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

Brindle Co's auditor is finalising the report on financial statements prepared under a fair presentation framework. Which of the following situations would be correctly reported in an Other Matter paragraph rather than an Emphasis of Matter paragraph?

The reference to the predecessor auditor's unmodified report on the prior year statements belongs in an Other Matter paragraph. It is not a matter presented or disclosed in the financial statements. The lawsuit, catastrophe and new standard are all disclosed, so they would be Emphasis of Matter items.

  1. AA significant uncertainty about the outcome of a lawsuit that is fully disclosed in the notes
  2. BThe prior year financial statements were audited by a predecessor auditor, who issued an unmodified opinion, and the current auditor chooses to refer to thisCorrect
  3. CA major catastrophe that has affected the entity's financial position and is disclosed in the notes
  4. DThe adoption of a new accounting standard that is described in the accounting policies note

Explanation

ISA 710 requires an Other Matter paragraph referring to the predecessor auditor's report when the prior period was audited by another auditor and the current auditor chooses to refer to it. The other options are matters already disclosed in the financial statements, which suit an Emphasis of Matter paragraph.

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