SA 706 “Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor's Report" requires the auditor to include an Emphasis…

CA Intermediate · Auditing and Ethics · MTP · January 2026
SA 706 “Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor's Report" requires the auditor to include an Emphasis of Matter paragraph in the auditor's report when the auditor considers it necessary to draw users' attention to a matter presented or disclosed in the financial statements, which is of such importance that it is fundamental to users' understanding of the financial statements. Give examples of circumstances where the auditor may consider it necessary to include an Emphasis of Matter paragraph in the auditor's report.

Suggested Answer and Working Notes:

Some examples of circumstances where the auditor may consider it necessary to include an Emphasis of Matter paragraph. An uncertainty relating to the future outcome of exceptional litigation or regulatory action.A significant subsequent event that occurs between the date of the financial statements and the date of the auditor’s report.Early application (where permitted) of a new accounting standard that has a material effect on the financial statements.A major catastrophe that has had, or continues to have, a significant effect on the entity’s financial position.

Topics: Audit Report

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