ISA 706 (REVISED), EMPHASIS OF MATTER PARAGRAPHS AND OTHER MATTER PARAGRAPHS IN THE INDEPENDENT
AUDITOR’S REPORT
Introduction
Scope of this ISA
1. This International Standard on Auditing (ISA) deals with additional communication in the auditor’s
report when the auditor considers it necessary to:
(a) Draw users’ attention to a matter or matters presented or disclosed in the financial
statements that are of such importance that they are fundamental to users’ understanding of
the financial statements; or
(b) Draw users’ attention to any matter or matters other than those presented or disclosed in the
financial statements that are relevant to users’ understanding of the audit, the auditor’s
responsibilities or the auditor’s report.
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2. ISA 701 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 ISA addresses the relationship between key audit
matters and any additional communication in the auditor’s report in accordance with this ISA. (Ref:
Para. A1–A3)
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3. ISA 570 (Revised) establishes requirements and provides guidance about communication in the
auditor’s report relating to going concern.
4. Appendices 1 and 2 identify ISAs 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 ISA regarding the form of such paragraphs apply. (Ref:
Para. A4)
Effective Date
5. This ISA is effective for audits of financial statements for periods ending on or after December 15,
2016.
Objective
6. The objective of the auditor, having formed an opinion on the financial statements, is to draw users’
attention, when in the auditor’s judgment it is necessary to do so, by way of clear additional
communication in the auditor’s report, to:
(a) A matter, although appropriately presented or disclosed in the financial statements, that is of
such importance that it is fundamental to users’ understanding of the financial statements; or
(b) As appropriate, any other matter that is relevant to users’ understanding of the audit, the
auditor’s responsibilities or the auditor’s report.
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ISA 701, Communicating Key Audit Matters in the Independent Auditor’s Report
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ISA 570 (Revised), Going Concern
ISA 706 (REVISED), EMPHASIS OF MATTER PARAGRAPHS AND OTHER MATTER PARAGRAPHS IN THE INDEPENDENT
AUDITOR’S REPORT
Definitions
7. For purposes of the ISAs, the following terms have the meanings attributed below:
(a) Emphasis of Matter paragraph – A paragraph included in the auditor’s report that refers to a
matter appropriately presented or disclosed in the financial statements that, in the auditor’s
judgment, is of such importance that it is fundamental to users’ understanding of the financial
statements.
(b) 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 statements that, in the auditor’s
judgment, 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
8. If the auditor considers it necessary to draw users’ attention to a matter presented or disclosed in
the financial statements that, in the auditor’s judgment, is of such importance that it is fundamental
to users’ understanding of the financial statements, the auditor shall include an Emphasis of Matter
paragraph in the auditor’s report provided: (Ref: Para. A5–A6)
(a) The auditor would not be required to modify the opinion in accordance with ISA 705
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(Revised) as a result of the matter; and
(b) When ISA 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)
9. When the auditor includes an Emphasis of Matter paragraph in the auditor’s report, the auditor
shall:
(a) Include the paragraph within a separate section of the auditor’s report with an appropriate
heading that includes the term “Emphasis of Matter”;
(b) Include in the paragraph 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.
The paragraph shall refer only to information presented or disclosed in the financial
statements; and
(c) Indicate that the auditor’s opinion is not modified in respect of the matter emphasized. (Ref:
Para. A7–A8, A16–A17)
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ISA 705 (Revised), Modifications to the Opinion in the Independent Auditor’s Report