SA 706 governs two distinct additional paragraphs an auditor can add to a report without modifying the opinion: an emphasis of matter paragraph, which draws attention to something already appropriately presented or disclosed in the financial statements, and an other matter paragraph, which refers to a matter other than those presented in the financial statements that's relevant to users' understanding of the audit, the auditor's responsibilities, or the report itself. The direction each points in is the whole distinction — emphasis of matter points inward at the entity's own disclosure; other matter points outward at something the financial statements don't and wouldn't contain.
When each actually gets used
| Paragraph type | Typical use |
|---|---|
| Emphasis of matter | A material uncertainty related to going concern, adequately disclosed (SA 570); an unusually significant subsequent event, already disclosed; early adoption of a new accounting standard with a significant effect, already disclosed |
| Other matter | A restriction on distribution of the report where relevant; a reference to another auditor's report on comparative figures; a statement that the auditor is not independently reporting on prior-period figures audited by a predecessor |
An emphasis of matter paragraph is never used to draw attention to something the financial statements have NOT adequately disclosed — if disclosure is inadequate, the correct response is a qualified or adverse opinion under SA 705, not an emphasis paragraph dressed up as a workaround.
Why neither paragraph modifies the opinion
Both paragraphs sit inside what is still, formally, an unmodified opinion — the auditor is not expressing reservation about the financial statements by including either one. This is precisely why an emphasis of matter paragraph can never be used as a softer alternative to a qualification: if the matter being emphasised actually represents a problem with the financial statements rather than something already correctly handled within them, SA 706 is the wrong tool, and reaching for it instead of the appropriate SA 705 modification is a misapplication of the standard, not a lesser version of the same conclusion.
- Placed immediately after the Basis for Opinion section, with a clear heading naming it as "Emphasis of Matter" or "Other Matter."
- Includes a clear reference to the specific note or disclosure in the financial statements being emphasised, where applicable.
- States explicitly that the auditor's opinion is not modified in respect of the matter.
- Is used only where genuinely relevant to users' understanding — not as a general-purpose way to add caveats to an otherwise clean opinion.
This is practical guidance written for audit teams, not an authoritative statement of any standard or statute. Standards, forms and timelines change. Check the current text issued by the ICAI and the relevant authority before relying on anything here in an audit file.
Related resources
- Audit workflow & automationSA 700: forming an opinion, and what "true and fair" actually requires concluding onFinishing every planned procedure isn't the same as forming an opinion. SA 700 is the step that happens after the checklist, not instead of it.
- Audit workflow & automationSA 705: qualified, adverse or disclaimer — choosing the right modified opinionTwo questions decide which modification applies, and they're genuinely independent of each other — getting one right doesn't tell you the other.
- Audit workflow & automationSA 570: going concern, and when it actually changes the audit reportMost going-concern evaluations end exactly where they should: no material uncertainty, no change to the report. The standard is about the minority of cases where that's not true.
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