What is an Other Matter paragraph?
ISA 706.10 requires an Other Matter paragraph when the auditor considers it necessary to communicate a matter that is not presented or disclosed in the financial statements but is relevant to users' understanding. The key distinction from an emphasis of matter paragraph is the source: the matter lives outside the financial statements.
ISA 706.A10–A12 describe common situations. A predecessor firm audited the prior period comparatives, and the current auditor needs to disclose that fact. Distribution of the report may be restricted to specific users, which requires an explicit statement. Supplementary information accompanies the financial statements, and the auditor must clarify whether it falls within the scope of the audit opinion. Or the prior period was never audited at all. These are all matters about the audit engagement itself, not about what the financial statements contain.
The paragraph must be placed after the opinion section and after any emphasis of matter paragraph, under the heading "Other Matter" or another appropriately descriptive heading (ISA 706.11). Placement matters because it signals to the reader that this information relates to the audit process, not to the financial statement balances.
Key Points
- An Other Matter paragraph does not modify the audit opinion.
- It covers information about the audit or the report, not about the financial statements themselves.
- The most common use is disclosing that a predecessor auditor audited the prior period.
- Omitting one when circumstances require it leaves an incomplete report that reviewers will flag.
Why it matters in practice
The most common error is omission. When a predecessor firm audited the prior year, ISA 710.19 makes the Other Matter paragraph mandatory. Teams that treat it as optional leave an incomplete report that reviewers and regulators will flag as non-compliant with the reporting standard.
Some practitioners include audit process information (such as the predecessor auditor disclosure) inside the body of the opinion section or in an appendix rather than in a properly headed Other Matter paragraph. ISA 706.11 requires the separate paragraph with an appropriate heading. The structure of the report is part of the compliance requirement, not just the content.
Worked example: Fontaine Participations S.A.
Client: French holding company, FY2024, consolidated revenue €120M, IFRS reporter. A different firm (Auditeurs Dumont & Associés) audited the FY2023 consolidated financial statements and issued an unmodified opinion dated 15 March 2024. Fontaine Participations appointed the current auditor for FY2024. The FY2024 financial statements present corresponding figures for FY2023.
Determine whether an Other Matter paragraph is required: ISA 710.19 requires the auditor to state in an Other Matter paragraph that the prior period financial statements were audited by a predecessor auditor, the type of opinion expressed, the date of that report, and whether the opinion was modified.
Draft the Other Matter paragraph: The paragraph states that the FY2023 consolidated financial statements were audited by Auditeurs Dumont & Associés and that they expressed an unmodified opinion on those financial statements, with the report date of 15 March 2024.
Confirm placement in the report: The Other Matter paragraph sits after the opinion paragraph. No emphasis of matter paragraph applies to this engagement, so placement is straightforward. ISA 706.11 governs the ordering. The Other Matter paragraph is defensible because ISA 710.19 specifically requires it when a predecessor auditor audited the prior period comparatives.
Other Matter paragraph vs emphasis of matter paragraph
The distinction comes down to the source of the matter. An Other Matter paragraph communicates information about the audit or the report – matters that live outside the financial statements. An emphasis of matter paragraph draws attention to a disclosed matter that users might underweight – something already in the financial statements.
The practical test is the same from either direction: if the matter cannot be found in a specific note or disclosure in the financial statements, it is an Other Matter paragraph. If it can, it is an emphasis of matter paragraph. Common Other Matter triggers include predecessor auditor disclosures, restricted distribution, and supplementary information. Common EOM triggers include pending litigation, catastrophic events, and going concern uncertainty. Both leave the audit opinion unmodified.
Key standard references
- ISA 706.10–11: Requirements for including an Other Matter paragraph in the auditor's report.
- ISA 706.A10–A12: Application guidance with examples of common Other Matter situations.
- ISA 710.19: Mandatory Other Matter paragraph when a predecessor auditor audited the prior period comparatives.
- ISA 700.43–44: Ordering of report sections, including placement of the Other Matter paragraph.
Related terms
Related reading
Frequently asked questions
When is an Other Matter paragraph mandatory?
ISA 710.19 makes it mandatory when a predecessor auditor audited the prior period comparatives. The paragraph must identify the predecessor, state the type of opinion expressed, the date of that report, and whether the opinion was modified.
Where does the Other Matter paragraph sit in the auditor's report?
ISA 706.11 requires the Other Matter paragraph to appear after the opinion section and after any emphasis of matter paragraph, under the heading 'Other Matter' or another appropriately descriptive heading.