## SA-706: Emphasis of Matter (EOM) and Other Matter (OM) Paragraphs

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### Emphasis of Matter (EOM) Paragraph

Definition: A paragraph in the auditor's report referring to a matter appropriately presented or disclosed in the financial statements that is important for users' understanding.

> The matter already exists in the FS — the auditor is just drawing extra attention to it.

#### Examples of EOM

Change in accounting policies
Early application (where permitted) of a new AS with material effect on FS
Significant subsequent events
Outcome of pending litigation
Major catastrophic event with significant effect on financial position

#### How to Disclose EOM

Location: After the Basis for Opinion paragraph
Format: Separate section
Heading: "Emphasis of Matter"
Clearly reference the matter
Explicitly state that the report is not modified in respect of this matter
Refer only to matters already disclosed in the FS

#### EOM Is NOT a Substitute For

Not a substitute for	Why
Modified opinion (SA-705)	If FS are misstated, issue modification — don't just emphasize
Management's required disclosures	Management's obligation to disclose stands separately
SA-570 going concern reporting	Material uncertainty on going concern requires specific SA-570 treatment

#### Pre-Conditions Before Including EOM

Auditor must confirm:

1. Report is NOT required to be modified under SA-705

2. Matter is NOT a KAM under SA-701

#### Specific Circumstances Permitting EOM

1. FRF prescribed by law/regulation would be unacceptable but for being legally prescribed

2. To alert users that FS are prepared under a special purpose framework

3. When facts become known after the report date and auditor issues a new/amended report (subsequent events)

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### Other Matter (OM) Paragraph

Definition: A paragraph referring to a matter other than those presented or disclosed in the FS, included to help users understand the auditor's responsibilities or the auditor's report.

> The matter is NOT in the FS — it's something about the audit or auditor's role.

#### Examples of OM

Any technological update relevant to the audit
Child labour employed at client's site (not disclosed in FS)

#### How to Disclose OM

Format: Separate section
Heading: "Other Matters"
Location: After EOM paragraph (if EOM exists)

#### Conditions for Including OM Paragraph

1. Not prohibited by law/regulation

2. Matter has NOT been determined as a KAM under SA-701

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### Quick Comparison: EOM vs. OM

Feature	EOM	OM
Matter location	IN the FS (disclosed)	NOT in the FS
Purpose	Draw attention to significant FS matter	Explain auditor's role/responsibilities
Heading	"Emphasis of Matter"	"Other Matters"
Location in report	After Basis for Opinion	After EOM (if any)
Modifies opinion?	No	No
Can also be KAM?	No	No

Worked example

### Example 1

Q: During audit of DEF Ltd, the auditor notes that the company changed its depreciation method from SLM to WDV, which is fully disclosed in the notes to accounts. Should this be an EOM or a modified opinion?

A: This should be an EOM paragraph. The change in accounting policy is already appropriately disclosed in the FS (notes to accounts). The auditor should add an Emphasis of Matter paragraph after the Basis for Opinion section, headed "Emphasis of Matter," drawing attention to the change and clearly stating "our opinion is not modified in respect of this matter."

### Example 2

Q: An auditor discovers that a client employs child labour, which is not disclosed anywhere in the financial statements. What paragraph, if any, should appear in the audit report?

A: This is an Other Matter (OM) paragraph situation. Since child labour is not presented or disclosed in the FS, it cannot be an EOM. The auditor may include an OM paragraph (heading: "Other Matters") after any EOM paragraph, provided it is not prohibited by law/regulation and the matter has not been determined as a KAM. OM helps users understand the auditor's report context.

### Example 3

Q: The auditor believes a going concern material uncertainty should be flagged in the report. Can the auditor just add an EOM paragraph instead of following SA-570?

A: No. EOM is specifically NOT a substitute for SA-570 reporting when material uncertainty exists that casts significant doubt on going concern. The auditor must follow SA-570 requirements fully. Adding only an EOM would be incorrect and insufficient — it may even give users a false sense of security since EOM explicitly states the report is not modified.

⚠️ Common exam mistakes

Confusing EOM with a modified opinion — EOM explicitly states the opinion is NOT modified. Students often think adding EOM means the opinion is qualified.
Using EOM for matters NOT disclosed in FS — EOM can only refer to matters already presented or disclosed in FS. For matters not in FS, use OM.
Adding an EOM instead of issuing a modified opinion when the matter is actually a misstatement — EOM is not a shortcut to avoid modification.
Placing the OM paragraph before the EOM paragraph — the correct order is EOM first, then OM.
Thinking the KAM section and EOM/OM can cover the same matter — a matter determined as a KAM cannot simultaneously be reported as an EOM or OM.

Reference:

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