ASA 706 - Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor's Report - December 2015
Circumstances in Which an Emphasis of MaCircumstances in Which an Emphasis of Matter Paragraph May Be Necessary (Ref: Para. 4, 8)
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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.