14.4 Emphasis of the matter paragraph and key audit matters

The “Emphasis of Matter” paragraph and “Key Audit Matters” are two additional sections that may be included in an audit report to provide further clarification and transparency to the users of the financial statements. Here’s an explanation of each:

1. Emphasis of Matter Paragraph: This paragraph draws the reader’s attention to a specific matter that is already adequately disclosed in the financial statements, but the auditor believes it is important to highlight or provide additional information to enhance the understanding of the financial statements. The emphasis of matter paragraph is typically used when there is a significant uncertainty, a going concern issue, a major litigation, or any other matter that may have a material impact on the financial statements.

The emphasis of matter paragraph does not modify the auditor’s opinion on the financial statements. It is separate from the opinion section and is placed either before or after the opinion section in the audit report. The paragraph explains the nature of the matter, provides additional context or details, and clarifies the auditor’s role in relation to that matter.

2. Key Audit Matters (KAMs): Key Audit Matters are the most significant matters that the auditor considered during the audit of the financial statements. These matters are selected based on their importance to the financial statements and their risk of material misstatement. KAMs are included in the audit report to provide users with insights into the areas of significant audit attention and judgment.

Each KAM is described in a separate section of the audit report, which outlines the nature of the matter, why it was considered significant, how it was addressed in the audit, and any related disclosures in the financial statements. The inclusion of KAMs aims to enhance the transparency and understanding of the audit process, allowing users to gain insights into the areas that required the most auditor scrutiny and judgment.