(i) An Emphasis of Matter (EoM) paragraph is a paragraph in the auditor’s report that refers to a matter that is appropriately presented or disclosed in the financial statements, but which is so important that special emphasis is needed for users.

An EoM is different from a modification to the auditor’s opinion. An EoM paragraph does not modify the opinion; indeed, it should state clearly that this is the case. An auditor should only include an EoM if they have sufficient appropriate audit evidence that the matter is not materially misstated.

The EoM should provide a clear reference to the matter and to where the appropriate disclosures and other information can be found in the financial statements.

Examples of when an EoM should be used include:

• An uncertainty relating to the future outcome of exceptional litigation.
• Early application of a new accounting standard that has a pervasive effect on the financial statements.
• A major catastrophe that has had a significant effect on the entity’s financial position.
• Significant going concern issues.

(ii) An Other Matter (OM) paragraph has in common with the EoM the fact that it does not modify the auditor’s opinion. However, whereas the EoM refers to a matter within the financial statements, an OM refers to information that is rightly not present in the financial statements, but which is so important for users’ understanding of them that it needs to be highlighted in the auditor’s report.

Examples of situations include:

• Law, regulation, or generally accepted practice may require or permit the auditor to elaborate on matters that provide further explanation of the auditor’s responsibilities or report.
• The auditor may be reporting on more than one set of financial statements (e.g., a set of statements prepared under a national reporting framework, and a set of statements prepared under International Financial Reporting Standards).
• Any restriction on the distribution of the auditor’s report.

The OM is thus a means for the auditor to communicate with users and should state explicitly that the matter referred to is not required to be included in the financial statements.