Audit and Assurance · The Independent Auditor's Report

Emphasis of Matter and Other Matter Paragraphs in the Auditor's Report

Updated 11 October 2026 · Fact-checked

An emphasis of matter paragraph draws users to a matter already properly presented or disclosed in the financial statements that is fundamental to their understanding. An other matter paragraph refers to a matter not presented or disclosed in them that is relevant to users' understanding of the audit or report. Neither modifies the opinion.

Understand Emphasis of Matter and Other Matter Paragraphs

The auditor's opinion is the main message of the report. Sometimes the auditor is happy with the opinion but wants to point users to something. ISA 706 gives two tools for this. Both sit in the report as separate paragraphs and neither changes the opinion.

An emphasis of matter (EOM) paragraph points to something that is already presented or disclosed in the financial statements. The matter must be of such importance that it is fundamental to users' understanding of the statements. Typical examples are a major uncertainty about the outcome of a lawsuit, a significant subsequent event, or a major catastrophe that has affected the entity's financial position. The key point is that the disclosure exists and is adequate. The EOM only highlights it.

An other matter (OM) paragraph points to something that is not presented or disclosed in the financial statements but is relevant to users' understanding of the audit, the auditor's responsibilities or the auditor's report. Typical examples are that the prior period financial statements were audited by another auditor, or that the prior period statements were unaudited. Another example is a report restricted in use or distribution where law allows this.

The paragraph must not replace a modification. If the disclosure is missing or wrong, the auditor gives a qualified or adverse opinion instead. An EOM cannot fix poor disclosure. Also, an EOM is not a substitute for a material uncertainty related to going concern section. If the going concern disclosure is adequate, the auditor uses a separate heading, not an EOM. Matters communicated as key audit matters are different again, and an EOM does not replace a KAM.

Placement matters. The auditor puts the EOM paragraph straight after the opinion section or in a position suited to its content. It carries a heading that includes 'Emphasis of Matter'. It states clearly that the opinion is not modified in respect of the matter. An OM paragraph uses the heading 'Other Matter' or another suitable heading.

Key rules to remember

Emphasis of matter test: EOM = matter appropriately disclosed in the financial statements + fundamental to users' understanding; Both conditions must be met. If the disclosure is inadequate, modify the opinion instead.
Other matter test: OM = matter NOT disclosed in the financial statements + relevant to users' understanding of the audit, auditor's responsibilities or report; Use only when not prohibited by law or regulation.
Effect on opinion: EOM or OM paragraph → opinion unchanged; The paragraph should say the opinion is not modified in respect of the matter.
Content of an EOM paragraph: Clear reference to the matter + reference to the note disclosing it + statement that opinion is not modified; Do not put new information about the entity in the paragraph. That is management's job.
Placement: EOM: within the report, with an 'Emphasis of Matter' heading. OM: within the report, with an 'Other Matter' heading; Both are separate from the opinion and basis for opinion sections.

How to solve Emphasis of Matter and Other Matter Paragraphs questions

Use this method for any question asking whether an EOM or OM paragraph is needed, or asking you to draft or explain one.

1Identify the matter and say whether it is material and important to users.
2Check whether the matter is disclosed in the financial statements. Read the scenario for words such as 'note', 'disclosed' or 'not disclosed'.
3If it is not disclosed or is wrongly disclosed and material, stop. The answer is a modified opinion, not an EOM.
4If it is adequately disclosed and fundamental to understanding, choose an EOM paragraph.
5If it is not in the financial statements but relevant to users' understanding of the audit or report, choose an OM paragraph.
6State that the opinion is not modified and say where the paragraph sits in the report.
7Give the content: a clear heading, a description of the matter, a reference to the note, and the statement that the opinion is not modified.
8Check for traps: going concern material uncertainty, key audit matters, or a matter already fully covered by the opinion.

Quickest way: Disclosed or not? Two-question shortcut

When to use it: Use this in Section A and OT case questions, where you have under two minutes per question.

Ask: is the matter in the financial statements? Yes points to EOM. No points to OM.
Ask: is the disclosure adequate? If no, the answer is a qualified or adverse opinion.
Ask: is it a going concern uncertainty? If yes, use the material uncertainty section, not EOM.
Remember that both paragraphs leave the opinion unmodified.

Common mistakes in Emphasis of Matter and Other Matter Paragraphs

Using an EOM paragraph when the disclosure is missing or inadequate.
Students see an important matter and think any highlighting is enough.
Fix: An EOM only works if the matter is properly disclosed. Otherwise modify the opinion for material misstatement.
Saying an EOM paragraph modifies the opinion.
The paragraph looks serious, and students confuse it with a qualification.
Fix: State that the opinion is unmodified. The paragraph is additional and does not change the opinion type.
Mixing up EOM and OM.
Both names sound similar and both sit outside the opinion.
Fix: Link EOM to a matter in the financial statements and OM to a matter outside them.
Using an EOM for a going concern material uncertainty.
Older audit reports used EOM for this. Students remember the old practice.
Fix: When disclosure is adequate, use the separate 'Material Uncertainty Related to Going Concern' section.
Treating an EOM as a substitute for a key audit matter or using it for minor items.
Students think more highlighting is always safer.
Fix: Use an EOM sparingly, only where the matter is fundamental to understanding. KAMs are a separate area of the report.
Leaving out the sentence that the opinion is not modified, or the reference to the note.
Students describe the matter but forget the required elements.
Fix: Always include the heading, the matter, the note reference and the unmodified-opinion statement.

Worked examples

Example 1

At the year end, Kestrel Co is the defendant in a major lawsuit. Management has properly disclosed the nature of the claim and the uncertainty in note 18. The outcome is unknown, and the amount could affect the entity significantly. The directors have not provided for the claim because a loss is not probable. The auditor agrees. Advise on the audit report.

Show the solution

The matter is a major uncertainty and is important to users.
It is properly disclosed in note 18, and the auditor agrees with the accounting treatment.
Because the disclosure is adequate, there is no misstatement, so the opinion is not modified.
The matter is fundamental to users' understanding, so an EOM paragraph is appropriate.
The paragraph should have an 'Emphasis of Matter' heading, refer to note 18, describe the matter briefly and state that the opinion is not modified in respect of it.

Answer: Include an emphasis of matter paragraph referring to note 18 and give an unmodified opinion.

Example 2

Banyan Co's financial statements for the current year are audited by your firm. The prior year financial statements were audited by another firm, which gave an unmodified opinion. Nothing about this is disclosed in the financial statements. Explain how your report should deal with it.

Show the solution

The matter is that the comparatives were audited by another auditor.
This is not presented or disclosed in the financial statements, so it cannot be an EOM.
It is relevant to users' understanding of the audit and the auditor's report, so an OM paragraph fits.
The paragraph should have an 'Other Matter' heading. It should state that the prior year statements were audited by another auditor, name the date of that report and give the type of opinion expressed.
The opinion on the current year is not affected, so it remains unmodified.

Answer: Include an other matter paragraph stating that the prior year statements were audited by another auditor, with the date and opinion type. The current opinion is unmodified.

Exam tips

Always test the matter against disclosure first. It decides EOM, OM or modification.
Write 'the opinion is not modified in respect of this matter' in any drafted paragraph. Examiners look for it.
In OT questions, watch for answers that treat EOM as a type of modified opinion. They are wrong.
Do not recommend an EOM for every important matter. Say it must be fundamental to understanding.
For written answers, give the heading, the matter, the note reference and the unmodified statement. Use short bullet points.

Emphasis of Matter and Other Matter Paragraphs in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Emphasis of Matter and Other Matter Paragraphs: frequently asked questions

What is the difference between an emphasis of matter and an other matter paragraph?

An EOM refers to a matter that is presented or disclosed in the financial statements and is fundamental to users' understanding. An OM refers to a matter that is not disclosed in the financial statements but is relevant to understanding the audit, the auditor's responsibilities or the report. Neither changes the opinion.

Does an emphasis of matter paragraph mean the audit opinion is qualified?

No. The opinion stays unmodified. The paragraph only draws attention to a disclosed matter. If the auditor disagrees with the disclosure, the opinion would be modified instead.

Can I use an emphasis of matter paragraph for going concern?

Not where there is a material uncertainty that is adequately disclosed. That is reported in a separate section headed 'Material Uncertainty Related to Going Concern'. If the disclosure is inadequate, the opinion is modified.

Where does the emphasis of matter paragraph go in the audit report?

It goes within the report, with a heading that includes 'Emphasis of Matter', in a position that suits its content. It is separate from the opinion and basis for opinion sections. It must say the opinion is not modified in respect of the matter.