Skip to content

Compliance Management, Audit and Due Diligence · Forming an Opinion and Reporting

Emphasis of Matter and Other Matter Paragraphs under SA 706

Updated 11 October 2026 · Fact-checked

An Emphasis of Matter (EOM) paragraph draws users' attention 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. Neither changes the auditor's opinion. Neither replaces a modified opinion when one is needed.

Understand Emphasis of Matter and Other Matter Paragraphs

An auditor's opinion says whether the financial statements give a true and fair view. Sometimes the statements are fine, yet one matter is so important that readers must not miss it. SA 706 (Revised) gives the auditor a tool for this: a separate paragraph in the report that points the reader to the matter. The opinion stays unmodified.

An Emphasis of Matter paragraph points to a matter that is already presented or disclosed in the financial statements. The matter must be fundamental to users' understanding. Examples are a major uncertainty about the outcome of litigation, or a significant subsequent event. The paragraph refers to the note where the disclosure sits.

An Other Matter paragraph points to a matter that is not presented or disclosed in the financial statements. It is relevant to users' understanding of the audit, the auditor's responsibilities or the report. A common example is that the prior period statements were audited by another auditor.

The SA text states the key limit: including an EOM paragraph does not affect the opinion. An EOM paragraph is not a substitute for (a) a modified opinion under SA 705 (Revised) when the circumstances require one; (b) disclosures that the framework requires management to make, or that are needed for fair presentation; or (c) reporting under SA 570 (Revised) when a material uncertainty exists about going concern.

Think of it this way. If the statements are wrong or the disclosure is missing, modify the opinion. If the statements are right and the disclosure is adequate, but the matter is vital, emphasise it.

Key rules to remember

Emphasis of Matter test
Matter is presented or disclosed in the financial statements + fundamental to users' understanding → EOM paragraph
The opinion is not modified. The paragraph refers to the note where the matter is disclosed.
Other Matter test
Matter is NOT presented or disclosed in the financial statements + relevant to users' understanding of the audit, the auditor's responsibilities or the report → Other Matter paragraph
Used for matters outside the financial statements, such as a predecessor auditor's report on comparatives.
EOM is not a substitute (SA 706, A7)
EOM ≠ modified opinion (SA 705) ≠ missing required disclosure ≠ going concern reporting (SA 570)
If a modified opinion, a required disclosure or going concern reporting is called for, an EOM paragraph cannot stand in for it.
Other framework disclosure (SA 700, A26)
Misleading disclosure → modified opinion; not misleading but fundamental → EOM
Applies when the statements also disclose compliance with another framework and that disclosure cannot be clearly differentiated from the statements.
Going concern, material uncertainty (SA 700 Appendix)
Adequate disclosure → draw attention to it; inadequate disclosure → modify the opinion
This follows the auditor's responsibility described in the report text.

How to solve Emphasis of Matter and Other Matter Paragraphs questions

Use this sequence for any case question on EOM or Other Matter. It forces a clear provision, analysis and conclusion.

  1. 1Identify the matter in the facts: litigation, subsequent event, going concern doubt, another framework, predecessor auditor and so on.
  2. 2Ask first whether the financial statements are misstated or a required disclosure is missing or inadequate. If yes, the issue belongs to SA 705 and the opinion is modified. Say so and stop the EOM route.
  3. 3If the statements are properly prepared and disclosed, ask whether the matter is disclosed in them. Disclosed and fundamental to understanding points to an EOM paragraph.
  4. 4If the matter is not disclosed in the statements but is relevant to understanding the audit, the auditor's responsibilities or the report, choose an Other Matter paragraph.
  5. 5For going concern, check whether a material uncertainty exists. With adequate disclosure, the auditor draws attention to it. With inadequate disclosure, the auditor modifies the opinion.
  6. 6State clearly that the opinion remains unmodified when an EOM or Other Matter paragraph is used.
  7. 7Draft the conclusion: name the paragraph type, say where it appears in the report, and refer to the note number for an EOM.

Quickest way: Disclosed, adequate, fundamental: the three-question filter

When to use it: Use this when time is short and the question asks you to choose between EOM, Other Matter and a modified opinion.

  1. Q1: Is the disclosure wrong, misleading or missing? Yes means modified opinion under SA 705.
  2. Q2: Is the matter disclosed in the financial statements and fundamental? Yes means EOM.
  3. Q3: Is the matter outside the financial statements but relevant to the audit or report? Yes means Other Matter.
  4. Write one closing line: the opinion is not affected by the paragraph.

Common mistakes in Emphasis of Matter and Other Matter Paragraphs

  • Treating an EOM paragraph as a qualification of the opinion.

    Both appear in the report and both draw attention to a problem, so they look alike.

    Fix: Remember that SA 706 says an EOM paragraph does not affect the opinion. A qualification changes the opinion itself.

  • Using EOM to cover a missing or inadequate disclosure.

    Students assume pointing to the matter is enough.

    Fix: An EOM requires the matter to be presented or disclosed already. Per A7 it cannot substitute for required disclosures or a modified opinion. If disclosure is inadequate, modify the opinion.

  • Confusing EOM and Other Matter.

    Both are separate paragraphs, so the labels blur.

    Fix: Ask where the matter sits. In the financial statements means EOM. Outside them means Other Matter.

  • Using EOM instead of going concern reporting when a material uncertainty exists.

    Going concern looks like just another important matter.

    Fix: SA 706 states EOM is not a substitute for reporting under SA 570 (Revised). The auditor draws attention to adequate disclosures, or modifies the opinion if they are inadequate.

  • Adding an EOM for every minor matter.

    Students think more emphasis is safer.

    Fix: Use EOM only for matters fundamental to users' understanding. Minor matters do not qualify.

Worked examples

Example 1

Sundaram Textiles Ltd has a major tax dispute pending before an appellate authority. The outcome is uncertain. The company has fully disclosed it in Note 32 and has made the accounting treatment required by the framework. The auditor considers the matter fundamental to users' understanding. Advise on the reporting.

Show the solution
  1. Provision: SA 706 allows an EOM paragraph for a matter presented or disclosed in the financial statements that is fundamental to users' understanding.
  2. Analysis: the dispute is disclosed in Note 32 and the required accounting is done. There is no misstatement and no missing disclosure, so SA 705 does not apply. The auditor judges the matter fundamental.
  3. Conclusion: the auditor adds an EOM paragraph referring to Note 32. The opinion stays unmodified.

Answer: Add an Emphasis of Matter paragraph referring to Note 32. The opinion is not modified.

Example 2

Kaveri Foods Ltd discloses a material uncertainty about going concern. The auditor concludes that a material uncertainty exists. In Case A the note disclosure is adequate. In Case B it is inadequate. State the reporting in each case and whether EOM alone is sufficient.

Show the solution
  1. Provision: under the auditor's responsibilities in the report, if a material uncertainty exists the auditor must draw attention to the related disclosures or, if they are inadequate, modify the opinion.
  2. Case A: the disclosure is adequate. The auditor draws attention to it in the report. The opinion is not modified. This is reporting under SA 570 (Revised), not a mere EOM.
  3. Case B: the disclosure is inadequate. The auditor modifies the opinion under SA 705 (Revised).
  4. Check SA 706 A7: an EOM paragraph is not a substitute for reporting under SA 570 (Revised) when a material uncertainty exists, nor for a modified opinion.

Answer: Case A: draw attention to the disclosure, with no modification. Case B: modify the opinion. An EOM paragraph alone does not replace going concern reporting.

Exam tips

  • Begin every answer with a one-line definition of the paragraph, then say the opinion is not affected.
  • Always test for misstatement or inadequate disclosure first. Examiners plant this trap in cases.
  • Quote the SA 706 A7 list of three things an EOM cannot substitute for.
  • In going concern questions, split your answer on adequate versus inadequate disclosure.
  • Close with a practical point: cite the note number and place the paragraph clearly in the report.

Practice questions from Forming an Opinion and Reporting

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 already presented or disclosed in the financial statements that is fundamental to users' understanding. An Other Matter paragraph refers to a matter not presented or disclosed in them but relevant to understanding the audit, the auditor's responsibilities or the report. Neither modifies the opinion.

Does an Emphasis of Matter paragraph make the opinion qualified?

No. SA 706 states that including an EOM paragraph does not affect the auditor's opinion. A qualified opinion is a modification under SA 705 (Revised) and is a different thing.

Can an auditor use EOM instead of a modified opinion?

No. An EOM paragraph is not a substitute for a modified opinion when the circumstances require one. It is also not a substitute for required disclosures or for going concern reporting.

How is going concern material uncertainty reported?

If the auditor concludes a material uncertainty exists, the auditor draws attention in the report to the related disclosures. If the disclosures are inadequate, the auditor modifies the opinion.