Key Points
- Both paragraphs sit in the auditor's report but serve different purposes and reference different information.
- An emphasis of matter paragraph always points to a disclosure already in the financial statements.
- An other matter paragraph covers audit-related information not presented in the financials.
- Using the wrong paragraph type is one of the most common report-drafting errors flagged by regulators.
Side-by-side comparison
| Dimension | Emphasis of Matter (EOM) | Other Matter (OM) |
|---|---|---|
| What it references | A matter disclosed in the financial statements | A matter relevant to the audit or the report, not disclosed in the financials |
| Governed by | ISA 706.6–706.7 | ISA 706.8 |
| Who decides to include it | The auditor, based on professional judgment | The auditor, based on professional judgment |
| Effect on the opinion | None. The opinion is not modified. | None. The opinion is not modified. |
| Typical placement | Immediately after the opinion paragraph (or after basis for opinion) | After the EOM paragraph, or after the opinion if no EOM exists |
| Common example | Going concern uncertainty adequately disclosed under IAS 1 | Predecessor auditor issued the prior-year report |
When the distinction matters on an engagement
The distinction matters because the wording and the required cross-reference differ. ISA 706.7 requires an emphasis of matter paragraph to include a clear reference to the relevant disclosure in the financial statements. If you use an OM paragraph for a matter that is actually disclosed in the financials, you lose that mandatory cross-reference, and a reviewer will flag the report as non-compliant.
It also matters for going concern. When management has disclosed a material uncertainty under IAS 1.25 and the auditor concludes the disclosure is adequate, ISA 570.22 requires an emphasis of matter paragraph (not an other matter paragraph). Mixing them up does not change the opinion, but it changes the report structure, and inspectors treat report structure errors as findings even when the underlying audit work is sound.
Worked example: Gruber Handels GmbH
Client: Austrian retail chain, FY2024, revenue €28M, reporting under Austrian UGB with IFRS-aligned disclosures.
Emphasis of matter situation
During FY2024, a fire destroyed Gruber's largest warehouse. Management disclosed the event and the €3.2M insurance claim in Note 18 to the financial statements.
Documentation note: "Matter disclosed in Note 18. We consider this fundamental to users' understanding because the insurance outcome is uncertain and the amount is 11% of revenue. EOM paragraph included under ISA 706.6."
The auditor includes an emphasis of matter paragraph referencing Note 18, stating that a fire destroyed the warehouse and that the outcome of the €3.2M insurance claim remains uncertain. The paragraph ends with a sentence confirming the opinion is not modified in respect of this matter, as required by ISA 706.7(d).
Other matter situation (same engagement)
Gruber's prior-year financial statements were audited by a different firm. That firm issued an unmodified opinion dated 15 March 2024.
Documentation note: "Prior-year financials audited by predecessor. No restatement. OM paragraph included under ISA 710.18 referencing the predecessor's report and opinion type."
The auditor includes an other matter paragraph stating that the prior-year financials were audited by another auditor who expressed an unmodified opinion. This information is not in the financial statements (it is about the audit, not the entity), so it cannot go in an EOM paragraph.
Consequence of confusing the two
If the predecessor-auditor fact were placed in an EOM paragraph, it would imply the information is disclosed in the financial statements. It is not. A reviewer would flag the report as structurally non-compliant with ISA 706.
What reviewers get wrong
- The FRC's 2023 Audit Quality Inspection Report noted that firms sometimes include emphasis of matter paragraphs that fail to reference the specific note or disclosure in the financial statements, violating ISA 706.7(b). The paragraph must contain a precise cross-reference, not a general statement.
- Teams occasionally draft an EOM paragraph for a matter the entity has not disclosed at all. ISA 706.6 is explicit: the matter must be "appropriately presented or disclosed in the financial statements." If disclosure is missing, the issue is a potential modification to the opinion (ISA 705), not an EOM paragraph.
Key standard references
- ISA 706.6–706.7: Defines and governs emphasis of matter paragraphs, including required cross-referencing.
- ISA 706.8: Defines and governs other matter paragraphs.
- ISA 570.22: Requires an EOM paragraph when a material uncertainty related to going concern is adequately disclosed.
- ISA 710.18: Requires an OM paragraph when prior-year financials were audited by a predecessor.
Related terms
Related reading
Frequently asked questions
Does an emphasis of matter paragraph modify the audit opinion?
No. ISA 706.7(d) requires the paragraph to state explicitly that the opinion is not modified in respect of the matter. Both EOM and OM paragraphs leave the opinion unchanged. If the matter requires a modification, ISA 705 applies instead.
Can a single auditor's report contain both an EOM and an OM paragraph?
Yes. They serve different purposes and appear in different locations in the report. An EOM paragraph references a financial statement disclosure. An OM paragraph covers audit-related information. The same report can include one or more of each where the auditor's judgment warrants it.
What is the most common mistake when drafting these paragraphs?
Using an EOM paragraph for a matter that is not disclosed in the financial statements. ISA 706.6 requires the matter to be appropriately presented or disclosed. If the disclosure is missing, the issue is a potential opinion modification under ISA 705, not an EOM paragraph.