## Other Matter (OM) Paragraph — SA 706

### What Is an OM Paragraph?

An Other Matter (OM) paragraph communicates something that is not presented or disclosed in the financial statements but which the auditor judges to be relevant to:

Users' understanding of the audit
Users' understanding of the auditor's responsibilities
Users' understanding of the auditor's report

> Contrast with EOM: An Emphasis of Matter (EOM) paragraph draws attention to something already disclosed inside the FS. An OM paragraph communicates something that exists outside the FS entirely.

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### Conditions for Including an OM Paragraph

Both conditions must be satisfied:

1. Inclusion is not prohibited by law or regulation

2. Where SA 701 (KAM reporting) applies, the matter has not already been designated as a Key Audit Matter

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### Prior Communication with TCWG

Before including an OM paragraph, the auditor must communicate with Those Charged With Governance (TCWG) regarding:

The reason for including the paragraph
The exact wording of the paragraph

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### Examples of OM Situations — Mnemonic: RALI

Letter	Situation
R	Reasons why the auditor is unable to resign despite a scope limitation
A	Another set of FS prepared by the same entity under a different framework, on which the auditor also reported
L	Law / regulation / generally accepted practice requiring or permitting the auditor to elaborate further
I	The auditor's report is Intended solely for specific (intended) users

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### OM vs EOM — Quick Reference

Feature	EOM	OM
Draws attention to	Matter in the FS	Matter outside the FS
Requires opinion modification?	No	No
Heading	"Emphasis of Matter"	"Other Matter"
TCWG communication needed?	Yes	Yes
Excluded if KAM covers it?	Yes (SA 701)	Yes (SA 701)

Worked example

### Example 1

RALI – 'A' example: An auditor audits a company's Indian GAAP financial statements. The same entity also prepares IFRS financial statements for its foreign parent, and the auditor issued a separate report on those IFRS statements. In the Indian GAAP auditor's report, the auditor includes an OM paragraph disclosing the existence of the IFRS report. This is the 'Another set of FS' scenario under RALI.

### Example 2

RALI – 'R' example: During the audit, the auditor encounters a management-imposed limitation of scope that would ordinarily require withdrawal from the engagement. However, the applicable statute prevents the auditor from resigning mid-engagement. The auditor includes an OM paragraph explaining why resignation was not possible despite the scope limitation — the 'Reasons for inability to resign' scenario.

### Example 3

RALI – 'I' example: A bank's auditor prepares a report for use exclusively by the central bank (regulator) and not for the general public. The auditor includes an OM paragraph with the heading 'Restriction on Distribution and Use' specifying that the report is intended solely for the central bank.

⚠️ Common exam mistakes

Confusing EOM with OM: EOM highlights something already INSIDE the FS (e.g., a going concern note, litigation disclosure). OM communicates something OUTSIDE the FS. The source of the matter determines which paragraph to use.
Forgetting to communicate with TCWG before including an OM paragraph — SA 706 explicitly requires the auditor to discuss both the reason for inclusion and the exact wording.
Including as an OM paragraph a matter that SA 701 has already designated as a Key Audit Matter — KAM and OM paragraphs are mutually exclusive for the same matter.
Using OM to repeat or summarise information already in the FS — that would be an EOM, not an OM.
Treating the OM paragraph as equivalent to a modified opinion — neither EOM nor OM constitutes a modification of the audit opinion.

Bare-Act text SA 706, Paragraph 8 · SA 706 (Revised) — Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor's Report · click to expand

If the auditor considers it necessary to communicate a matter other than those that are presented or disclosed in the financial statements that, in the auditor's judgement, is relevant to users' understanding of the audit, the auditor's responsibilities or the auditor's report, the auditor shall do so in a paragraph in the auditor's report, with the heading 'Other Matter' or other appropriate heading.

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Other Matter (OM) Paragraph in Auditor's Report

Worked example

⚠️ Common exam mistakes