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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Auditor's reports

Auditor Lena has included an Emphasis of Matter paragraph in the report for Sable Group, an unmodified opinion. Management objects, claiming the paragraph will imply a modified opinion. Which statement best reflects ISA 706 (Revised) requirements regarding the paragraph?

The Emphasis of Matter paragraph must sit in its own section with a heading containing Emphasis of Matter, refer clearly to the note where the matter is disclosed, and state that the opinion is not modified regarding it. Management's agreement is not required, and the auditor should not add original information.

  1. AThe paragraph must be placed immediately before the Basis for Opinion section and must not refer to the opinion
  2. BThe paragraph must be in a separate section with an appropriate heading that includes the term Emphasis of Matter, must include a clear reference to the note disclosing the matter, and must state that the opinion is not modified in respect of itCorrect
  3. CThe paragraph may be omitted if management does not agree, since it is voluntary and the auditor needs management's consent
  4. DThe paragraph must describe the matter in full detail and quantify its financial effect, as the notes need not do so

Explanation

ISA 706 requires the paragraph to be in a separate section with a heading including Emphasis of Matter, to refer clearly to where the relevant disclosure appears, and to state that the opinion is not modified in respect of the matter. Management's consent is not required, and the paragraph should not contain information not provided in the financial statements by management.

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