that another financial report has been prepared by the same entity in accordance with another general purpose framework and that the auditor has issued a report on that financial report.
Restriction on distribution or use of the auditor’s report
A financial report prepared for a specific purpose may be prepared in accordance with a general purpose framework because the intended users have determined that such a general purpose financial report meets their financial information needs. Since the auditor’s report is intended for specific users, the auditor may consider it necessary in the circumstances to include an Other Matter paragraph, stating that the auditor’s report is intended solely for the intended users, and should not be distributed to or used by other parties.
Including an Other Matter Paragraph in the Auditor’s Report
The content of an Other Matter paragraph reflects clearly that such other matter is not required to be presented and disclosed in the financial report. An Other Matter paragraph does not include information that the auditor is prohibited from providing by law, regulation or other professional standards, for example, relevant ethical standards relating to confidentiality of information. An Other Matter paragraph also does not include information that is required to be provided by management.
Placement of Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Auditor’s Report (Ref: Para. 9, 11)
The placement of an Emphasis of Matter paragraph or Other Matter paragraph in the auditor’s report depends on the nature of the information to be communicated, and the auditor’s judgement as to the relative significance of such information to intended users compared to other elements required to be reported in accordance with ASA 700. For example:
Emphasis of Matter Paragraphs
When the Emphasis of Matter paragraph relates to the applicable financial reporting framework, including circumstances where the auditor determines that the financial reporting framework prescribed by law or regulation would otherwise be unacceptable,[12] the auditor may consider it necessary to place the paragraph immediately following the Basis of Opinion section to provide appropriate context to the auditor’s opinion.
When a Key Audit Matters section is presented in the auditor’s report, an Emphasis of Matter paragraph may be presented either directly before or after the Key Audit Matters section, based on the auditor’s judgement as to the relative significance of the information included in the Emphasis of Matter paragraph. The auditor may also add further context to the heading “Emphasis of Matter”, such as “Emphasis of Matter–Subsequent Event”, to differentiate the Emphasis of Matter paragraph from the individual matters described in the Key Audit Matters section.
Other Matter Paragraphs
When a Key Audit Matters section is presented in the auditor’s report and an Other Matter paragraph is also considered necessary, the auditor may add further context to the heading “Other Matter”, such as “Other Matter – Scope of the Audit”, to differentiate the Other Matter paragraph from the individual matters described in the Key Audit Matters section.
When an Other Matter paragraph is included to draw users’ attention to a matter relating to Other Reporting Responsibilities addressed in the auditor’s report, the paragraph may be included in the Report on Other Legal and Regulatory Requirements section.
When relevant to all the auditor’s responsibilities or users’ understanding of the auditor’s report, the Other Matter paragraph may be included as a separate section following the Report on the Audit of the Financial Report and the Report on Other Legal and Regulatory Requirements.
Appendix 3 is an illustration of the interaction between the Key Audit Matters section, an Emphasis of Matter paragraph and an Other Matter paragraph when all are presented in the auditor’s report. The illustrative report in Appendix 4 includes an Emphasis of Matter paragraph in an auditor’s report for an entity other than a listed entity that contains a qualified opinion and for which key audit matters have not been communicated.
Communication with Those Charged with Governance (Ref: Para. 12)
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.
The Relationship between Emphasis of Mat
The Relationship between Emphasis of Matter Paragraphs and Key Audit Matters in the Auditor’s Report (Ref: Para. 2, 8(b))
The Relationship between Emphasis of Matter Paragraphs and Key Audit Matters in the Auditor’s Report (Ref: Para. 2, 8(b))
Key audit matters are defined in ASA 701 as those matters that, in the auditor’s professional judgement, were of most significance in the audit of the financial report of the current period. Key audit matters are selected from matters communicated with those charged with governance, which include significant findings from the audit of the financial report of the current period.[5] Communicating key audit matters provides additional information to intended users of the financial report to assist them in understanding those matters that, in the auditor’s professional judgement, were of most significance in the audit and may also assist them in understanding the entity and areas of significant management judgement in the audited the financial report. When ASA 701 applies, the use of Emphasis of Matter paragraphs is not a substitute for a description of individual key audit matters.
Matters that are determined to be key audit matters in accordance with ASA 701 may also be, in the auditor’s judgement, fundamental to users’ understanding of the financial report. In such cases, in communicating the matter as a key audit matter in accordance with ASA 701, the auditor may wish to highlight or draw further attention to its relative importance. The auditor may do so by presenting the matter more prominently than other matters in the Key Audit Matters section (e.g., as the first matter) or by including additional information in the description of the key audit matter to indicate the importance of the matter to users’ understanding of the financial report.
There may be a matter that is not determined to be a key audit matter in accordance with ASA 701 (i.e., because it did not require significant auditor attention), but which, in the auditor’s judgement, is fundamental to users’ understanding of the financial report (e.g., a subsequent event). If the auditor considers it necessary to draw users’ attention to such a matter, the matter is included in an Emphasis of Matter paragraph in the auditor’s report in accordance with this ASA.
Circumstances in Which an Emphasis of Ma
Circumstances in Which an Emphasis of Matter Paragraph May Be Necessary (Ref: Para. 4, 8)
Circumstances in Which an Emphasis of Matter Paragraph May Be Necessary (Ref: Para. 4, 8)
Appendix 1 identifies Australian Auditing Standards that contain specific requirements for the auditor to include Emphasis of Matter paragraphs in the auditor’s report in certain circumstances. These circumstances include:
When the financial reporting framework prescribed by law or regulation would be unacceptable but for the fact that it is prescribed by law or regulation.
To alert users that the financial report is prepared in accordance with a special purpose framework.
When facts become known to the auditor after the date of the auditor’s report and the auditor provides a new or amended auditor’s report (i.e., subsequent events).[6]
Examples of circumstances where the auditor may consider it necessary to include an Emphasis of Matter paragraph are:
An uncertainty relating to the future outcome of exceptional litigation or regulatory action.
A significant subsequent event that occurs between the date of the financial report and the date of the auditor’s report.[7]
Early application (where permitted) of a new accounting standard that has a material effect on the financial report.
A major catastrophe that has had, or continues to have, a significant effect on the entity’s financial position.
However, a widespread use of Emphasis of Matter paragraphs may diminish the effectiveness of the auditor’s communication about such matters.
Including an Emphasis of Matter Paragrap
Including an Emphasis of Matter Paragraph in the Auditor’s Report (Ref: Para. 9)
Including an Emphasis of Matter Paragraph in the Auditor’s Report (Ref: Para. 9)
The inclusion of an Emphasis of Matter paragraph in the auditor’s report does not affect the auditor’s opinion. An Emphasis of Matter paragraph is not a substitute for:
A modified opinion in accordance with ASA 705 when required by the circumstances of a specific audit engagement;
Disclosures in the financial report that the applicable financial reporting framework requires management to make, or that are otherwise necessary to achieve fair presentation; or
Reporting in accordance with ASA 570[8] when a material uncertainty exists relating to events or conditions that may cast significant doubt on an entity’s ability to continue as a going concern.
Paragraphs A16–A17 provide further guidance on the placement of Emphasis of Matter paragraphs in particular circumstances.
Aus A8.1 When an auditor’s report is prepared on a financial report prepared under the Corporations Act 2001 (the Act), section 308(3B) of the Act requires that if the financial report includes additional information under paragraph 295(3)(c) (additional information included to give a true and fair view of the entity’s financial position and performance), the auditor’s report includes the auditor’s opinion on whether the additional information was necessary to give a true and fair view.
Placement of Emphasis of Matter Paragrap
Placement of Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Auditor’s Report (Ref: Para. 9, 11)
Placement of Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Auditor’s Report (Ref: Para. 9, 11)
The placement of an Emphasis of Matter paragraph or Other Matter paragraph in the auditor’s report depends on the nature of the information to be communicated, and the auditor’s judgement as to the relative significance of such information to intended users compared to other elements required to be reported in accordance with ASA 700. For example:
Emphasis of Matter Paragraphs
When the Emphasis of Matter paragraph relates to the applicable financial reporting framework, including circumstances where the auditor determines that the financial reporting framework prescribed by law or regulation would otherwise be unacceptable,[12] the auditor may consider it necessary to place the paragraph immediately following the Basis of Opinion section to provide appropriate context to the auditor’s opinion.
When a Key Audit Matters section is presented in the auditor’s report, an Emphasis of Matter paragraph may be presented either directly before or after the Key Audit Matters section, based on the auditor’s judgement as to the relative significance of the information included in the Emphasis of Matter paragraph. The auditor may also add further context to the heading “Emphasis of Matter”, such as “Emphasis of Matter–Subsequent Event”, to differentiate the Emphasis of Matter paragraph from the individual matters described in the Key Audit Matters section.
Other Matter Paragraphs
When a Key Audit Matters section is presented in the auditor’s report and an Other Matter paragraph is also considered necessary, the auditor may add further context to the heading “Other Matter”, such as “Other Matter – Scope of the Audit”, to differentiate the Other Matter paragraph from the individual matters described in the Key Audit Matters section.
When an Other Matter paragraph is included to draw users’ attention to a matter relating to Other Reporting Responsibilities addressed in the auditor’s report, the paragraph may be included in the Report on Other Legal and Regulatory Requirements section.
When relevant to all the auditor’s responsibilities or users’ understanding of the auditor’s report, the Other Matter paragraph may be included as a separate section following the Report on the Audit of the Financial Report and the Report on Other Legal and Regulatory Requirements.
Appendix 3 is an illustration of the interaction between the Key Audit Matters section, an Emphasis of Matter paragraph and an Other Matter paragraph when all are presented in the auditor’s report. The illustrative report in Appendix 4 includes an Emphasis of Matter paragraph in an auditor’s report for an entity other than a listed entity that contains a qualified opinion and for which key audit matters have not been communicated.
List of Australian auditing standards Co
List of Australian auditing standards Containing Requirements for Emphasis of Matter Paragraphs
List of Australian auditing standards Containing Requirements for Emphasis of Matter Paragraphs
This appendix identifies paragraphs in other Australian Auditing Standards that require the auditor to include an Emphasis of Matter paragraph in the auditor’s report in certain circumstances. The list is not a substitute for considering the requirements and related application and other explanatory material in Australian Auditing Standards.
ASA 210 Agreeing the Terms of Audit Engagements – paragraph 19(b).
ASA 560 Subsequent Events – paragraphs 12(b) and 16.
ASA 800 Special Considerations—Audits of a Financial Report Prepared in Accordance with Special Purpose Frameworks – paragraph 14.
List of australian auditing standards Co
List of australian auditing standards Containing Requirements for Other Matter Paragraphs
List of australian auditing standards Containing Requirements for Other Matter Paragraphs
This appendix identifies paragraphs in other Australian Auditing Standards that require the auditor to include an Other Matter paragraph in the auditor’s report in certain circumstances. The list is not a substitute for considering the requirements and related application and other explanatory material in Australian Auditing Standards.
ASA 560 Subsequent Events – paragraphs 12(b) and 16.
ASA 710 Comparative Information—Corresponding Figures and Comparative Financial Reports – paragraphs 13–14, 16–17 and 19.
ASA 720 The Auditor’s Responsibilities Relating to Other Information – paragraph 10(a).
Illustration of an Auditor’s Report that
Illustration of an Auditor’s Report that Includes a Key Audit Matters Section, an Emphasis of Matter Paragraph, and an Other Matter Paragraph
Illustration of an Auditor’s Report that Includes a Key Audit Matters Section, an Emphasis of Matter Paragraph, and an Other Matter Paragraph
Example Auditor’s Report
Single Company—Corporations Act 2001
(Fair Presentation Framework)
[Aus] Illustration 1A:
For purposes of this illustrative auditor’s report, the following circumstances are assumed:
Audit of a single listed company’s financial report using a fair presentation framework. The audit is not a group audit (i.e., ASA 600[*] does not apply).
The financial report is prepared by the directors of the company in accordance with Australian Accounting Standards (a general purpose framework) and under the Corporations Act 2001.
The terms of the audit engagement reflect the description of the directors’ responsibility for the financial report in ASA 210.
The auditor has concluded an unmodified (i.e., “clean”) opinion is appropriate based on the audit evidence obtained.
The relevant ethical requirements that apply to the audit are the Accounting Professional & Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards).
Based on the audit evidence obtained, the auditor has concluded that a material uncertainty does not exist related to events or conditions that may cast significant doubt on the company’s ability to continue as a going concern in accordance with ASA 570.
Between the date of the financial report and the date of the auditor’s report, there was a fire in the company’s production facilities, which was disclosed by the company as a subsequent event. In the auditor’s judgement, the matter is of such importance that it is fundamental to users’ understanding of the financial report. The matter did not require significant auditor attention in the audit of the financial report in the current period.
Key audit matters have been communicated in accordance with ASA 701.
The auditor has obtained all of the other information prior to the date of the auditor’s report and has not identified a material misstatement of the other information.
Corresponding figures are presented, and the prior period’s financial report was audited by a predecessor auditor. The auditor is not prohibited by law or regulation from referring to the predecessor auditor’s report on the corresponding figures and has decided to do so.
In addition to the audit of the financial report, the auditor has other reporting responsibilities required under section 308(3C) of the Corporations Act 2001.
We have audited the financial report of ABC Company Ltd. (the Company), which comprises the statement of financial position as at 30 June 20X1, the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including material accounting policy information, and the directors’ declaration.
In our opinion, the accompanying financial report of ABC Company Ltd., is in accordance with the Corporations Act 2001, including:
giving a true and fair view of the company’s financial position as at 30 June 20X1 and of its financial performance for the year then ended; and
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of a Financial Report section of our report. We are independent of the Company in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company would be in the same terms if given to the directors as at the time of this auditor’s report.[#]
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We draw attention to Note X of the financial report, which describes the effects of a fire in the Company’s production facilities. Our opinion is not modified in respect of this matter.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
[Description of each key audit matter in accordance with ASA 701.]
Other Information [or another title if appropriate such as “Information Other than the Financial Report and Auditor’s Report Thereon”]
[Reporting in accordance with the reporting requirements in ASA 720 – see [Aus] Illustration 1A in Appendix 3 of ASA 720.]
Other Matter
The financial report of ABC Company Ltd., for the year ended 30 June 20X0, was audited by another auditor who expressed an unmodified opinion on that report on 31 August 20X1.
Responsibilities of the Directors for the Financial Report[*]
[Reporting in accordance with ASA 700 – see [Aus] Illustration 1A in ASA 700.]
Auditor’s Responsibilities for the Audit of the Financial Report
[Reporting in accordance with ASA 700 – see [Aus] Illustration 1A in ASA 700.]
Report on Other Legal and Regulatory Requirements
[Reporting in accordance with ASA 700 – see [Aus] Illustration 1A in ASA 700.]
Illustration of an Auditor’s Report Containing a Qualified Opinion Due to a Departure from the Applicable Financial Reporting Framework and that Includes an Emphasis of Matter Paragraph
Illustration of an Auditor’s Report Containing a Qualified Opinion Due to a Departure from the Applicable Financial Reporting Framework and that Includes an Emphasis of Matter Paragraph
Example Auditor’s Report
Single Entity (not listed)
(Fair Presentation Framework)
[Aus] Illustration 2A
For purposes of this illustrative auditor’s report, the following circumstances are assumed:
Audit of a financial report of an entity other than a listed entity using a fair presentation framework. The audit is not a group audit (i.e., ASA 600 does not apply).
The financial report is prepared by management of the entity in accordance with Australian Accounting Standards (a general purpose framework). The financial report is not prepared in accordance with the Corporations Act 2001.
The terms of the audit engagement reflect the description of management’s responsibility for the financial report in ASA 210.
A departure from the applicable financial reporting framework resulted in a qualified opinion.
The relevant ethical requirements that apply to the audit are the Accounting Professional & Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards).
Based on the audit evidence obtained, the auditor has concluded that a material uncertainty does not exist related to events or conditions that may cast significant doubt on the entity’s ability to continue as a going concern in accordance with ASA 570.
Between the date of the financial report and the date of the auditor’s report, there was a fire in the entity’s production facilities, which was disclosed by the entity as a subsequent event. In the auditor’s judgement, the matter is of such importance that it is fundamental to users’ understanding of the financial report. The matter did not require significant auditor attention in the audit of the financial report in the current period.
The auditor is not required, and has otherwise not decided, to communicate key audit matters in accordance with ASA 701.
The auditor has not obtained any other information prior to the date of the auditor’s report.
Those responsible for oversight of the financial report differ from those responsible for the preparation of the financial report.
In addition to the audit of the financial report, the auditor has other reporting responsibilities required under law.
INDEPENDENT AUDITOR’S REPORT
To the Members of ABC Entity [or Other Appropriate Addressee]
We have audited the financial report of ABC Entity (the Entity), which comprises the statement of financial position as at 30 June 20X1, the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial report, including material accounting policy information, and the declaration by those charged with governance.[#]
In our opinion, except for the effects of the matter described in the Basis for Qualified Opinion section of our report, the accompanying financial report presents fairly, in all material respects, (or gives a true and fair view of) the financial position of the Entity as at 30 June 20X1, and (of) its financial performance and its cash flows for the year then ended in accordance with Australian Accounting Standards.
Basis for Qualified Opinion
The Entity’s short‑term marketable securities are carried in the statement of financial position at $xxx. Management has not marked these securities to market but has instead stated them at cost, which constitutes a departure from Australian Accounting Standards. The Entity’s records indicate that had management marked the marketable securities to market, the Entity would have recognised an unrealised loss of $xxx in the statement of comprehensive income for the year. The carrying amount of the securities in the statement of financial position would have been reduced by the same amount at 30 June 20X1, and income tax, net income and shareholders’ equity would have been reduced by $xxx, $xxx and $xxx, respectively.
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Company in accordance with the ethical requirements of the Accounting Professional & Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion.
Emphasis of Matter – Effects of a Fire
We draw attention to Note X of the financial report, which describes the effects of a fire in the Entity’s production facilities. Our opinion is not modified in respect of this matter.
Responsibilities of Management and Those Charged with Governance for the Financial Report[†]
[Reporting in accordance with ASA 700 – see Illustration 3 in ASA 700.]
Auditor’s Responsibilities for the Audit of the Financial Report
[Reporting in accordance with ASA 700 – see Illustration 3 in ASA 700.]
Report on Other Legal and Regulatory Requirements
[Reporting in accordance with ASA 700 – see [Aus] Illustration 1A in ASA 700.]
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Mechanically, therefore, ASA 706 (a) defines the two paragraph types, (b) imposes threshold and form conditions for their inclusion (including the non-modification-of-opinion condition for Emphasis of Matter), (c) constrains overlap with ASA 701 Key Audit Matters, (d) prescribes communication obligations with governance, and (e) provides placement guidance in the auditor’s report (A16-A17). The compilation details show amendments up to ASA 2023‑1 and earlier amendments such as ASA 2020‑2 (Compilation Details, Table of Standards, Table of Amendments).
Main concepts
ASA 706 turns on two core concepts defined in the standard. First, an Emphasis of Matter paragraph is defined as a paragraph that refers to a matter appropriately presented or disclosed in the financial report that is, in the auditor’s judgement, of such importance that it is fundamental to users’ understanding of the financial report (Definitions, para 7.1(a); paras 8-9). Second, an Other Matter paragraph is defined as a paragraph that refers to a matter other than those presented or disclosed in the financial report that is, in the auditor’s judgement, relevant to users’ understanding of the audit, the auditor’s responsibilities or the auditor’s report (Definitions, para 7.1(b); paras 10-11).
Relationship to Key Audit Matters (KAMs). ASA 706 repeatedly cross‑references ASA 701. Where ASA 701 applies (i.e. for entities required or electing to disclose KAMs), matters determined to be KAMs should not also be communicated as Emphasis of Matter or Other Matter paragraphs; the standard requires that Emphasis/Other Matter paragraphs should not duplicate KAMs (paras 1-3, 8.1, 10.1; A1-A3). The standard recognises that a matter may be both a KAM and fundamental to users’ understanding; in that case the auditor can emphasise it within the Key Audit Matters section (A2).
Thresholds and constraints. For an Emphasis of Matter paragraph, the auditor must be satisfied that (a) the matter is appropriately disclosed in the financial report and (b) inclusion of the paragraph would not require a modification of opinion under ASA 705 (para 8.1). Emphasis paragraphs must refer only to information presented or disclosed in the financial report, include a clear reference to the disclosure location, and state that the auditor’s opinion is not modified (para 9.2.1-9.2.3; A7-Aus A8.1). For Other Matter paragraphs, the auditor must ensure the paragraph is not prohibited by law or regulation and that it is not duplicative of KAMs when ASA 701 applies (para 10.1). Other Matter paragraphs must not include information the auditor is prohibited from providing (A9-A15).
Placement and presentation. ASA 706 provides choice to the auditor about placement depending on relative significance (A16-A17). Examples include placing Emphasis of Matter immediately after the Basis of Opinion where it relates to the reporting framework; or before/after a KAMs section if present. Other Matter paragraphs can appear in the Report on Other Legal and Regulatory Requirements or as a separate section, depending on relevance (A16-A17).
Interlocking standards and appendices. ASA 706 is designed to operate with ASA 101, ASA 200, ASA 700, ASA 701, ASA 705, ASA 570, ASA 720 and ASA 102. Appendices 1 and 2 list other standards that require Emphasis/Other Matter paragraphs in specific circumstances (for example ASA 210, ASA 560, ASA 800 for Emphasis of Matter; ASA 560, ASA 710, ASA 720 for Other Matter). The Australian‑specific additions are flagged with the prefix “Aus” (Authority Statement).
Practical examples and illustrations. The standard supplies illustrative auditor’s reports (Appendices 3 and 4, including Aus Illustrations 1A and 2A) showing interaction between KAMs, Emphasis of Matter and Other Matter paragraphs, and in one case an auditor’s report containing a qualified opinion with an Emphasis of Matter paragraph (Appendix 4).
Who it affects
Primary addressees. The immediate addressees are auditors performing audits of financial reports or other historical financial information in Australia. The application paragraph (Aus 0.1) states the standard applies to audits in accordance with the Corporations Act 2001 (financial year and half‑year reports) and to audits of financial reports or complete sets of financial statements for any other purpose. Thus auditors of listed and unlisted entities, charities, not‑for‑profits, and other entities whose financial reports are audited fall within scope.
Reporting entities and users. The standard affects entities whose auditors may use Emphasis of Matter or Other Matter paragraphs in the auditor’s report. That includes entities whose financial reports are prepared under the Corporations Act 2001 (see Aus A8.1 referencing s 308(3B) of the Act) and entities using special purpose frameworks (see A4 and Appendix 1 references to ASA 800). Users of audited financial reports,directors, creditors, investors and regulators,are affected because the standard governs when auditors may draw attention to particular disclosures or matters outside the financial report and how those communications are presented.
Those charged with governance. The standard imposes a procedural requirement to communicate with those charged with governance regarding the auditor’s expectation to include an Emphasis of Matter or Other Matter paragraph and the wording of the paragraph (para 12; Aus A18). That places an operational obligation on audit committees, boards and others charged with governance to engage with auditors on proposed report wording and to be prepared to discuss the rationale.
Regulators and standard setters. The AUASB is the issuer and identifies conformity with the International Standard on Auditing (ISA 706). The standard is made under section 227B of the ASIC Act and section 336 of the Corporations Act (Authority Statement). Regulators (ASIC) and professional bodies will use the standard to assess audit reports for compliance with Australian Auditing Standards and to set expectations about auditor reporting.
Audit firms and the compliance function. Audit firms must embed decision rules, drafting templates and governance processes to determine whether Emphasis or Other Matter paragraphs are required, ensure appropriate wording and placement, check law/regulation for prohibitions, and document communication with those charged with governance (paras 9-12, A16-A18). Firms must also coordinate ASA 706 requirements with ASA 701 KAMs, ASA 705 opinion modifications and ASA 570 going concern considerations.
Secondary impacts. Preparers must ensure appropriate disclosures are present in the financial report when an Emphasis of Matter paragraph is contemplated, because the Emphasis paragraph must refer only to information in the report (para 9.2.2). Entities preparing multiple financial reports under different frameworks may need to coordinate reporting and auditor communications where Other Matter paragraphs draw attention to other reports (A9-A15).
Geographic and temporal scope. The operative date is financial reporting periods ending on or after 15 December 2016 (Aus 0.3). The compilation details show the 2015 ASA 706 was amended by ASA 2020‑2 and ASA 2023‑1 (Compilation Details; Table of Standards).
Key duties and rights
Duties imposed on auditors. ASA 706 contains prescriptive duties. The auditor shall include an Emphasis of Matter paragraph if, in the auditor’s judgement, a matter appropriately presented or disclosed in the financial report is of such importance that it is fundamental to users’ understanding of the financial report, provided (a) the auditor would not be required to modify the opinion under ASA 705 due to the matter, and (b) where ASA 701 applies, the matter is not a Key Audit Matter (para 8.1). When included, the Emphasis of Matter paragraph must be in a separate section headed with the term “Emphasis of Matter”, must refer to the matter and to where relevant disclosures can be found in the financial report, and must indicate the auditor’s opinion is not modified in respect of the matter (para 9.2.1-9.2.3).
The auditor shall include an Other Matter paragraph when the auditor considers it necessary to communicate a matter other than those presented or disclosed in the financial report that is relevant to users’ understanding of the audit, the auditor’s responsibilities or the auditor’s report, provided that this is not prohibited by law or regulation and that the matter has not been determined to be a KAM under ASA 701 where that standard applies (para 10.1). Other Matter paragraphs must be in a separate section with the heading “Other Matter” or another appropriate heading (para 11.2).
Communication obligation. If the auditor expects to include an Emphasis of Matter or Other Matter paragraph, the auditor shall communicate with those charged with governance about this expectation and the wording of the paragraph (para 12; Aus A18). This is a process duty to ensure governance is informed and can seek clarification.
Form and placement choices. The auditor must select appropriate placement in the auditor’s report based on the nature and relative significance of the information (A16-A17). For example, where an Emphasis of Matter relates to the applicable financial reporting framework, the auditor may place it immediately after the Basis of Opinion section to provide context (A16.1).
Constraints and prohibitions. Other Matter paragraphs cannot include information the auditor is prohibited from providing by law, regulation or professional standards (A9). Emphasis of Matter paragraphs must refer only to information presented or disclosed in the financial report (para 9.2.2). Both paragraph types must not duplicate matters determined to be KAMs when ASA 701 applies (paras 8.1(b), 10.1(b), A1-A3).
Rights and professional judgement. The standard recognises auditor judgement as central: whether a matter is “of such importance” or “relevant to users’ understanding” is a matter for the auditor’s professional judgement (Definitions; paras 8-11). The standard authorises the auditor to choose wording, placement and level of emphasis, provided the mandatory constraints are respected.
Interconnections that affect duties. The standard makes explicit that Emphasis of Matter paragraphs are not substitutes for a modified opinion under ASA 705, nor for required disclosures or for reporting under ASA 570 for going concern uncertainties (A9.1). That linkage imposes a duty to consider parallel standards before choosing to include an Emphasis of Matter paragraph.
Documentation implicit duty. While ASA 706 does not quote a separate documentation paragraph, the duties to form and express an opinion and to communicate with governance mean auditors will need contemporaneous documentation to support the judgement that a matter is fundamental, not a subject for modifying the opinion, and not a KAM where ASA 701 applies (paras 8-12, A18). This is standard audit practice referenced across ASA 101/200/700.
Penalties and enforcement
Statutory basis and regulatory context. ASA 706 is a standard made by the AUASB under statutory powers noted in the authority statement: pursuant to section 227B of the Australian Securities and Investments Commission Act 2001 and section 336 of the Corporations Act 2001 (Authority Statement; Auditing Standard ASA 706). The standard states its conformity with ISA 706 and indicates compliance with ASA 706 enables compliance with ISA 706 (Authority Statement).
What the standard itself prescribes about penalties. The text of ASA 706 does not prescribe criminal, civil or disciplinary penalties within the standard. It sets out auditing requirements and procedures (paras 8-12, A1-A18) but does not contain a sanctions clause or specify enforcement mechanisms or sanctions. The standard does reference, by way of the Aus A8.1 note, a statutory requirement in the Corporations Act 2001 (s 308(3B)) that, where additional information is included under paragraph 295(3)(c), the auditor’s report must include the auditor’s opinion on whether that additional information was necessary to give a true and fair view. That statutory provision is part of the Corporations Act and non‑compliance with the Act can have statutory consequences, but ASA 706 itself does not define those consequences.
Regulatory enforcement and professional discipline , what can be said from the source. The Authority Statement and the references to the Corporations Act and ASIC Act indicate ASA 706 sits within a regulatory framework in which auditors are regulated by statute and professional standards. The standard’s compilation and authority statements indicate that regulators and professional bodies will use it as the applicable standard. However, the standard text does not specify how ASIC, professional bodies, courts or other regulators will enforce the standard or what sanctions attach to non‑compliance. Any assertion about specific penalties would need to be drawn directly from the Corporations Act, ASIC enforcement practice or professional rules, none of which are contained within ASA 706 itself.
Practical enforcement implications for auditors and firms. While the standard does not list sanctions, compliance is necessary to be “in accordance with Australian Auditing Standards” (Basis for Opinion language and Authority Statement). Practically, failure to follow ASA 706 could feed into regulatory review of an audit or professional disciplinary processes brought by accounting bodies or by ASIC under separate statutory powers. ASA 706 requires communication with those charged with governance about planned Emphasis/Other Matter paragraphs (para 12) and sets form/wording constraints; failure to meet these will be observable on the face of an auditor’s report and thus relevant to a regulatory or professional review, although the standard itself does not set out penalty mechanics.
Caveat about reading enforcement into the standard. The standard’s text confines itself to requirements, definitions, placement and relationship with other standards (paras 1-12; A1-A18); it does not enlarge on enforcement. For any specific question about statutory sanctions or professional discipline arising from non‑compliance, one must consult the Corporations Act, ASIC guidance, or the rules of the relevant professional body , those materials are not reproduced in ASA 706.
How it interacts with other laws
Statutory cross‑references within ASA 706. ASA 706 explicitly notes it was made under section 227B of the Australian Securities and Investments Commission Act 2001 and section 336 of the Corporations Act 2001 (Authority Statement). The Australian‑specific application material Aus A8.1 refers to a statutory requirement in the Corporations Act, section 308(3B), which requires the auditor’s report to include an opinion on whether additional information inserted under s 295(3)(c) was necessary to give a true and fair view. ASA 706 therefore recognises the interface between auditing standard form and statutory reporting content for financial reports prepared under the Corporations Act.
Interaction with other Auditing Standards. ASA 706 is explicitly cross‑referenced to a number of other ASA standards, and its operation is conditioned on them:
ASA 701 Key Audit Matters: ASA 706 addresses the relationship between KAMs and Emphasis/Other Matter paragraphs and requires that matters determined to be KAMs should not be duplicated as Emphasis of Matter or Other Matter paragraphs where ASA 701 applies (paras 1-3, 8.1(b), 10.1(b); A1-A3).
ASA 705 Modifications to the Opinion: Emphasis of Matter paragraphs are permissible only where the auditor would not be required to modify the opinion under ASA 705; ASA 706 explicitly states an Emphasis of Matter is not a substitute for expressing a modified opinion where one is required (para 8.1(a); A9.1).
ASA 570 Going Concern: ASA 706 states that an Emphasis of Matter paragraph does not replace reporting under ASA 570 where a material uncertainty exists (A9.1(iii)).
ASA 720 Other Information: ASA 706 notes the relationship with ASA 720 when the auditor’s report also needs to address other information (paras 3, A9-A15).
ASA 101, ASA 200 and ASA 700: ASA 706 is to be read in conjunction with these standards , ASA 101 sets the interpretive framework for AUASB Standards, ASA 200 sets overall auditor objectives, and ASA 700 addresses the form and content of the auditor’s report (Authority Statement; paras A16-A17).
ASA 102 Compliance with Ethical Requirements: The Authority Statement notes the ISA 706 section on relevant ethical requirements is fulfilled in ASA 102 in Australia.
Interaction with Corporations Act reporting obligations. The standard notes that when an auditor’s report is prepared on a financial report under the Corporations Act, there is a statutory provision that affects auditor reporting where additional information is included in the financial report (Aus A8.1 referencing s 308(3B)). The illustrative auditor’s report in Appendix 3 is explicitly prepared to conform with the Corporations Act 2001 (Illustration 1A). Thus ASA 706 both aligns with and is constrained by the statutory scheme governing financial reports and auditor’s reports under the Corporations Act.
Interaction with law/regulation on prohibitions. ASA 706 requires the auditor to ensure an Other Matter paragraph is not prohibited by law or regulation (para 10.1(a); A9). This creates a duty to check external legal/regulatory restrictions that may prohibit inclusion of certain extra‑reporting content. The standard does not list those legal prohibitions, so auditors must consult relevant statutes, regulations and industry rules to determine whether an Other Matter paragraph is permitted.
International standard conformity and copyright. ASA 706 conforms with ISA 706 (Authority Statement). The standard reproduces parts of ISA 706 where appropriate. The compilation and copyright sections note the AUASB’s incorporation of IAASB/IFAC material and related copyright arrangements (Copyright section). Users must be aware of the AUASB/IFAC copyright constraints on reproduction.
Practical coordination tasks implied by interactions. Auditors must coordinate ASA 706 decisions with multiple legal and standard‑based inputs: whether the entity is reporting under the Corporations Act, whether ASA 701 KAMs apply, whether circumstances call for ISA/ASA 705 opinion modification or ASA 570 going concern reporting, and whether law or regulation prohibits inclusion of particular Other Matter text (paras 8-12; A1-A18). The standard embeds these interactions as part of the auditor’s decision flow.
Amendment history
Compilation and amendments. The compiled version before you incorporates ASA 706 from December 2015 and amendments up to and including 15 March 2023 (Compilation Details). The Table of Standards in the compilation identifies:
ASA 706 [A], made 1 December 2015, operative for financial reporting periods ending on or after 15 December 2016.
ASA 2020‑2 [B], made 30 June 2020, operative for financial reporting periods ending on or after 15 July 2020.
ASA 2023‑1 [C], made 15 March 2023, operative for financial reporting periods commencing on or after 1 January 2023.
Table of amendments. The compilation includes a Table of Amendments showing paragraphs affected by subsequent amending standards:
Appendix 3 was amended by ASA 2020‑2 (paras [62] and [63] of that amending standard) and again by ASA 2023‑1 ([36]).
Appendix 4 was amended by ASA 2020‑2 ([64] and [65]) and ASA 2023‑1 ([37]).
Scope of amendments. The amendments appear concentrated in the illustrative appendices rather than in the core requirements (the Table of Amendments identifies Appendix 3 and Appendix 4 as the paragraphs affected). The compilation notes that paragraphs added that are unique to Australia carry the prefix “Aus” (Authority Statement).
Operative dates and transitional timing. The operative date for the base ASA 706 is financial reporting periods ending on or after 15 December 2016 (Aus 0.3). The compilation details note operative dates for the amending standards (ASA 2020‑2 operative for reporting periods ending on or after 15 July 2020; ASA 2023‑1 operative for reporting periods commencing on or after 1 January 2023). Practitioners must therefore check which version and amendments apply to a particular reporting period.
Relationship to international changes. ASA 706 states compliance enables compliance with ISA 706 (Authority Statement). The compilation and copyright text emphasise that the AUASB reproduces substantial parts of the corresponding ISA and notes IFAC copyright ownership in the international standard. Any future IAASB amendments to ISA 706 would likely prompt AUASB follow‑on amendments, and the compilation mechanism records such changes.
Record of AUASB action. The Authority Statement records that the AUASB made ASA 706 on 1 December 2015 and that the compilation was prepared on 22 March 2023. The Compilation Details section makes clear this compiled version is not a separate standard but a representation of ASA 706 as amended up to the compilation date.
Practical implication of amendment history. The amendments concentrated in appendices suggest that the core principles and main requirements have been stable since 2015, while examples and illustrative reports have been updated to reflect evolving practice (for example interaction with ASA 701 Key Audit Matters). Firms should ensure their report templates and illustrative wording reflect the latest appendices and note operative dates for new drafting conventions where client reporting periods straddle amendment dates.
Litigation history
What the source contains. ASA 706 itself contains no litigation history or citations to judicial decisions. The standard cites other Auditing Standards and statutory sections (as noted in the Authority Statement and Aus A8.1), but it does not name cases or report judicial interpretations. The Appendices and application material include illustrative reports and references to other standards, not to case law.
What can be inferred and what cannot. Because the standard contains no case law, practitioners should not rely on ASA 706 for judicial interpretation of auditor reporting obligations. Any litigation‑relevant interpretations of terms such as “fundamental to users’ understanding” or the sufficiency of an Emphasis/Other Matter paragraph will depend on external judicial decisions or regulatory determinations that are not included in the standard. The standard does not purport to summarise or list litigation outcomes.
Where to look for litigation guidance. For disputes about the sufficiency or appropriateness of an Emphasis of Matter or Other Matter paragraph, auditors and lawyers would need to look beyond ASA 706 to:
Corporations Act case law dealing with the content and adequacy of financial reports and auditor’s reports (not reproduced here).
Professional disciplinary decisions by accounting bodies where the adequacy of auditor reporting has been considered (not reproduced here).
Relevant cases interpreting the duties of auditors under common law or statute (again not included in ASA 706).
Practical caution. Absent litigation guidance in ASA 706, auditors must rely on the plain wording of the standard (paras 8-12), the related standards it cross‑references (ASA 701, ASA 705, ASA 570, ASA 720, ASA 700), statutory obligations (for example the Corporations Act references in Aus A8.1), and contemporaneous documentation of their professional judgement. If an auditor anticipates litigation risk around the wording or placement of Emphasis/Other Matter paragraphs, they should obtain legal advice and retain the communications with those charged with governance required by para 12/A18.
Summary. ASA 706 contains no litigation history; the standard is procedural and prescriptive in form and must be interpreted against external case law and regulatory practice not contained within the text. Any legal disputes over auditor reporting will be resolved by courts/regulators interpreting the standards, statutes and facts of particular cases , those materials are outside ASA 706 and should be consulted separately.
Gotchas
Overlap with Key Audit Matters. ASA 706 requires that matters determined to be Key Audit Matters under ASA 701 should not be repeated as Emphasis of Matter or Other Matter paragraphs where ASA 701 applies (paras 8.1(b), 10.1(b), A1-A3). This creates a practical trap: auditors must ensure they have completed the KAM determination process before deciding on Emphasis/Other Matter paragraphs; failing to sequence or coordinate properly can lead to duplication or misplacement of material (see paras 1-3, A1-A3).
Emphasis of Matter must not imply opinion modification. An Emphasis of Matter paragraph is permissible only when the auditor would not be required to modify the opinion under ASA 705 because of the matter (para 8.1(a)). Yet the natural reader of an Emphasis paragraph may infer increased risk. The standard obliges the auditor to state explicitly that the opinion is not modified in respect of the matter (para 9.2.3). Auditors must be careful in wording and placement so the paragraph does not create a de facto impression of qualification despite the explicit statement.
Emphasis of Matter may only refer to information presented in the financial report. The Emphasis of Matter paragraph “shall refer only to information presented or disclosed in the financial report” (para 9.2.2). Practitioners sometimes draft Emphasis paragraphs that stray beyond the audited report; ASA 706 prohibits that. If the matter to be emphasised sits outside the financial report, an Other Matter paragraph is the available route but that route may be constrained by law or confidentiality (A9-A15, para 10.1(a)).
Other Matter paragraphs can be prohibited by law or regulation. Para 10.1(a) and A9 state the auditor must ensure inclusion of an Other Matter paragraph is not prohibited by law or regulation. Auditors must therefore check whether sectoral rules, confidentiality obligations or contractual restrictions prevent the inclusion of particular extra‑reporting information. Failure to check can expose the auditor to legal or professional complaints.
Placement choices are strategic. ASA 706 gives auditors discretion over placement based on relative significance (A16-A17), but the standard also flags that placing an Emphasis of Matter paragraph immediately after the Basis of Opinion may provide necessary context if the paragraph relates to the reporting framework. Misplaced paragraphs may confuse users about the auditor’s opinion or responsibilities. The standard’s flexibility requires active judgement and, where necessary, communication with governance (para 12; Aus A18).
Risk of widespread use diluting message. ASA 706 cautions that “a widespread use of Emphasis of Matter paragraphs may diminish the effectiveness of the auditor’s communication about such matters” (A4.1). There is therefore an implicit constraint against overuse. Auditors and firms need internal policies to prevent routine or low‑threshold Emphasis paragraphs that make the report less informative.
Interplay with statutory reporting , watch Corporations Act requirements. Aus A8.1 points to s 308(3B) of the Corporations Act, which imposes an auditor’s opinion requirement when additional information is included under s 295(3)(c). An auditor preparing a report under the Corporations Act must check and satisfy that statutory requirement in addition to ASA 706 constraints (Aus A8.1). Overlooking the statute may yield technical non‑compliance even if ASA 706 drafting is correct.
Rare cases where withdrawal is blocked. ASA 706 notes a rare circumstance where the auditor cannot withdraw from an engagement even when limitations are pervasive; the auditor may need to include an Other Matter paragraph to explain why withdrawal was not possible (A9.1.2). This is an operational gotcha: auditors must consider whether the underlying constraints on their evidence allow them to continue and whether an explanatory Other Matter paragraph is necessary; it is not an invitation to stay in an engagement without adequate evidence.
Mixing of frameworks and multiple reports. The standard permits an Other Matter paragraph where an entity prepares more than one financial report under different frameworks and the auditor has reported on both (A9.1). Auditors must be careful to describe relationships between reports accurately and to ensure the Other Matter paragraph does not create inconsistent impressions between reports.
Document the judgement and communicate it. ASA 706 requires communication with those charged with governance about the expectation and wording of Emphasis/Other Matter paragraphs (para 12; Aus A18). Practically, auditors should document that communication and the reasoning underpinning the decision. A lack of contemporaneous documentation is a common source of regulatory criticism.
How to comply
Decision flow checklist (core). Use ASA 706 required steps as a checklist for each potential Emphasis of Matter or Other Matter paragraph:
Identify the matter and determine whether it is (a) presented/disclosed in the financial report (candidate for Emphasis of Matter) or (b) a matter outside the financial report relevant to understanding the audit/auditor’s responsibilities (candidate for Other Matter) (Definitions; paras 8-11).
Confirm the matter would not require a modified opinion under ASA 705 (Emphasis only) (para 8.1(a)).
Check whether ASA 701 Key Audit Matters apply and whether the matter has been determined to be a KAM; if so, do not include it as an Emphasis or Other Matter paragraph (paras 8.1(b), 10.1(b); A1-A3).
For Other Matter paragraphs, confirm that inclusion is not prohibited by law or regulation (para 10.1(a); A9).
Communicate with those charged with governance about the expectation to include the paragraph and the wording (para 12; Aus A18). Document that communication.
Drafting and wording rules. When including an Emphasis of Matter paragraph, ensure the paragraph:
Is presented in a separate section headed with the term “Emphasis of Matter” (para 9.2.1).
Contains a clear reference to the matter being emphasised and to the location in the financial report where the full disclosures appear; the paragraph must refer only to information presented or disclosed in the financial report (para 9.2.2).
Explicitly states the auditor’s opinion is not modified in respect of the matter emphasised (para 9.2.3).
When including an Other Matter paragraph, ensure the paragraph:
Is presented in a separate section with the heading “Other Matter” or another appropriate heading (para 11.2).
Clearly reflects that the matter is not required to be presented or disclosed in the financial report and does not include information prohibited by law, regulation or professional standards (A9, A11).
Placement and presentation. Select placement consistent with ASA 706 guidance (A16-A17):
If the Emphasis relates to the applicable financial reporting framework, consider placing it immediately after the Basis of Opinion section to provide context (A16.1).
If a Key Audit Matters section is present, present Emphasis or Other Matter paragraphs directly before or after the Key Audit Matters section determined by relative significance; add context to headings where it helps (e.g. “Emphasis of Matter,Subsequent Event”) (A16.2, A16.3).
If an Other Matter paragraph relates to other reporting responsibilities, consider inclusion in the Report on Other Legal and Regulatory Requirements section (A16.4).
Coordinate with related standards. Before finalising wording, confirm there is no conflict with ASA 705 (opinion modification), ASA 570 (going concern), ASA 720 (other information), ASA 701 (KAMs), ASA 210 (terms of engagement), and ASA 260 (communication with those charged with governance) (see references across paras and application material). Use appendices to check specific mandated Emphasis/Other Matter requirements in other ASAs (Appendices 1 and 2 list relevant paragraphs in ASA 210, ASA 560, ASA 800, ASA 710, ASA 720).
Document the professional judgement. Maintain contemporaneous documentation demonstrating:
The auditor’s assessment that the matter is fundamental (for Emphasis) or relevant to understanding audit responsibilities (for Other Matter) and the reasoning why no opinion modification is required (paras 8-9, A4-A6).
Evidence of legal/regulatory checks confirming an Other Matter paragraph is permitted (para 10.1(a); A9).
Records of communication with those charged with governance about inclusion and wording (para 12; Aus A18).
Rationale for placement and wording choices relative to KAMs and other report sections (A16-A17).
Use and adapt illustrative reports. Refer to Appendix 3 (Aus Illustration 1A) and Appendix 4 (Aus Illustration 2A) for template language and structure tailored to reporting under the Corporations Act and to non‑listed entities, respectively. The compilation notes these appendices were amended by later amending standards (see Compilation Details and Table of Amendments); use the latest operative illustrations applicable to your reporting period.
Avoid overuse. Apply the standard’s stated caution that widespread use of Emphasis of Matter paragraphs can diminish effectiveness (A4.1). Set firm internal thresholds and peer review processes so Emphasis/Other Matter paragraphs are used only where the auditor’s judgement supports the “fundamental” or “relevant” criteria.
Coordinate report production workflow. Because ASA 706 interacts with ASA 701 (KAMs), ASA 700 (report form) and ASA 705 (opinion modifications), structure the audit close‑out process so that KAM determinations, going concern assessments and opinion drafting are completed before finalising decisions under ASA 706. Ensure the draft auditor’s report presented to those charged with governance includes the proposed Emphasis/Other Matter wording for discussion (para 12).
Check statutory requirements for Corporations Act reports. If preparing a report under the Corporations Act, ensure that the audit report addresses the statutory requirements referenced in Aus A8.1 (s 308(3B) obligations). Use the Aus illustrations as the starting point for wording consistent with the Act.
Train engagement teams. Embed ASA 706 decision points in audit methodology, templates and training. Practical compliance requires familiarity with the precise definitions (Definitions para 7), the non‑duplication rule with KAMs, and the explicit wording and placement requirements (paras 8-12, A16-A18).
Emphasis of Matter Paragraphs in the Auditor’s Report................................8-9
Other Matter Paragraphs in the Auditor’s Report...................................10-11
Communication with Those Charged with Governance.................................12
Application and Other Explanatory Material
The Relationship between Emphasis of Matter Paragraphs and Key Audit Matters in the Auditor’s Report A1-A3
Circumstances in Which an Emphasis of Matter Paragraph May Be Necessary.............A4-A6
Including an Emphasis of Matter Paragraph in the Auditor’s Report................A7-Aus A8.1
Other Matter Paragraphs in the Auditor’s Report.................................A9-A15
Placement of Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Auditor’s ReportA16-A17
Communication with Those Charged with Governance................................A18
Appendix 1: List of Australian Auditing Standards Containing Requirements for Emphasis of Matter Paragraphs
Appendix 2: List of Australian Auditing Standards Containing Requirements for Other Matter Paragraphs
Appendix 3: Illustration of an Auditor’s Report that Includes a Key Audit Matters Section, an Emphasis of Matter Paragraph, and an Other Matter Paragraph
Appendix 4: Illustration of an Auditor’s Report Containing a Qualified Opinion Due to a Departure from the Applicable Financial Reporting Framework and that Includes an Emphasis of Matter Paragraph
COMPILATION DETAILS COMPILATION DETAILS
Obtaining a Copy of this Auditing Standard
The most recently compiled versions of Auditing Standards, original Standards and amending Standards (see Compilation Details) are available on the AUASB website: www.auasb.gov.au
Contact Details
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Requests and enquiries concerning reproduction and rights for commercial purposes within Australia should be addressed to the Technical Director, Auditing and Assurance Standards Board, PO Box 204, Collins Street West, Melbourne, Victoria 8007 or sent to enquiries@auasb.gov.au. Otherwise, no part of this Auditing Standard may be reproduced, stored or transmitted in any form or by any means without the prior written permission of the AUASB except as permitted by law.
This Auditing Standard reproduces substantial parts of the corresponding International Standard on Auditing issued by the International Auditing and Assurance Standards Board (IAASB) and published by the International Federation of Accountants (IFAC), in the manner described in the statement on Conformity with International Standards on Auditing. The AUASB acknowledges that IFAC is the owner of copyright in the International Standard on Auditing incorporated in this Auditing Standard throughout the world.
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Further information and requests for authorisation to reproduce this Auditing Standard for commercial purposes outside Australia should be addressed to the Technical Director, Auditing and Assurance Standards Board, PO Box 204, Collins Street West, Melbourne, Victoria 8007 or sent to enquiries@auasb.gov.au. Any decision to approve a request may also require the agreement of IFAC.
ISSN 1833‑4393
CONTENTS
COMPILATION DETAILS
AUTHORITY STATEMENT
CONFORMITY WITH INTERNATIONAL STANDARDS ON AUDITING
Emphasis of Matter Paragraphs in the Auditor’s Report................................8-9
Other Matter Paragraphs in the Auditor’s Report...................................10-11
Communication with Those Charged with Governance.................................12
Application and Other Explanatory Material
The Relationship between Emphasis of Matter Paragraphs and Key Audit Matters in the Auditor’s Report A1-A3
Circumstances in Which an Emphasis of Matter Paragraph May Be Necessary.............A4-A6
Including an Emphasis of Matter Paragraph in the Auditor’s Report................A7-Aus A8.1
Other Matter Paragraphs in the Auditor’s Report.................................A9-A15
Placement of Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Auditor’s ReportA16-A17
Communication with Those Charged with Governance................................A18
Appendix 1: List of Australian Auditing Standards Containing Requirements for Emphasis of Matter Paragraphs
Appendix 2: List of Australian Auditing Standards Containing Requirements for Other Matter Paragraphs
Appendix 3: Illustration of an Auditor’s Report that Includes a Key Audit Matters Section, an Emphasis of Matter Paragraph, and an Other Matter Paragraph
Appendix 4: Illustration of an Auditor’s Report Containing a Qualified Opinion Due to a Departure from the Applicable Financial Reporting Framework and that Includes an Emphasis of Matter Paragraph
COMPILATION DETAILS
Auditing Standard ASA 706 Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor's Report (as Amended)
This compilation takes into account amendments made up to and including 15 March 2023 and was prepared on 22 March 2023 by the Auditing and Assurance Standards Board (AUASB).
This compilation is not a separate Auditing Standard made by the AUASB. Instead, it is a representation of ASA 706 (December 2015) as amended by other Auditing Standards which are listed in the Table below.
Table of Standards
Standard
Date made
Operative Date
ASA 706 [A]
1 December 2015
Financial reporting periods ending on or after 15 December 2016
ASA 2020-2 [B]
30 June 2020
Financial reporting periods ending on or after 15 July 2020
ASA 2023-1 [C]
15 March 2023
Financial reporting periods commencing on or after 1 January 2023
[A] Federal Register of Legislation – registration number F2015L02037, 16 December 2015
[B] Federal Register of Legislation – registration number F2020L00885, 7 July 2020
[C] Federal Register of Legislation – registration number F2023L00295, 21 March 2023
Table of Amendments
Paragraph affected
How affected
By … [paragraph]
Appendix 3
Amended
ASA 2020‑2 [62] and [63]
Appendix 4
Amended
ASA 2020-2 [64] and [65]
Appendix 3
Amended
ASA 2023-1 [36]
Appendix 4
Amended
ASA 2023-1 [37]
AUTHORITY STATEMENT
Auditing Standard ASA 706 Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor's Report (as amended to 15 March 2023) is set out in paragraphs Aus 0.1 to A18 and Appendices 1 to 4.
This Auditing Standard is to be read in conjunction with ASA 101 Preamble to AUASB Standards, which sets out how AUASB Standards are to be understood, interpreted and applied. This Auditing Standard is to be read also in conjunction with ASA 200 Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with Australian Auditing Standards.
Conformity with International Standards on Auditing
This Auditing Standard conforms with International Standard on Auditing ISA 706 Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor's Report issued by the International Auditing and Assurance Standards Board (IAASB), an independent standard‑setting board of the International Federation of Accountants (IFAC).
Paragraphs that have been added to this Auditing Standard (and do not appear in the text of the equivalent ISA) are identified with the prefix “Aus”.
The following application and other explanatory material is additional to ISA 706:
Paragraph Aus A8.1 refers to requirements under the Corporations Act 2001.
Appendix 3 comprises [Aus] Illustration 1A Example auditor’s report that conforms with the requirements of the Corporations Act 2001.
Appendix 4 comprises [Aus] Illustration 2A Example auditor’s report on a financial report that is not prepared under the Corporations Act 2001.
This Auditing Standard incorporates terminology and definitions used in Australia.
The equivalent requirements and related application and other explanatory material included in ISA 706 in respect of “relevant ethical requirements”, have been included in Auditing Standard, ASA 102 Compliance with Ethical Requirements when Performing Audits, Reviews and Other Assurance Engagements. There is no international equivalent to ASA 102.
Compliance with this Auditing Standard enables compliance with ISA 706.
Auditing Standard ASA 706 Emphasis of Ma Auditing Standard ASA 706 Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor's Report (as Amended)
Auditing Standard ASA 706 Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor's Report (as Amended)
This compilation takes into account amendments made up to and including 15 March 2023 and was prepared on 22 March 2023 by the Auditing and Assurance Standards Board (AUASB).
This compilation is not a separate Auditing Standard made by the AUASB. Instead, it is a representation of ASA 706 (December 2015) as amended by other Auditing Standards which are listed in the Table below.
Table of Standards Table of Standards
Table of Standards
Standard
Date made
Operative Date
ASA 706 [A]
1 December 2015
Financial reporting periods ending on or after 15 December 2016
ASA 2020-2 [B]
30 June 2020
Financial reporting periods ending on or after 15 July 2020
ASA 2023-1 [C]
15 March 2023
Financial reporting periods commencing on or after 1 January 2023
[A] Federal Register of Legislation – registration number F2015L02037, 16 December 2015
[B] Federal Register of Legislation – registration number F2020L00885, 7 July 2020
[C] Federal Register of Legislation – registration number F2023L00295, 21 March 2023
Table of Amendments Table of Amendments
Table of Amendments
Paragraph affected
How affected
By … [paragraph]
Appendix 3
Amended
ASA 2020‑2 [62] and [63]
Appendix 4
Amended
ASA 2020-2 [64] and [65]
Appendix 3
Amended
ASA 2023-1 [36]
Appendix 4
Amended
ASA 2023-1 [37]
AUTHORITY STATEMENT
Auditing Standard ASA 706 Emphasis of Matter Paragraphs and Othe
This is an opening excerpt, not the complete document.