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CA Final · Advanced Auditing, Assurance and Professional Ethics · Reporting

CA Tarun is finalising the report on Lakshya Pharma Ltd. The entity has also prepared a second set of statements under another general purpose framework, and Tarun has reported on that set. He is deciding between an Emphasis of Matter paragraph and an Other Matter paragraph for this reference. Which choice is consistent with SA 706 (Revised)?

An Other Matter paragraph is appropriate. The reference is to another set of financial statements and to the report issued on it, which is not presented or disclosed in the statements being reported on, so it falls under Other Matter rather than Emphasis of Matter.

  1. AAn Other Matter paragraph is appropriate, because the other set of statements is not presented or disclosed in the statements he is reporting onCorrect
  2. BAn Emphasis of Matter paragraph is mandatory, because it is a significant matter
  3. CNeither is allowed, because the second set must be kept confidential
  4. DBoth paragraphs must be included to be safe

Explanation

SA 706 (Revised) provides for an Other Matter paragraph where the auditor refers to another set of financial statements prepared under another general purpose framework and to his report on them. The reference is to something not presented or disclosed in the financial statements being reported on, so it is not an Emphasis of Matter. Reference is allowed, not prohibited, and nothing requires both paragraphs.

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