Question

If an auditor includes an emphasis-of-matter paragraph to draw users’ attention to a matter relevant to the users’ understanding of the financial statements of a nonissuer, then the auditor should

A) Notify the appropriate regulatory authority if the auditor’s opinion was modified on the basis of the matter.

B) Include the paragraph immediately after the opinion paragraph in the audit report.

C) Modify the introductory paragraph to direct the reader to the emphasis-of-matter paragraph.

D) Indicate in the audit report that the emphasis-of-matter paragraph is required by law or regulation.

Answer 1

The Correct Answer would be option B

Include the paragraph immediately after the opinion paragraph in the Audit Report.

The Emphasis of Matter Paragaraph deals with additional communication 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, that, in the Auditor's judgement is of such importance that it is fundamental to the users' understanding of financial statements.

The Auditor shall include an Emphasis of Matter paragraph in his report provided the auditor has obtained sufficient and appropriate audit evidenec that the matter is not materially misstated in the financial statements.

The Emphasis of Matter paragraph shall refer only to the information presented or disclosed in the financial statements.

When the Auditor's report contains Emphasis of Matter paragraph then the auditor must make sure that such a paragraph is included immediately after the opinion paragraph in the Audit Report.