HKSA 706 - Emphasis of Matter Paragraphs
1. INTRODUCTION AND SCOPE
HKSA 706 (Revised) deals with additional communication in the auditor's report when the auditor considers it necessary to:
(a) Draw users' attention to matters presented or disclosed in the financial statements that are of such importance that they are fundamental to users' understanding of the financial statements.
(b) Draw users' attention to 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.
Key Relationships with Other Standards:
| Standard | Relationship |
|---|---|
| ---------- | ------------- |
| HKSA 701 | Establishes requirements for key audit matters (KAMs); HKSA 706 addresses the relationship between KAMs and additional communication |
| HKSA 570 (Revised) | Deals with going concern communication |
| HKSA 720 (Revised) | Deals with other information communication |
| HKSA 705 (Revised) | Deals with modified opinions |
Effective Date: Audits of financial statements for periods ending on or after 15 December 2016.
2. OBJECTIVES
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:
(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.
3. DEFINITIONS
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.
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.
Critical Distinction:
| Aspect | Emphasis of Matter | Other Matter |
|---|---|---|
| -------- | ------------------- | -------------- |
| Source of matter | Presented or disclosed in financial statements | NOT presented or disclosed in financial statements |
| Purpose | Fundamental to understanding financial statements | Relevant to understanding audit, auditor's responsibilities, or auditor's report |
| Heading | "Emphasis of Matter" | "Other Matter" (or other appropriate heading) |
4. REQUIREMENTS FOR EMPHASIS OF MATTER PARAGRAPHS
4.1 Conditions for Inclusion (Paragraph 8)
The auditor shall include an Emphasis of Matter paragraph in the auditor's report if the auditor considers it necessary to draw users' attention to a matter presented or disclosed in the financial statements that is fundamental to users' understanding, provided:
(a) The auditor would not be required to modify the opinion in accordance with HKSA 705 (Revised) as a result of the matter; AND
(b) When HKSA 701 applies, the matter has not been determined to be a key audit matter to be communicated in the auditor's report.
4.2 Format Requirements (Paragraph 9)
When the auditor includes an Emphasis of Matter paragraph, 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 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.
4.3 Circumstances Where Emphasis of Matter May Be Necessary (Paragraph A5)
Examples include:
- 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
- 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
Warning: A widespread use of Emphasis of Matter paragraphs may diminish the effectiveness of the auditor's communication about such matters.
4.4 What Emphasis of Matter Is NOT a Substitute For (Paragraph A7)
An Emphasis of Matter paragraph is not a substitute for:
(a) A modified opinion in accordance with HKSA 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 HKSA 570 (Revised) 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.
5. REQUIREMENTS FOR OTHER MATTER PARAGRAPHS
5.1 Conditions for Inclusion (Paragraph 10)
If the auditor considers it necessary to communicate a matter other than those presented or disclosed in the financial statements that 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, provided:
(a) This is not prohibited by law or regulation; AND
(b) When HKSA 701 applies, the matter has not been determined to be a key audit matter to be communicated in the auditor's report.
5.2 Format Requirements (Paragraph 11)
When the auditor includes an Other Matter paragraph, the auditor shall include the paragraph within a separate section with the heading "Other Matter" , or other appropriate heading.
5.3 Circumstances Where Other Matter May Be Necessary
Relevant to Users' Understanding of the Audit (Paragraph A9-A10):
- Law or regulation may require communication about planning and scoping matters
- In rare circumstances where the auditor is unable to withdraw from an engagement despite a pervasive scope limitation imposed by management
Relevant to Users' Understanding of the Auditor's Responsibilities or the Auditor's Report (Paragraph A11-A14):
- Law, regulation, or generally accepted practice may require elaboration on auditor's responsibilities
- Reporting on more than one set of financial statements (Paragraph A13)
- Restriction on distribution or use of the auditor's report (Paragraph A14)
5.4 Content Restrictions (Paragraph A15)
An Other Matter paragraph:
- Reflects clearly that such other matter is not required to be presented and disclosed in the financial statements
- Does not include information that the auditor is prohibited from providing by law, regulation, or other professional standards (e.g., ethical standards relating to confidentiality)
- Does not include information that is required to be provided by management
6. RELATIONSHIP BETWEEN EMPHASIS OF MATTER AND KEY AUDIT MATTERS
Key Principles (Paragraphs A1-A3):
- KAMs are not a substitute for Emphasis of Matter – When HKSA 701 applies, the use of Emphasis of Matter paragraphs is not a substitute for a description of individual key audit matters.
- Matters that are KAMs may also be fundamental – In such cases, the auditor may present the matter more prominently in the KAM section (e.g., as the first matter) or include additional information to indicate its importance.
- Matters not determined as KAMs may still require Emphasis of Matter – A matter that did not require significant auditor attention (and therefore is not a KAM) may still be fundamental to users' understanding (e.g., a subsequent event) and should be included in an Emphasis of Matter paragraph.
7. PLACEMENT IN THE AUDITOR'S REPORT
7.1 Emphasis of Matter Placement (Paragraph A16)
| Circumstance | Placement |
|---|---|
| -------------- | ----------- |
| Relates to applicable financial reporting framework (e.g., framework prescribed by law would otherwise be unacceptable) | Immediately following the Basis for Opinion section |
| When a Key Audit Matters section is presented | Either directly before or after the Key Audit Matters section, based on auditor's judgment |
| To differentiate from KAMs | May add further context to heading, e.g., "Emphasis of Matter – Subsequent Event" |
7.2 Other Matter Placement (Paragraph A16)
| Circumstance | Placement |
|---|---|
| -------------- | ----------- |
| When a Key Audit Matters section is presented | May add further context to heading, e.g., "Other Matter – Scope of the Audit" |
| Relates to Other Reporting Responsibilities | May be included in the Report on Other Legal and Regulatory Requirements section |
| Relevant to all auditor's responsibilities or users' understanding | 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 |
8. COMMUNICATION WITH THOSE CHARGED WITH GOVERNANCE (Paragraph 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
- The wording of this paragraph
Purpose (Paragraph A18):
- Enables those charged with governance to be made aware of the nature of any specific matters the auditor intends to highlight
- Provides them with an opportunity to obtain further clarification from the auditor where necessary
Recurring Engagements:
Where the inclusion of an Other Matter paragraph on a particular matter recurs on each successive engagement, the auditor may determine that it is unnecessary to repeat the communication on each engagement, unless otherwise required by law or regulation.
9. APPENDICES REFERENCED IN HKSAs
Appendix 1: HKSAs Requiring Emphasis of Matter Paragraphs
| Standard | Paragraph | Circumstance |
|---|---|---|
| ---------- | ----------- | -------------- |
| HKSA 210 | 19(b) | Financial reporting framework prescribed by law or regulation would be unacceptable but for the fact that it is prescribed by law or regulation |
| HKSA 560 | 12(b) and 16 | 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 |
| HKSA 800 (Revised) | 14 | Financial statements prepared in accordance with a special purpose framework |
Appendix 2: HKSAs Requiring Other Matter Paragraphs
| Standard | Paragraph | Circumstance |
|---|---|---|
| ---------- | ----------- | -------------- |
| HKSA 560 | 12(b) and 16 | Subsequent events |
| HKSA 710 | 13-14, 16-17, 19 | Comparative information—corresponding figures and comparative financial statements |
10. ILLUSTRATIVE EXAMPLES
Example 1: Emphasis of Matter Paragraph (from Appendix 3)
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.
Example 2: Other Matter Paragraph (from Appendix 3)
Other Matter
>
The financial statements of ABC Company for the year ended 31 December 20X0, were audited by another auditor who expressed an unmodified opinion on those statements on 31 March 20X1.
11. KEY TAKEAWAYS SUMMARY
| Concept | Key Points |
|---|---|
| --------- | ------------ |
| Emphasis of Matter | Refers to matters in the financial statements; fundamental to understanding; opinion NOT modified |
| Other Matter | Refers to matters not in the financial statements; relevant to understanding audit/responsibilities/report |
| Conditions for Emphasis of Matter | No modified opinion required; not a KAM (when HKSA 701 applies) |
| Conditions for Other Matter | Not prohibited by law/regulation; not a KAM (when HKSA 701 applies) |
| Format | Separate section; appropriate heading; clear reference to disclosures; state opinion not modified |
| Placement | Depends on nature and significance; may be before or after KAM section |
| Communication with Governance | Required regarding expectation and wording |
| Not a substitute for | Modified opinion; required disclosures; going concern reporting |
| Warning | Overuse diminishes effectiveness |
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PART II: TRADITIONAL CHINESE STUDY NOTES (繁體中文學習筆記)
1. 引言及範圍
香港審計準則第706號（經修訂） 處理審計師報告中的額外溝通，當審計師認為有必要：
(a) 提請使用者注意財務報表中已呈報或披露的事項，該等事項對使用者理解財務報表至關重要；或
(b) 提請使用者注意財務報表中未呈報或披露的其他事項，該等事項與使用者理解審計、審計師的責任或審計師報告相關。
生效日期： 適用於2016年12月15日或之後結束期間的財務報表審計。
2. 目標
審計師在形成對財務報表的意見後，其目標是通過在審計師報告中進行清晰的額外溝通，提請使用者注意：
(a) 雖然在財務報表中已適當呈報或披露，但對使用者理解財務報表至關重要的事項；或
(b) 與使用者理解審計、審計師的責任或審計師報告相關的任何其他事項。
3. 定義
強調事項段 – 審計師報告中包含的一段，提及財務報表中已適當呈報或披露的事項，根據審計師的判斷，該事項對使用者理解財務報表至關重要。
其他事項段 – 審計師報告中包含的一段，提及財務報表中未呈報或披露的事項，根據審計師的判斷，該事項與使用者理解審計、審計師的責任或審計師報告相關。
關鍵區別：
| 方面 | 強調事項 | 其他事項 |
|---|---|---|
| ------ | ---------- | ---------- |
| 事項來源 | 財務報表中已呈報或披露 | 財務報表中未呈報或披露 |
| 目的 | 對理解財務報表至關重要 | 與理解審計、審計師責任或報告相關 |
| 標題 | 「強調事項」 | 「其他事項」（或其他適當標題） |
4. 強調事項段的要求
4.1 納入條件（第8段）
如果審計師認為有必要提請使用者注意財務報表中已呈報或披露且對使用者理解至關重要的事項，審計師應在審計師報告中包含強調事項段，前提是：
(a) 審計師無需因此事項根據香港審計準則第705號（經修訂）修改意見；且
(b) 當香港審計準則第701號適用時，該事項未被確定為需要在審計師報告中溝通的關鍵審計事項。
4.2 格式要求（第9段）
當審計師包含強調事項段時，審計師應：
(a) 在審計師報告的單獨章節中包含該段落，並使用包含「強調事項」 字樣的適當標題；
(b) 在段落中明確引用被強調的事項，以及可在財務報表中找到充分描述該事項的相關披露的位置。該段落應僅提及財務報表中呈報或披露的信息；且
(c) 表明審計師的意見未因所強調的事項而修改。
4.3 可能需要強調事項的情況（第A5段）
示例包括：
- 與異常訴訟或監管行動的未來結果相關的不確定性
- 在財務報表日期與審計師報告日期之間發生的重大期後事項
- 提前應用（如允許）對財務報表有重大影響的新會計準則
- 已經或持續對實體財務狀況產生重大影響的重大災難
警告： 廣泛使用強調事項段可能會削弱審計師對此類事項溝通的效力。
4.4 強調事項不能替代的內容（第A7段）
強調事項段不能替代：
(a) 根據香港審計準則第705號（經修訂）要求的修改意見；
(b) 適用的財務報告框架要求管理層作出的披露，或為實現公允列報而必需的披露；或
(c) 當存在可能對實體持續經營能力產生重大疑慮的事項或情況時，根據香港審計準則第570號（經修訂）的報告。
5. 其他事項段的要求
5.1 納入條件（第10段）
如果審計師認為有必要溝通財務報表中未呈報或披露但與使用者理解審計、審計師責任或審計師報告相關的事項，審計師應包含其他事項段，前提是：
(a) 法律或法規未禁止這樣做；且
(b) 當香港審計準則第701號適用時，該事項未被確定為需要在審計師報告中溝通的關鍵審計事項。
5.2 格式要求（第11段）
當審計師包含其他事項段時，審計師應在單獨章節中包含該段落，並使用「其他事項」 或其他適當標題。
5.3 可能需要其他事項的情況
與使用者理解審計相關（第A9-A10段）：
- 法律或法規可能要求溝通計劃和範圍事項
- 在罕見情況下，儘管管理層施加的範圍限制影響廣泛，審計師仍無法退出業務
與使用者理解審計師責任或審計師報告相關（第A11-A14段）：
- 法律、法規或普遍接受的實務可能要求詳細說明審計師的責任
- 對多於一套財務報表進行報告（第A13段）
- 對審計師報告的分發或使用的限制（第A14段）
5.4 內容限制（第A15段）
其他事項段：
- 清楚表明該其他事項無需在財務報表中呈報和披露
- 不包括法律、法規或其他專業準則（例如，與保密性相關的道德準則）禁止審計師提供的信息
- 不包括需要由管理層提供的信息
6. 強調事項與關鍵審計事項的關係
關鍵原則（第A1-A3段）：
- 關鍵審計事項不能替代強調事項 – 當香港審計準則第701號適用時，使用強調事項段不能替代對個別關鍵審計事項的描述。
- 被確定為關鍵審計事項的事項也可能至關重要 – 在這種情況下，審計師可以在關鍵審計事項部分更突出地呈現該事項（例如，作為第一個事項）或包含額外信息以表明其重要性。
- 未被確定為關鍵審計事項的事項仍可能需要強調事項 – 不需要重大審計關注的事項（因此不是關鍵審計事項）仍可能對使用者理解至關重要（例如，期後事項），應包含在強調事項段中。
7. 在審計師報告中的位置
7.1 強調事項的位置（第A16段）
| 情況 | 位置 |
|---|---|
| ------ | ------ |
| 與適用的財務報告框架相關（例如，法律規定的框架否則不可接受） | 緊接在意見基礎部分之後 |
| 當包含關鍵審計事項部分時 | 根據審計師的判斷，在關鍵審計事項部分之前或之後 |
| 為與關鍵審計事項區分 | 可在標題中添加進一步背景，例如「強調事項 – 期後事項」 |
7.2 其他事項的位置（第A16段）
| 情況 | 位置 |
|---|---|
| ------ | ------ |
| 當包含關鍵審計事項部分時 | 可在標題中添加進一步背景，例如「其他事項 – 審計範圍」 |
| 與其他報告責任相關 | 可包含在「關於其他法律和監管要求的報告」部分 |
| 與所有審計師責任或使用者理解相關 | 可作為單獨部分，緊接在「關於財務報表審計的報告」和「關於其他法律和監管要求的報告」之後 |
8. 與治理層的溝通（第12段）
如果審計師預計在審計師報告中包含強調事項段或其他事項段，審計師應就以下事項與治理層溝通：
- 此預期
- 該段落的措辭
目的（第A18段）：
- 使治理層了解審計師打算強調的任何具體事項的性質
- 為治理層提供必要時從審計師處獲得進一步澄清的機會
連續業務：
如果某特定事項的其他事項段在連續的每次業務中重複出現，審計師可以確定無需在每次業務中重複溝通，除非法律或法規另有要求。
9. 附錄參考
附錄1：要求強調事項段的香港審計準則
| 準則 | 段落 | 情況 |
|---|---|---|
| ------ | ------ | ------ |
| 香港審計準則第210號 | 19(b) | 法律或法規規定的財務報告框架若非因法律或法規規定則不可接受 |
| 香港審計準則第560號 | 12(b)和16 | 審計師報告日後審計師知悉事實且審計師提供新的或經修改的審計師報告 |
| 香港審計準則第800號（經修訂） | 14 | 根據特殊目的框架編製的財務報表 |
附錄2：要求其他事項段的香港審計準則
| 準則 | 段落 | 情況 |
|---|---|---|
| ------ | ------ | ------ |
| 香港審計準則第560號 | 12(b)和16 | 期後事項 |
| 香港審計準則第710號 | 13-14, 16-17, 19 | 比較信息—對應數字和比較財務報表 |
10. 關鍵要點總結
| 概念 | 要點 |
|---|---|
| ------ | ------ |
| 強調事項 | 提及財務報表中的事項；對理解至關重要；意見未修改 |
| 其他事項 | 提及財務報表中未包含的事項；與理解審計/責任/報告相關 |
| 強調事項條件 | 無需修改意見；非關鍵審計事項（當香港審計準則第701號適用時） |
| 其他事項條件 | 法律/法規未禁止；非關鍵審計事項（當香港審計準則第701號適用時） |
| 格式 | 單獨章節；適當標題；明確引用披露；說明意見未修改 |
| 位置 | 取決於性質和重要性；可在關鍵審計事項部分之前或之後 |
| 與治理層溝通 | 需要就預期和措辭進行溝通 |
| 不能替代 | 修改意見；要求的披露；持續經營報告 |
| 警告 | 過度使用會降低效力 |
PART III: 50 MULTIPLE CHOICE QUESTIONS
Q1. According to HKSA 706 (Revised), what is the primary purpose of an Emphasis of Matter paragraph?
A. To modify the auditor's opinion
B. To draw users' attention to a matter fundamental to understanding the financial statements
C. To replace key audit matters
D. To disclose information not presented in the financial statements
Answer: B
Q2. An Emphasis of Matter paragraph refers to matters that are:
A. Not presented or disclosed in the financial statements
B. Presented or disclosed in the financial statements
C. Required to be disclosed by management only
D. Prohibited by law or regulation
Answer: B
Q3. An Other Matter paragraph refers to matters that are:
A. Presented or disclosed in the financial statements
B. Fundamental to understanding the financial statements
C. Not presented or disclosed in the financial statements
D. Always required by HKSA 701
Answer: C
Q4. When including an Emphasis of Matter paragraph, the auditor must indicate that:
A. The opinion is modified
B. The opinion is not modified in respect of the matter emphasized
C. The financial statements are not fairly presented
D. The matter is a key audit matter
Answer: B
Q5. Which of the following is NOT a condition for including an Emphasis of Matter paragraph?
A. The auditor would not be required to modify the opinion
B. When HKSA 701 applies, the matter has not been determined to be a key audit matter
C. The matter is prohibited by law or regulation
D. The matter is appropriately presented or disclosed in the financial statements
Answer: C
Q6. An Emphasis of Matter paragraph is NOT a substitute for:
A. A modified opinion when required
B. Disclosures required by the applicable financial reporting framework
C. Going concern reporting under HKSA 570 (Revised)
D. All of the above
Answer: D
Q7. The heading for an Emphasis of Matter paragraph must include the term:
A. "Key Audit Matter"
B. "Emphasis of Matter"
C. "Other Matter"
D. "Basis for Opinion"
Answer: B
Q8. According to HKSA 706, which standard deals with key audit matters?
A. HKSA 705 (Revised)
B. HKSA 701
C. HKSA 570 (Revised)
D. HKSA 720 (Revised)
Answer: B
Q9. When should the auditor communicate with those charged with governance regarding an Emphasis of Matter paragraph?
A. After issuing the auditor's report
B. Only if requested by management
C. If the auditor expects to include such a paragraph
D. Only for listed entities
Answer: C
Q10. Which of the following is an example of a circumstance where an Emphasis of Matter paragraph may be necessary?
A. A material uncertainty related to going concern
B. A significant subsequent event between the date of financial statements and the date of the auditor's report
C. A pervasive scope limitation
D. A material misstatement in the financial statements
Answer: B
Q11. An Other Matter paragraph may be included when:
A. Law or regulation prohibits it
B. The matter is a key audit matter
C. The matter is relevant to users' understanding of the audit
D. The matter is presented in the financial statements
Answer: C
Q12. The effective date of HKSA 706 (Revised) is for audits of financial statements for periods ending on or after:
A. 15 December 2014
B. 15 December 2015
C. 15 December 2016
D. 15 December 2017
Answer: C
Q13. Which HKSA contains requirements for Emphasis of Matter paragraphs related to special purpose frameworks?
A. HKSA 210
B. HKSA 560
C. HKSA 800 (Revised)
D. HKSA 710
Answer: C
Q14. An Emphasis of Matter paragraph should refer only to:
A. Information obtained from management
B. Information presented or disclosed in the financial statements
C. Information from external sources
D. Information about the auditor's responsibilities
Answer: B
Q15. When a Key Audit Matters section is presented, an Emphasis of Matter paragraph may be placed:
A. Only before the Key Audit Matters section
B. Only after the Key Audit Matters section
C. Either directly before or after the Key Audit Matters section
D. Only in the Basis for Opinion section
Answer: C
Q16. Which of the following is TRUE about the relationship between Emphasis of Matter paragraphs and Key Audit Matters?
A. Emphasis of Matter paragraphs can replace Key Audit Matters
B. Key Audit Matters can replace Emphasis of Matter paragraphs
C. Emphasis of Matter paragraphs are not a substitute for describing individual key audit matters
D. They are identical in purpose
Answer: C
Q17. An Other Matter paragraph does NOT include:
A. Information relevant to users' understanding of the audit
B. Information prohibited by law, regulation, or professional standards
C. Information about the auditor's responsibilities
D. Information about the auditor's report
Answer: B
Q18. According to Appendix 1, which HKSA requires an Emphasis of Matter paragraph when facts become known after the date of the auditor's report?
A. HKSA 210
B. HKSA 560
C. HKSA 800 (Revised)
D. HKSA 710
Answer: B
Q19. The widespread use of Emphasis of Matter paragraphs may:
A. Enhance the effectiveness of communication
B. Diminish the effectiveness of communication
C. Have no effect on communication
D. Always be required by law
Answer: B
Q20. When including an Other Matter paragraph, the auditor shall include it within:
A. The Opinion section
B. The Basis for Opinion section
C. A separate section with an appropriate heading
D. The Key Audit Matters section
Answer: C
Q21. Which of the following is NOT a circumstance where an Emphasis of Matter paragraph may be necessary?
A. Uncertainty relating to exceptional litigation
B. Early application of a new accounting standard
C. A major catastrophe affecting the entity
D. A material misstatement in the financial statements
Answer: D
Q22. The objective of HKSA 706 is to draw users' attention by way of:
A. Modified opinions
B. Clear additional communication in the auditor's report
C. Management letters
D. Oral communication with shareholders
Answer: B
Q23. An Other Matter paragraph may be included when the auditor reports on:
A. Only one set of financial statements
B. More than one set of financial statements
C. No financial statements
D. Only management accounts
Answer: B
Q24. According to paragraph A14, an Other Matter paragraph may be used to:
A. Restrict distribution or use of the auditor's report
B. Modify the auditor's opinion
C. Replace key audit matters
D. Disclose confidential information
Answer: A
Q25. Which HKSA contains requirements for Other Matter paragraphs related to comparative information?
A. HKSA 560
B. HKSA 710
C. HKSA 800 (Revised)
D. HKSA 210
Answer: B
Q26. When the auditor includes an Emphasis of Matter paragraph, the paragraph shall include:
A. A clear reference to the matter being emphasized
B. A modified opinion
C. Information not disclosed in the financial statements
D. The auditor's recommendation
Answer: A
Q27. Communication with those charged with governance regarding an Emphasis of Matter paragraph should include:
A. Only the expectation of including the paragraph
B. Only the wording of the paragraph
C. Both the expectation and the wording of the paragraph
D. Neither the expectation nor the wording
Answer: C
Q28. An Emphasis of Matter paragraph is appropriate when:
A. The matter requires a qualified opinion
B. The matter is fundamental to users' understanding but does not require opinion modification
C. The matter is not disclosed in the financial statements
D. The matter is a key audit matter
Answer: B
Q29. Which of the following statements about Other Matter paragraphs is CORRECT?
A. They always modify the auditor's opinion
B. They refer to matters presented in the financial statements
C. They are relevant to users' understanding of the audit, auditor's responsibilities, or auditor's report
D. They are required in all audit reports
Answer: C
Q30. The heading "Other Matter" may be modified to add further context, such as:
A. "Other Matter – Scope of the Audit"
B. "Emphasis of Matter – Scope of the Audit"
C. "Key Audit Matter – Scope of the Audit"
D. "Basis for Opinion – Scope of the Audit"
Answer: A
Q31. According to HKSA 706, which of the following is NOT a requirement for an Emphasis of Matter paragraph?
A. Include in a separate section
B. Use the heading "Emphasis of Matter"
C. Include a clear reference to the matter
D. Include the auditor's recommendation for management
Answer: D
Q32. An Other Matter paragraph may be included in the Report on Other Legal and Regulatory Requirements section when:
A. It relates to Other Reporting Responsibilities
B. It relates to key audit matters
C. It relates to going concern
D. It relates to the auditor's opinion
Answer: A
Q33. When a matter is determined to be a key audit matter and also fundamental to users' understanding, the auditor may:
A. Include it in both the KAM section and an Emphasis of Matter paragraph
B. Present it more prominently in the KAM section
C. Omit it from the KAM section
D. Include it only in an Emphasis of Matter paragraph
Answer: B
Q34. Which of the following is an example of a matter that may require an Other Matter paragraph?
A. A subsequent event disclosed in the financial statements
B. Restriction on distribution or use of the auditor's report
C. A material uncertainty related to going concern
D. Early application of a new accounting standard
Answer: B
Q35. The auditor shall not include an Emphasis of Matter paragraph if:
A. The matter is fundamental to users' understanding
B. The matter requires a modified opinion
C. The matter is appropriately disclosed
D. The matter is a subsequent event
Answer: B
Q36. According to paragraph A18, for recurring engagements, the auditor:
A. Must always repeat communication about Other Matter paragraphs
B. May determine it is unnecessary to repeat communication about Other Matter paragraphs
C. Cannot include Other Matter paragraphs
D. Must obtain written representation from management
Answer: B
Q37. An Emphasis of Matter paragraph shall indicate that:
A. The auditor's opinion is modified
B. The auditor's opinion is not modified
C. The financial statements are not fairly presented
D. The auditor disclaims an opinion
Answer: B
Q38. Which HKSA requires an Emphasis of Matter paragraph when the financial reporting framework prescribed by law would otherwise be unacceptable?
A. HKSA 210
B. HKSA 560
C. HKSA 800 (Revised)
D. HKSA 710
Answer: A
Q39. An Other Matter paragraph does NOT deal with circumstances where:
A. The auditor has other reporting responsibilities in addition to HKSAs
B. The auditor has been asked to perform additional specified procedures
C. The auditor has been asked to express an opinion on specific matters
D. All of the above
Answer: D
Q40. When an Emphasis of Matter paragraph relates to the applicable financial reporting framework, it may be placed:
A. At the end of the auditor's report
B. Immediately following the Basis for Opinion section
C. In the Key Audit Matters section
D. In the Other Information section
Answer: B
Q41. Which of the following is TRUE about the content of an Other Matter paragraph?
A. It may include information prohibited by law
B. It clearly reflects that the matter is not required to be presented in the financial statements
C. It must include information required to be provided by management
D. It must modify the auditor's opinion
Answer: B
Q42. The objective of HKSA 706 applies after the auditor has:
A. Commenced the audit
B. Formed an opinion on the financial statements
C. Issued the auditor's report
D. Obtained management representations
Answer: B
Q43. A matter that did not require significant auditor attention but is fundamental to users' understanding should be included in:
A. The Key Audit Matters section
B. An Emphasis of Matter paragraph
C. The Basis for Opinion section
D. The Other Information section
Answer: B
Q44. According to HKSA 706, which of the following is a requirement for both Emphasis of Matter and Other Matter paragraphs?
A. They must be included in a separate section
B. They must modify the auditor's opinion
C. They must refer to key audit matters
D. They must be approved by management
Answer: A
Q45. An Emphasis of Matter paragraph may be used to draw attention to:
A. A matter that is not disclosed in the financial statements
B. A matter that is appropriately presented or disclosed in the financial statements
C. The auditor's responsibilities
D. The audit scope
Answer: B
Q46. Which of the following is NOT listed in Appendix 1 as requiring an Emphasis of Matter paragraph?
A. HKSA 210
B. HKSA 560
C. HKSA 800 (Revised)
D. HKSA 720 (Revised)
Answer: D
Q47. When an Other Matter paragraph is included, the heading may be:
A. "Emphasis of Matter"
B. "Other Matter" or other appropriate heading
C. "Key Audit Matter"
D. "Basis for Opinion"
Answer: B
Q48. The auditor shall communicate with those charged with governance regarding an Emphasis of Matter paragraph:
A. After issuing the report
B. If the auditor expects to include such a paragraph
C. Only for listed entities
D. Only when required by law
Answer: B
Q49. An Emphasis of Matter paragraph is NOT a substitute for:
A. Disclosures in the financial statements
B. A modified opinion when required
C. Going concern reporting under HKSA 570 (Revised)
D. All of the above
Answer: D
Q50. According to HKSA 706, the use of Emphasis of Matter paragraphs when HKSA 701 applies is:
A. A substitute for describing key audit matters
B. Not a substitute for describing individual key audit matters
C. Required for all key audit matters
D. Prohibited by the standard
Answer: B
*End of Study Notes*
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