Emphasis of Matter paragraph And Other Matters paragraph

Question 1

3 scenarios when EoM paragraph required

Answer 1

• Substantial doubt about going concern
• Inconsistent accounting principles
• Special purpose framework used

Question 2

4 scenarios when EoM paragraph is recommended

Answer 2

• Litigation or regulator action
• Major casualty
• Significant related party transactions
• Unusually important sub events

Question 3

4 presentation requirements for EoM paragraph

Answer 3

1. Presented immediately after the opinion paragraph;
2. Should have an appropriate heading, such as “Emphasis of Matter”;
3. Should reference the specific matter being emphasized and identify where relevant disclosures can be found in the financial statements; and
4. State that the auditor’s opinion is not modified with respect to the matter emphasized.

Question 4

3 scenarios when OM paragraph is recommended

Answer 4

1. When the opinion currently expressed on PYs FS is different than the opinion previously expressed (required)
2. When reporting on more than one set of FS
3. When it is not possible for an auditor to withdrawal from an engagements in which management imposed a pervasive scope limitation

Question 5

3 presentation requirements for OM paragraph

Answer 5

1. After opinion paragraph or EoM paragraph
2. clearly indicated that the matter is not required to be presented/disclosed in the FS
3. May be included in the “Report on Other Legal and Regulatory Requirements”

Question 6

4 Items to evaluate a change in accounting principle

Answer 6

Whether the adopted principle is in accordance with the applicable financial reporting framework;

2. Whether the method of accounting for the effect of the change is in accordance with the applicable financial reporting framework;
3. Whether the disclosures about the change are adequate; and
4. Whether the entity has justified that the alternative adopted is preferable. (The issuance of an accounting pronouncement that requires or expresses a preference for an accounting principle is considered sufficient justification for a change in principle.)

Question 7

When all 4 criteria are met for a change in accounting principle, what type of paragraph should be used and what type of report.

Answer 7

Unmodified report with EoM paragraph

Question 8

When all 4 criteria are NOT met for a change in accounting principle, what type of paragraph should be used and what type of report.

Answer 8

Modify report, usually an qualified or adverse

Question 9

When Financials are restated to correct a prior period misstatement, what type of report and paragraph are included

Answer 9

unmodified and EoM paragraph