In a modified audit report with an unmodified opinion, which element might be included to draw attention to a significant matter?

In a modified audit report with an unmodified opinion, which element might be included to draw attention to a significant matter?

• A. An emphasis of matter paragraph
• B. A separate adverse opinion paragraph
• C. A disclaimer of opinion
• D. A positive assurance paragraph

Answer: (A)

An emphasis of matter paragraph is used when there is a matter disclosed in the financial statements that is so important for users to understand that the auditor wants to draw attention to it, but it does not change the auditor’s opinion. In a report that otherwise expresses an unmodified opinion, this paragraph sits after the opinion and explains the matter, which might be things like a significant going-concern issue or a large, unusual disclosure that the auditors believe users should be aware of. The opinion remains unmodified because the financial statements, taken as a whole, are still presented fairly. The other options would signal a change in the overall opinion or are not standard reporting elements. An adverse opinion paragraph would accompany a modified opinion, not an unmodified one. A disclaimer of opinion denotes insufficient evidence to form any opinion. A “positive assurance paragraph” isn’t a recognized component of standard audit reporting.

An emphasis of matter paragraph is used when there is a matter disclosed in the financial statements that is so important for users to understand that the auditor wants to draw attention to it, but it does not change the auditor’s opinion. In a report that otherwise expresses an unmodified opinion, this paragraph sits after the opinion and explains the matter, which might be things like a significant going-concern issue or a large, unusual disclosure that the auditors believe users should be aware of. The opinion remains unmodified because the financial statements, taken as a whole, are still presented fairly.

The other options would signal a change in the overall opinion or are not standard reporting elements. An adverse opinion paragraph would accompany a modified opinion, not an unmodified one. A disclaimer of opinion denotes insufficient evidence to form any opinion. A “positive assurance paragraph” isn’t a recognized component of standard audit reporting.