An emphasis of matter paragraph points the reader to something already disclosed in the financial statements. Key audit matters describe the areas that took most of the auditor's attention in the audit. An other matter paragraph covers something outside the financial statements that helps the reader understand the audit or the report. None of the three changes the opinion.
Last reviewed: 17 October 2026. Facts checked. We ran web searches on SA 701 and SA 706 and read summaries from ICAI regional council training material and a draft standard; we did not open the final ICAI text of either standard, so paragraph numbers are not quoted. The list of typical triggers was cross-checked against the ISA 706 examples (exceptional litigation, early application of a new standard, major catastrophe, a significant subsequent event) in a copy of the IAASB text seen in search results. We checked that the site posts linked below exist. The wording examples are illustrative and not from any real report. Check the current standards before drafting.
The three in one table
| Emphasis of matter | Key audit matters | Other matter | |
|---|---|---|---|
| Standard | SA 706 | SA 701 | SA 706 |
| Points at | A matter already presented or disclosed in the financial statements | The matters of most significance in the audit | A matter not presented in the financial statements |
| Reader's question it answers | What should I not miss in the notes? | Where did the auditor spend the effort? | What else do I need to understand the audit or the report? |
| Who gets it | Any audit where the auditor judges it needed | Listed entities, and others where required or chosen | Any audit where the auditor judges it needed |
| Effect on opinion | None | None | None |
| Own heading | Yes | Yes | Yes |
The "who gets it" row is the one people most often get wrong. From the training material we read, KAM reporting applies to listed entities, or where the auditor chooses to communicate them or the law requires it. Confirm the current scope in the standard and in any ICAI or regulator announcement.
Emphasis of matter: look at note 14
An emphasis of matter paragraph exists because the auditor believes a disclosed matter is so important to users that it is fundamental to understanding the financial statements. The matter must be properly presented and disclosed; the paragraph only draws the eye to it. If the disclosure is missing or wrong, the right response is a modified opinion, not an emphasis paragraph.
Typical triggers, as the training material describes them: a major uncertainty about the outcome of litigation, a significant event after the balance sheet date, early application of a new accounting standard with a pervasive effect, or a large catastrophe that affected the entity. A going concern uncertainty has its own route under SA 570, so do not stretch an emphasis paragraph to cover it.
Illustrative wording: "We draw attention to Note 14, which describes the uncertainty relating to the outcome of the tax assessment. Our opinion is not modified in respect of this matter."
Our fuller guide is SA 706 explained.
Key audit matters: where the effort went
KAM sits in its own section of the report. Each KAM states why the matter was significant and how the audit dealt with it. The auditor picks KAMs from the matters discussed with those charged with governance, choosing those of most significance. It is a selection of areas such as revenue recognition, a large impairment judgement or a complex acquisition, not a list of errors.
Two points from the summaries we read:
- A KAM should not be used to replace a modified opinion or a going concern paragraph.
- A matter that is already a KAM should not also be an other matter paragraph.
Our detailed guide with examples is key audit matters under SA 701.
Other matter: something outside the numbers
An other matter paragraph covers something that is not in the financial statements but is relevant to users' understanding of the audit, the auditor's responsibilities or the report. In practice the examples are things like comparatives audited by a predecessor, or a report prepared for a restricted purpose. It has its own heading and says only what the reader needs.
How to choose
Ask three questions in order.
- Is the disclosure missing, wrong or misleading? Then the opinion is modified. None of the three paragraphs is the answer.
- Is the matter in the financial statements and fundamental to users? Consider an emphasis of matter.
- Is the matter outside the financial statements and relevant to the reader? Consider an other matter paragraph.
Then, separately: if this is a KAM audit, which areas took the most attention? Those are KAMs, even where an emphasis paragraph also exists for a different matter. Do not report the same matter in two places.
A worked scenario (invented)
A listed company has a tax dispute with an uncertain outcome, fully disclosed in Note 14. The auditor also spent most of the audit on revenue recognition for long-term contracts. The prior-year audit was done by a predecessor firm.
- Emphasis of matter: the tax dispute, pointing to Note 14.
- KAM: revenue recognition on long-term contracts.
- Other matter: the predecessor firm audited the prior-year numbers.
- Opinion: unmodified, assuming the disclosures are right.
If the tax dispute were also one of the matters of most significance in the audit, the auditor would need to consider whether it belongs as a KAM rather than an emphasis paragraph. Do not use both for the same item.
Tell those charged with governance
If the auditor expects to include an emphasis of matter or other matter paragraph, the summaries we read say the auditor communicates this and the proposed wording to those charged with governance, so they understand the nature of the paragraph. Do this before the report date, not on it.
Common mistakes
- Using an emphasis paragraph to soften a qualification. It does not substitute for one.
- Wrong heading or position. Check the placement the standard requires.
- Repeating the note. Point to it and say the opinion is not modified; do not restate it.
- Treating KAM as a list of risks. Describe how the audit responded.
Frequently asked questions
What is an emphasis of matter paragraph in simple words?
It is a short paragraph in the auditor's report that tells the reader to look at a disclosed matter because it is important to understanding the accounts.
Does an emphasis of matter mean the accounts are wrong?
No. It says the matter is properly disclosed. The opinion stays unmodified.
Is an emphasis of matter the same as a key audit matter?
No. An emphasis points to a disclosed item. A KAM describes an area of significant audit attention and how it was handled.
Can a report have all three?
Yes, if each covers a different matter and the entity falls in a KAM audit.
Does every audit report need these paragraphs?
No. Many reports have none. They appear only when the auditor judges them needed.
Last reviewed: 17 October 2026. Facts checked. Opened: web search results and ICAI regional council training summaries on SA 701 and SA 706; our own site posts. Could not open: the final ICAI text of SA 701 and SA 706. Check scope, wording and placement there.
Statutory facts on this page are checked against their sources, and the page says where it relied on secondary reporting. How we verify · Report an error