SA 706 Emphasis & Other Matter

SA 706(Revised)*
Emphasis of Matter Paragraphs and Other
Matter Paragraphs in the Independent
Auditor’s Report
(Effective for audits of financial statements for periods
beginning on or after April 1, 2018)

Contents
Paragraph(s)
Introduction
Scope of this SA ............................................................................................1–4
Effective Date ............................................................................................ 5
Objective .................................................................................................. 6
Definitions ................................................................................................ 7
Requirements
Emphasis of Matter Paragraphs in the Auditor’s Report ....................... 8–9
Other Matter Paragraphs in the Auditor’s Report ............................. 10–11
Communication with Those Charged with Governance .......................... 12
Application and Other Explanatory Material
The Relationship between Emphasis of Matter Paragraphs and
Key Audit Matters in the Auditor’s report ......................................... A1–A3
Circumstances in Which an Emphasis of Matter Paragraph
May Be Necessary ........................................................................... A4–A6
Including an Emphasis of Matter Paragraph in the
Auditor’s Report ............................................................................... A7–A8
Other Matter Paragraphs in the Auditor’s Report .......................... A9–A15
Placement of Emphasis of Matter Paragraphs and Other Matter
Paragraphs in the Auditor’s Report .............................................. A16–A17
Communication with Those Charged with Governance ........................ A18

* Issued in May 2016.
Appendix 1: List of SAs Containing Requirements for Emphasis of Matter
Paragraphs
Appendix 2: List of SAs Containing Requirements for Other Matter
Paragraphs
Appendix 3: Illustration of an Auditor’s Report that Includes a Key Audit
Matters Section, an Emphasis of Matter Paragraph, and an Other Matter
Paragraph
Appendix 4: Illustration of an Auditor’s Report Containing a Qualified
Opinion Due to a Departure from the Applicable Financial Reporting
Framework and that Includes an Emphasis of Matter Paragraph

Standard on Auditing (SA) 706(Revised), “Emphasis of Matter
Paragraphs and Other Matter Paragraphs in the Independent Auditor’s
Report”, should be read in the context of the “Preface to the Standards
on Quality Control, Auditing, Review, Other Assurance and Related
Services”, which sets out the authority of SAs and SA 200, “Overall
Objectives of the Independent Auditor and the Conduct of an Audit in
Accordance with Standards on Auditing”.

SA 706(Revised) 2
Introduction
Scope of this SA
1. This Standard on Auditing (SA) deals with additional communication in the
auditor’s report when the auditor considers it necessary to:
(a) Draw users’ attention to a matter or matters presented or disclosed in the
financial statements that are of such importance that they are fundamental
to users’ understanding of the financial statements; or
(b) Draw users’ attention to any matter or matters other than those presented
or disclosed in the financial statements that are relevant to users’
understanding of the audit, the auditor’s responsibilities or the auditor’s
report.
2. SA 7011 establishes requirements and provides guidance when the auditor
determines key audit matters and communicates them in the auditor’s report.
When the auditor includes a Key Audit Matters section in the auditor’s report, this
SA addresses the relationship between key audit matters and any additional
communication in the auditor’s report in accordance with this SA. (Ref: Para. A1–
A3)
3
3. SA 570(Revised)2 and SA 720(Revised) establish requirements and
provide guidance about communication in the auditor’s report relating to going
concern and other information, respectively.
4. Appendices 1 and 2 identify SAs that contain specific requirements for the
auditor to include Emphasis of Matter paragraphs or Other Matter paragraphs in
the auditor’s report. In those circumstances, the requirements in this SA
regarding the form of such paragraphs apply. (Ref: Para. A4)
Effective Date
5. This SA is effective for audits of financial statements for periods beginning
on or after April 1, 2018.
Objective
6. The objective of the auditor, having formed an opinion on the financial
statements, is to draw users’ attention, when in the auditor’s judgment it is
necessary to do so, by way of clear additional communication in the auditor’s
report, to:

1
SA 701, Communicating Key Audit Matters in the Independent Auditor’s Report.
2
SA 570 (Revised), Going Concern.
3
SA 720 (Revised), The Auditor’s Responsibilities Relating to Other Information.

3 SA 706(Revised)
(a) A matter, although appropriately presented or disclosed in the financial
statements, that is of such importance that it is fundamental to users’
understanding of the financial statements; or
(b) As appropriate, any other matter that is relevant to users’ understanding of
the audit, the auditor’s responsibilities or the auditor’s report.
Definitions
7. For purposes of the SAs, the following terms have the meanings attributed
below:
(a) Emphasis of Matter paragraph – A paragraph included in the auditor’s
report that refers to a matter appropriately presented or disclosed in the
financial statements that, in the auditor’s judgment, is of such importance
that it is fundamental to users’ understanding of the financial statements.
(b) Other Matter paragraph – A paragraph included in the auditor’s report that
refers to a matter other than those presented or disclosed in the financial
statements that, in the auditor’s judgment, is relevant to users’
understanding of the audit, the auditor’s responsibilities or the auditor’s
report.
Requirements
Emphasis of Matter Paragraphs in the Auditor’s Report
8. If the auditor considers it necessary to draw users’ attention to a matter
presented or disclosed in the financial statements that, in the auditor’s judgment,
is of such importance that it is fundamental to users’ understanding of the
financial statements, the auditor shall include an Emphasis of Matter paragraph
in the auditor’s report provided: (Ref: Para. A5–A6)
(a) The auditor would not be required to modify the opinion in accordance with
SA 705 (Revised)4 as a result of the matter; and
(b) When SA 701 applies, the matter has not been determined to be a key
audit matter to be communicated in the auditor’s report. (Ref: Para. A1–A3)
9. When the auditor includes an Emphasis of Matter paragraph in the
auditor’s report, the auditor shall:
(a) Include the paragraph within a separate section of the auditor’s report with
an appropriate heading that includes the term “Emphasis of Matter”;
(b) Include in the paragraph a clear reference to the matter being emphasized

4
SA 705 (Revised), Modifications to the Opinion in the Independent Auditor’s Report.

SA 706(Revised) 4
 and to where relevant disclosures that fully describe the matter can be
found in the financial statements. The paragraph shall refer only to
information presented or disclosed in the financial statements; and
(c) Indicate that the auditor’s opinion is not modified in respect of the matter
emphasized. (Ref: Para. A7–A8, A16–A17)
Other Matter Paragraphs in the Auditor’s Report
10. 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 judgment, is relevant to users’ understanding of the audit, the auditor’s
responsibilities or the auditor’s report, the auditor shall include an Other Matter
paragraph in the auditor’s report, provided:
(a) This is not prohibited by law or regulation; and
(b) When SA 701 applies, the matter has not been determined to be a key
audit matter to be communicated in the auditor’s report. (Ref: Para. A9–
A14)
11. When the auditor includes an Other Matter paragraph in the auditor’s
report, the auditor shall include the paragraph within a separate section with the
heading “Other Matter,” or other appropriate heading. (Ref: Para. A15–A17)
Communication with Those Charged with Governance
12. If the auditor expects to include an Emphasis of Matter or an Other Matter
paragraph in the auditor’s report, the auditor shall communicate with those
charged with governance regarding this expectation and the wording of this
paragraph. (Ref: Para. A18)
***
Application and Other Explanatory Material
The Relationship between Emphasis of Matter Paragraphs and Key
Audit Matters in the Auditor’s Report (Ref: Para. 2, 8(b))
A1. Key audit matters are defined in SA 701 as those matters that, in the
auditor’s professional judgment, were of most significance in the audit of the
financial statements of the current period. Key audit matters are selected from
matters communicated with those charged with governance, which include
significant findings from the audit of the financial statements of the current
period.5 Communicating key audit matters provides additional information to

5
SA 260 (Revised), Communication with Those Charged with Governance, paragraph 16.

5 SA 706(Revised)
intended users of the financial statements to assist them in understanding those
matters that, in the auditor’s professional judgment, were of most significance in
the audit and may also assist them in understanding the entity and areas of
significant management judgment in the audited financial statements. When SA
701 applies, the use of Emphasis of Matter paragraphs is not a substitute for a
description of individual key audit matters.
A2. Matters that are determined to be key audit matters in accordance with SA
701 may also be, in the auditor’s judgment, fundamental to users’ understanding
of the financial statements. In such cases, in communicating the matter as a key
audit matter in accordance with SA 701, the auditor may wish to highlight or draw
further attention to its relative importance. The auditor may do so by presenting
the matter more prominently than other matters in the Key Audit Matters section
(e.g., as the first matter) or by including additional information in the description
of the key audit matter to indicate the importance of the matter to users’
understanding of the financial statements.
A3. There may be a matter that is not determined to be a key audit matter in
accordance with SA 701 (i.e., because it did not require significant auditor
attention), but which, in the auditor’s judgment, is fundamental to users’
understanding of the financial statements (e.g., a subsequent event). If the
auditor considers it necessary to draw users’ attention to such a matter, the
matter is included in an Emphasis of Matter paragraph in the auditor’s report in
accordance with this SA.
Circumstances in Which an Emphasis of Matter Paragraph May Be
Necessary (Ref: Para. 4, 8)
A4. Appendix 1 identifies SAs that contain specific requirements for the auditor
to include Emphasis of Matter paragraphs in the auditor’s report in certain
circumstances. These circumstances include:
 When a financial reporting framework prescribed by law or regulation would
be unacceptable but for the fact that it is prescribed by law or regulation.
 To alert users that the financial statements are prepared in accordance with
a special purpose framework.
 When facts become known to the auditor after the date of the auditor’s
report and the auditor provides a new or amended auditor’s report (i.e.,
subsequent events).6
A5. Examples of circumstances where the auditor may consider it necessary

6
SA 560, Subsequent Events, paragraphs 12(b) and 16.

SA 706(Revised) 6
to include an Emphasis of Matter paragraph are:
 An uncertainty relating to the future outcome of exceptional litigation or
regulatory action.
 A significant subsequent event that occurs between the date of the financial
statements and the date of the auditor’s report.7
 Early application (where permitted) of a new accounting standard that has a
material effect on the financial statements.
 A major catastrophe that has had, or continues to have, a significant effect
on the entity’s financial position.
A6. However, a widespread use of Emphasis of Matter paragraphs may
diminish the effectiveness of the auditor’s communication about such matters.
Including an Emphasis of Matter Paragraph in the Auditor’s Report
(Ref: Para. 9)
A7. The inclusion of an Emphasis of Matter paragraph in the auditor’s report
does not affect the auditor’s opinion. An Emphasis of Matter paragraph is not a
substitute for:
(a) A modified opinion in accordance with SA 705 (Revised) when required by
the circumstances of a specific audit engagement;
(b) Disclosures in the financial statements that the applicable financial
reporting framework requires management to make, or that are otherwise
necessary to achieve fair presentation; or
(c) Reporting in accordance with SA 570 (Revised)8 when a material
uncertainty exists relating to events or conditions that may cast significant
doubt on an entity’s ability to continue as a going concern.
A8. Paragraphs A16–A17 provide further guidance on the placement of
Emphasis of Matter paragraphs in particular circumstances.
Other Matter Paragraphs in the Auditor’s Report (Ref: Para. 10–11)
Circumstances in Which an Other Matter Paragraph May Be Necessary
Relevant to Users’ Understanding of the Audit
A9. SA 260 (Revised) requires the auditor to communicate with those charged
with governance about the planned scope and timing of the audit, which includes

7
SA 560, paragraph 6.
8
SA 570 (Revised), paragraphs 22–23.

7 SA 706(Revised)
communication about the significant risks identified by the auditor.9 Although
matters relating to significant risks may be determined to be key audit matters,
other planning and scoping matters (e.g., the planned scope of the audit, or the
application of materiality in the context of the audit) are unlikely to be key audit
matters because of how key audit matters are defined in SA 701. However, law
or regulation may require the auditor to communicate about planning and
scoping matters in the auditor’s report, or the auditor may consider it necessary
to communicate about such matters in an Other Matter paragraph.
A10. In the rare circumstance where the auditor is unable to withdraw from an
engagement even though the possible effect of an inability to obtain sufficient
appropriate audit evidence due to a limitation on the scope of the audit imposed
by management is pervasive,10 the auditor may consider it necessary to include
an Other Matter paragraph in the auditor’s report to explain why it is not possible
for the auditor to withdraw from the engagement.
Relevant to Users’ Understanding of the Auditor’s Responsibilities or the
Auditor’s Report
A11. 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 in the audit of the financial statements or of the auditor’s report
thereon. When the Other Matter section includes more than one matter that, in
the auditor’s judgment, is relevant to users’ understanding of the audit, the
auditor’s responsibilities or the auditor’s report, it may be helpful to use different
sub-headings for each matter.
A12. An Other Matter paragraph does not deal with circumstances where the
auditor has other reporting responsibilities that are in addition to the auditor’s
responsibility under the SAs (see Other Reporting Responsibilities section in SA
700 (Revised)11), or where the auditor has been asked to perform and report on
additional specified procedures, or to express an opinion on specific matters.
Reporting on more than one set of financial statements
A13. An entity may prepare one set of financial statements in accordance with a
general purpose framework (e.g., the national framework) and another set of
financial statements in accordance with another general purpose framework
(e.g., International Financial Reporting Standards), and engage the auditor to
report on both sets of financial statements. If the auditor has determined that the

9
SA 260 (Revised), paragraph 15.
10
See paragraph 13(b)(ii) of SA 705 (Revised) for a discussion of this circumstance.
11
SA 700 (Revised), Forming an Opinion and Reporting on Financial Statements, paragraphs 43-
45.

SA 706(Revised) 8
frameworks are acceptable in the respective circumstances, the auditor may
include an Other Matter paragraph in the auditor’s report, referring to the fact that
another set of financial statements has been prepared by the same entity in
accordance with another general purpose framework and that the auditor has
issued a report on those financial statements.
Restriction on distribution or use of the auditor’s report
A14. Financial statements prepared for a specific purpose may be prepared in
accordance with a general purpose framework because the intended users have
determined that such general purpose financial statements meet their financial
information needs. Since the auditor’s report is intended for specific users, the
auditor may consider it necessary in the circumstances to include an Other
Matter paragraph, stating that the auditor’s report is intended solely for the
intended users, and should not be distributed to or used by other parties.
Including an Other Matter Paragraph in the Auditor’s Report
A15. The content of an Other Matter paragraph reflects clearly that such other
matter is not required to be presented and disclosed in the financial statements.
An Other Matter paragraph does not include information that the auditor is
prohibited from providing by law, regulation or other professional standards, for
example, ethical standards relating to confidentiality of information. An Other
Matter paragraph also does not include information that is required to be
provided by management.
Placement of Emphasis of Matter Paragraphs and Other Matter
Paragraphs in the Auditor’s Report (Ref: Para. 9, 11)
A16. The placement of an Emphasis of Matter paragraph or Other Matter
paragraph in the auditor’s report depends on the nature of the information to be
communicated, and the auditor’s judgment as to the relative significance of such
information to intended users compared to other elements required to be
reported in accordance with SA 700 (Revised). For example:
Emphasis of Matter Paragraphs
 When the Emphasis of Matter paragraph relates to the applicable financial
reporting framework, including circumstances where the auditor determines
that the financial reporting framework prescribed by law or regulation would
otherwise be unacceptable,12 the auditor may consider it necessary to
place the paragraph immediately following the Basis of Opinion section to
provide appropriate context to the auditor’s opinion.
12
For example, as required by SA 210, Agreeing the Terms of Audit Engagements, paragraph 19
and SA 800, Special Considerations—Audits of Financial Statements Prepared in Accordance with
Special Purpose Frameworks, paragraph 14.

9 SA 706(Revised)
 When a Key Audit Matters section is presented in the auditor’s report, an
Emphasis of Matter paragraph may be presented either directly before or
after the Key Audit Matters section, based on the auditor’s judgment as to
the relative significance of the information included in the Emphasis of
Matter paragraph. The auditor may also add further context to the heading
“Emphasis of Matter”, such as “Emphasis of Matter – Subsequent Event”, to
differentiate the Emphasis of Matter paragraph from the individual matters
described in the Key Audit Matters section.
Other Matter Paragraphs
 When a Key Audit Matters section is presented in the auditor’s report and
an Other Matter paragraph is also considered necessary, the auditor may
add further context to the heading “Other Matter”, such as “Other Matter –
Scope of the Audit”, to differentiate the Other Matter paragraph from the
individual matters described in the Key Audit Matters section.
 When an Other Matter paragraph is included to draw users’ attention to a
matter relating to Other Reporting Responsibilities addressed in the
auditor’s report, the paragraph may be included in the Report on Other
Legal and Regulatory Requirements section.
 When relevant to all the auditor’s responsibilities or users’ understanding of
the auditor’s report, the Other Matter paragraph may be included as a
separate section following the Report on the Audit of the Financial
Statements and the Report on Other Legal and Regulatory Requirements.
A17. Appendix 3 is an illustration of the interaction between the Key Audit
Matters section, an Emphasis of Matter paragraph and an Other Matter
paragraph when all are presented in the auditor’s report. The illustrative report in
Appendix 4 includes an Emphasis of Matter paragraph in an auditor’s report for
an entity other than a listed entity that contains a qualified opinion and for which
key audit matters have not been communicated.
Communication with Those Charged with Governance (Ref. Para. 12)
A18. The communication required by paragraph 12 enables those charged with
governance to be made aware of the nature of any specific matters that the
auditor intends to highlight in the auditor’s report, and provides them with an
opportunity to obtain further clarification from the auditor where necessary.
Where the inclusion of an Other Matter paragraph on a particular matter in the
auditor’s report recurs on each successive engagement, the auditor may
determine that it is unnecessary to repeat the communication on each
engagement, unless otherwise required to do so by law or regulation.

SA 706(Revised) 10
 Appendix 1
(Ref: Para. 4, A4)
List of SAs Containing Requirements for Emphasis of
Matter Paragraphs
This appendix identifies paragraphs in other SAs that require the auditor to
include an Emphasis of Matter paragraph in the auditor’s report in certain
circumstances. The list is not a substitute for considering the requirements and
related application and other explanatory material in SAs.
 SA 210, Agreeing the Terms of Audit Engagements – paragraph 19(b).
 SA 560, Subsequent Events – paragraphs 12(b) and 16.
 SA 800, Special Considerations—Audits of Financial Statements Prepared
in Accordance with Special Purpose Frameworks – paragraph 14.

11 SA 706(Revised)
 Appendix 2
(Ref: Para. 4)
List of SAs Containing Requirements for Other Matter
Paragraphs
This appendix identifies paragraphs in other SAs that require the auditor to
include an Other Matter paragraph in the auditor’s report in certain
circumstances. The list is not a substitute for considering the requirements and
related application and other explanatory material in SAs.
 SA 560, Subsequent Events – paragraphs 12(b) and 16.
 SA 710, Comparative Information—Corresponding Figures and
Comparative Financial Statements – paragraphs 13–14, 16–17 and 19.

SA 706(Revised) 12
 Appendix 3
(Ref: Para. A17)
Illustration of an Auditor’s Report that Includes a Key Audit Matters
Section, an Emphasis of Matter Paragraph, and an Other Matter
Paragraph
For purposes of this illustrative auditor’s report, the following circumstances are
assumed:
 Audit of a complete set of financial statements of a listed company
(registered under the companies Act, 2013) using a fair presentation
framework. The audit is not a group audit. (i.e., SA 600 does not apply)
 The financial statements are prepared by management of the company in
accordance with the Accounting Standards prescribed under section 133 of
the Companies Act, 2013 (a general purpose framework).
 The terms of the audit engagement reflect the description of management’s
responsibility for the financial statements in SA 210.
 The auditor has concluded an unmodified (i.e., “clean”) opinion is
appropriate based on the audit evidence obtained.
 The relevant ethical requirements that apply to the audit are those of the
ICAI’s Code of Ethics and the provisions of the Companies Act, 2013.
 Based on the audit evidence obtained, the auditor has concluded that a
material uncertainty does not exist related to events or conditions that may
cast significant doubt on the company’s ability to continue as a going
concern in accordance with SA 570(Revised).
 Between the date of the financial statements and the date of the auditor’s
report, there was a fire in the company’s production facilities, which was
disclosed by the company as a subsequent event. In the auditor’s
judgment, the matter is of such importance that it is fundamental to users’
understanding of the financial statements. The matter did not require
significant auditor attention in the audit of the financial statements in the
current period.
 Key audit matters have been communicated in accordance with SA 701.
 The auditor has obtained all of the other information prior to the date of the
auditor's report and has not identified a material misstatement of the other
information.

13 SA 706(Revised)
 Corresponding figures are presented, and the prior period’s financial
statements were audited by a predecessor auditor. The auditor is not
prohibited by law or regulation from referring to the predecessor auditor’s
report on the corresponding figures and has decided to do so.
 Those responsible for oversight of the financial statements differ from those
responsible for the preparation of the financial statements.
 In addition to the audit of the financial statements, the auditor has other
reporting responsibilities required under the Companies Act, 2013.

INDEPENDENT AUDITOR’S REPORT
To the Members of ABC Company Limited
Report on the Audit of the Standalone Financial Statements
Opinion
We have audited the standalone financial statements of ABC Company Limited
(“the Company”), which comprise the balance sheet as at March 31, 20X1, and
the statement of Profit & Loss, (statement of changes in equity)13 and the
statement of cash flows for the year then ended, and notes to the financial
statements, including a summary of significant accounting policies and other
explanatory information (in which are included the Returns for the year ended on
that date audited by the branch auditors of the Company’s branches located at
(location of branches))14.
In our opinion, and to the best of our information and according to the
explanations given to us the aforesaid financial statements, give the information
required by the Companies Act, 2013 in the manner so required, and give a true
and fair view, in conformity with the accounting principles generally accepted in
India, of the state of affairs of the Company as at March 31st, 20X1 and its
profit/loss, (changes in equity15) and its cash flows for the year ended on that
date.
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing (SAs)
specified under Section 143(10) of the Companies Act, 2013. Our responsibilities
under those standards are further described in the Auditor’s Responsibilities for

13
Where applicable.
14
Where applicable.
15
Where applicable.

SA 706(Revised) 14
the Audit of the Financial Statements section of our report. We are independent
of the Company in accordance with the ethical requirements that are relevant to
our audit of the financial statements as per the ICAI’s Code of Ethics and the
provisions of the Companies Act, 2013, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
16
Emphasis of Matter
We draw attention to Note X of the financial statements, which describes the
effects of a fire in the Company’s production facilities. Our opinion is not modified
in respect of this matter.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of
most significance in our audit of the financial statements of the current period.
These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
[Description of each key audit matter in accordance with SA 701.]
Other Matter
The financial statements of ABC Company Limited for the year ended March 31,
20X0, were audited by another auditor who expressed an unmodified opinion on
those statements on June 15, 20X0.
Other Information [or another title if appropriate such as “Information
Other than the Financial Statements and Auditor’s Report Thereon”]
[Reporting in accordance with the reporting requirements in SA 720 (Revised) –
see Illustration 1 in Appendix 2 of SA 720 (Revised).]
Responsibilities of Management and Those Charged with Governance for
the Financial Statements
[Reporting in accordance with SA 700 (Revised) – see Illustration 1 in SA 700
(Revised).]
Auditor’s Responsibilities for the Audit of the Financial Statements
[Reporting in accordance with SA 700 (Revised) – see Illustration 1 in SA 700
(Revised).]

16
As noted in paragraph A16, an Emphasis of Matter paragraph may be presented either directly
before or after the Key Audit Matters section based on the auditor’s judgment as to the relative
significance of the information included in the Emphasis of Matter paragraph.

15 SA 706(Revised)
Report on Other Legal and Regulatory Requirements
[Reporting in accordance with SA 700 (Revised) – see Illustration 1 in SA 700
(Revised).]
While reporting under Section 143(3) of the Companies Act, 2013, the auditor is
required to suitably reword the wordings given in the Illustration in SA
700(Revised) to meet the circumstances of the audit.

For XYZ & Co
Chartered Accountants
(Firm’s Registration No.)

Signature
(Name of the Member signing the Audit Report)
(Designation17)
(Membership No.)
Place of Signature:
Date:

17
Partner or Proprietor, as the case may be

SA 706(Revised) 16
 Appendix 4
(Ref: Para. A8)
Illustration of an Auditor’s Report Containing a Qualified Opinion
Due to a Departure from the Applicable Financial Reporting
Framework and that Includes an Emphasis of Matter Paragraph
For purposes of this illustrative auditor’s report, the following circumstances are
assumed:
 Audit of a complete set of financial statements of an unlisted company
(registered under the Companies Act, 2013) using a fair presentation
framework. The audit is not a group audit (i.e. SA 600 does not apply)
 The financial statements are prepared by management of the company in
accordance with the Accounting Standards prescribed under section 133
of the Companies Act, 2013 (a general purpose framework).
 The terms of the audit engagement reflect the description of
management’s responsibility for the financial statements in SA 210.
 A departure from the applicable financial reporting framework resulted in a
qualified opinion.
 The relevant ethical requirements that apply to the audit are the ICAI’s
Code of Ethics and the provisions of the Companies Act, 2013.
 Based on the audit evidence obtained, the auditor has concluded that a
material uncertainty does not exist related to events or conditions that
may cast significant doubt on the company’s ability to continue as a going
concern in accordance with SA 570(Revised).
 Between the date of the financial statements and the date of the auditor’s
report, there was a fire in the company’s production facilities, which was
disclosed by the company as a subsequent event. In the auditor’s
judgment, the matter is of such importance that it is fundamental to users’
understanding of the financial statements. The matter did not require
significant auditor attention in the audit of the financial statements in the
current period.
 The auditor is not required, and has otherwise not decided, to
communicate key audit matters in accordance with SA 701.
 The auditor has not obtained any other information prior to the date of the
auditor’s report.
 Those responsible for oversight of the financial statements differ from
those responsible for the preparation of the financial statements.
 In addition to the audit of the financial statements, the auditor has other
reporting responsibilities required under the Companies Act, 2013.

17 SA 706(Revised)
INDEPENDENT AUDITOR’S REPORT
To the Members of ABC Company Limited
Report on the Audit of the Standalone Financial Statements
Qualified Opinion
We have audited the standalone financial statements of ABC Company Limited
(“the Company”), which comprise the balance sheet as at March 31st, 20X1, and
the statement of Profit and Loss, (statement of changes in equity)18 and the
statement of cash flows for the year then ended, and notes to the financial
statements, including a summary of significant accounting policies and other
explanatory information (in which are included the Returns for the year ended on
that date audited by the branch auditors of the Company’s branches located at
(location of branches))2.
In our opinion and to the best of our information and according to the
explanations given to us, except for the effects of the matter described in the
Basis for Qualified Opinion section of our report, the aforesaid financial
statements give the information required by the Companies Act 2013 in the
manner so required and give a true and fair view in conformity with the
accounting principles generally accepted in India of the state of affairs of the
Company as at March 31st, 20X1 and its profit/loss, (changes in equity19) and its
cash flows for the year ended on that date.
Basis for Qualified Opinion
The Company’s short-term marketable securities are carried in the balance sheet
at Rs. xxx. Management has not marked these securities to market but has
instead stated them at cost, which constitutes a departure from the Accounting
Standards prescribed under Section 133 of the Companies Act, 2013. The
Company’s records indicate that had management marked the marketable
securities to market, the Company would have recognized an unrealized loss of
Rs. xxx in the statement of profit and loss for the year. The carrying amount of
the securities in the balance sheet would have been reduced by the same
amount at March 31, 20X1, and income tax, net income and shareholders’ equity
would have been reduced by Rs. xxx, Rs. xxx and Rs. xxx, respectively.
We conducted our audit in accordance with the Standards on Auditing (SAs)
specified under Section 143(10) of the Companies Act 2013. Our responsibilities
under those standards are further described in the Auditor’s Responsibilities for
the Audit of the Financial Statements section of our report. We are independent
of the Company in accordance with the ethical requirements that are relevant to

18
Where applicable.
19
Where applicable.

SA 706(Revised) 18
our audit of the financial statements as per the Code of Ethics issued by ICAI
and under the provisions of the Companies Act, 2013, and we have fulfilled our
other ethical responsibilities in accordance with these requirements and the
ICAI’s Code of Ethics. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our qualified opinion.
Emphasis of Matter – Effects of a Fire
We draw attention to Note X of the financial statements, which describes the
effects of a fire in the Company’s production facilities. Our opinion is not modified
in respect of this matter.
Responsibilities of Management and Those Charged with Governance for
the Financial Statements
[Reporting in accordance with SA 700(Revised)–see Illustration 3 in SA
700(Revised).]
Auditor’s Responsibilities for the Audit of the Financial Statements
[Reporting in accordance with SA 700(Revised – see Illustration 3 in SA
700(Revised).]
Report on Other Legal and Regulatory Requirements
[Reporting in accordance with SA 700 (Revised) – see Illustration 3 in SA 700
(Revised).]
While reporting under Section 143(3) of the Companies Act, 2013, the auditor is
required to suitably reword the wordings given in the Illustration in SA
700(Revised) to meet the circumstances of the audit.
For XYZ & Co
Chartered Accountants
(Firm’s Registration No.)

Signature
(Name of the Member signing the Audit Report)
(Designation20)
(Membership No.)
Place of Signature:
Date:

20
Partner or Proprietor, as the case may be.

19 SA 706(Revised)