In Section 706 of the American Institute of Certified Public Accountants Professional Auditing Standards, Emphasis-of-Matter Paragraphs and Other-Matter Paragraphs in the Independent Auditor’s Report are discussed. This Standard comes from SAS No 122 and is effective for audits of financial statements ending on or before December 15, 2012.
The scope of this section is to address additional communications in the auditor’s report when the auditor considers it necessary to draw the user’s attention to a matter that is:
• Presented or disclosed in the financial statements that are of such importance that they are fundamental to user’s understanding of the financial ...view middle of the document...
When there is a need for the emphasis-of-matter paragraph, the auditor should:
• Include the emphasis-of-matter paragraph after the opinion paragraph in the auditor’s report.
• Use the heading “Emphasis of Matter” or other appropriate heading.
• Include a clear reference to the matter being emphasized and to where relevant disclosures that fully describe the matter can be found in the financial statements.
• Indicate that the auditor’s opinion is not modified with respect to the matter emphasized.
The requirements for the Other-Matter paragraph in the auditor’s report, the auditor must include relevant information in a paragraph with a heading of “Other Matter” or one which is appropriate to the situation. This paragraph should be included immediately after the auditor’s opinion and any emphasis of matter paragraphs, or if the content of the other matter paragraph is relevant to the “Other Reporting Responsibilities” section.
The requirements of the auditor to communicate with those charged with governance is to ensure that those charged with governance are aware of the intention of the auditor to include emphasis-of-matter paragraphs or other matter paragraphs and the proposed wording of the paragraphs.
The following items are included in the application and other explanatory material section.
The scope of the section is expounded on. The exhibits mentioned before are discussed.
The emphasis-of-matter paragraphs in the auditor’s report section is also expanded to include Circumstances in which an emphasis-of-matter paragraph may be necessary and how to include an emphasis-of-matter paragraph in the auditor’s report.