ISA 706 (Revised)

April 2015

International Standard on Auditing

ISA 706 (Revised),

Emphasis of Matter Paragraphs
and Other Matter Paragraphs in
the Independent Auditor’s Report
 INTERNATIONAL STANDARD ON AUDITING 706 (REVISED)

Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor’s Report

Explanatory Foreword

The Council of the Malaysian Institute of Accountants has approved this standard in April 2015 for
publication. This standard should be read in conjunction with the Preface to Malaysian Approved
Quality Control, Auditing, Review, Other Assurance, and Related Services Pronouncements; and
the Malaysian Approved Preface to the International Quality Control, Auditing, Review, Other
Assurance, and Related Services Pronouncements; Glossary of Terms and International Framework
for Assurance Engagements.

The status of International Standards on Auditing is set out in the Preface to Malaysian Approved
Quality Control, Auditing, Review, Other Assurance, and Related Services Pronouncements.

Applicability

International Standards on Auditing (ISAs) are to be applied in the audit of financial statements
under all reporting frameworks.

ISAs are to be applied in the audit of historical financial information.

Effective Date in Malaysia

This ISA is effective for audits of financial statements for periods ending on or after December 15,
2016.

Reproduction of Full Text of Final IFAC Publication

Copyright © January 2015 by the International Federation of Accountants (IFAC). All rights
reserved. Used with permission of IFAC. Contact Permissions@ifac.org for permission to
reproduce, store or transmit, or to make other similar uses of this document.

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 INTERNATIONAL STANDARD ON AUDITING 706 (REVISED)
EMPHASIS OF MATTER PARAGRAPHS AND OTHER MATTER
PARAGRAPHS IN THE INDEPENDENT AUDITOR’S REPORT
(Effective for audits of financial statements for periods ending on or after December 15, 2016)

CONTENTS

Paragraph
Introduction
Scope of this ISA ................................................................................................. 1–4
Effective Date ..................................................................................................... 5
Objective ........................................................................................................... 6
Definitions ......................................................................................................... 7
Requirements
Emphasis of Matter Paragraphs in the Auditor’s Report ............................................ 8–9
Other Matter Paragraphs in the Auditor’s Report .................................................... 10–11
Communication with Those Charged with Governance ........................................... 12
Application and Other Explanatory Material
The Relationship between Emphasis of Matter Paragraphs and Key Audit Matters in the
Auditor’s Report ............................................................................................ A1–A3
Circumstances in Which an Emphasis of Matter Paragraph May Be Necessary ........... A4–A6
Including an Emphasis of Matter Paragraph in the Auditor’s Report ........................... A7–A8
Other Matter Paragraphs in the Auditor’s Report .................................................... A9–A15
Placement of Emphasis of Matter Paragraphs and Other Matter Paragraphs in the
Auditor’s Report ............................................................................................ A16–A17
Communication with Those Charged with Governance ........................................... A18
Appendix 1: List of ISAs Containing Requirements for Emphasis of Matter Paragraphs
Appendix 2: List of ISAs Containing Requirements for Other Matter Paragraphs
Appendix 3: Illustration of an Auditor’s Report that Includes a Key Audit Matters Section, an
Emphasis of Matter Paragraph, and an Other Matter Paragraph
Appendix 4: Illustration of an Auditor’s Report Containing a Qualified Opinion Due to a
Departure from the Applicable Financial Reporting Framework and that Includes an Emphasis
of Matter Paragraph

International Standard on Auditing (ISA) 706 (Revised), Emphasis of Matter Paragraphs and Other
Matter Paragraphs in the Independent Auditor’s Report, should be read in conjunction with ISA
200, Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance
with International Standards on Auditing.

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 ISA 706 (REVISED), EMPHASIS OF MATTER PARAGRAPHS AND OTHER MATTER PARAGRAPHS IN THE INDEPENDENT
AUDITOR’S REPORT

Introduction
Scope of this ISA
1. This International Standard on Auditing (ISA) deals with additional communication in the
auditor’s report when the auditor considers it necessary to:
(a) Draw users’ attention to a matter or matters presented or disclosed in the financial
statements that are of such importance that they are fundamental to users’
understanding of the financial statements; or
(b) Draw users’ attention to any matter or 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.
2. ISA 7011 establishes requirements and provides guidance when the auditor determines key
audit matters and communicates them in the auditor’s report. When the auditor includes a
Key Audit Matters section in the auditor’s report, this ISA addresses the relationship between
key audit matters and any additional communication in the auditor’s report in accordance
with this ISA. (Ref: Para. A1–A3)
3. ISA 570 (Revised)2 establishes requirements and provides guidance about communication in
the auditor’s report relating to going concern.
4. Appendices 1 and 2 identify ISAs that contain specific requirements for the auditor to include
Emphasis of Matter paragraphs or Other Matter paragraphs in the auditor’s report. In those
circumstances, the requirements in this ISA regarding the form of such paragraphs apply.
(Ref: Para. A4)

Effective Date
5. This ISA is effective for audits of financial statements for periods ending on or after
December 15, 2016.

Objective
6. 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.

Definitions
7. For purposes of the ISAs, the following terms have the meanings attributed below:
(a) 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,

1
ISA 701, Communicating Key Audit Matters in the Independent Auditor’s Report
2
ISA 570 (Revised), Going Concern

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 ISA 706 (REVISED), EMPHASIS OF MATTER PARAGRAPHS AND OTHER MATTER PARAGRAPHS IN THE INDEPENDENT
AUDITOR’S REPORT

in the auditor’s judgment, is of such importance that it is fundamental to users’

understanding of the financial statements.
(b) 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.

Requirements
Emphasis of Matter Paragraphs in the Auditor’s Report
8. If the auditor considers it necessary to draw users’ attention to a matter 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, the auditor shall
include an Emphasis of Matter paragraph in the auditor’s report provided: (Ref: Para. A5–
A6)
(a) The auditor would not be required to modify the opinion in accordance with ISA 705
(Revised)3 as a result of the matter; and
(b) When ISA 701 applies, the matter has not been determined to be a key audit matter to
be communicated in the auditor’s report. (Ref: Para. A1–A3)
9. When the auditor includes an Emphasis of Matter paragraph in the auditor’s report, 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.
(Ref: Para. A7–A8, A16–A17)

Other Matter Paragraphs in the Auditor’s Report

10. If the auditor considers it necessary to communicate a matter other than those that are
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, the
auditor shall include an Other Matter paragraph in the auditor’s report, provided:
(a) This is not prohibited by law or regulation; and
(b) When ISA 701 applies, the matter has not been determined to be a key audit matter
to be communicated in the auditor’s report. (Ref: Para. A9–A14)

3
ISA 705 (Revised), Modifications to the Opinion in the Independent Auditor’s Report

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 ISA 706 (REVISED), EMPHASIS OF MATTER PARAGRAPHS AND OTHER MATTER PARAGRAPHS IN THE INDEPENDENT
AUDITOR’S REPORT

11. When the auditor includes an Other Matter paragraph in the auditor’s report, the auditor
shall include the paragraph within a separate section with the heading “Other Matter,” or
other appropriate heading. (Ref: Para. A15–A17)

Communication with Those Charged with Governance

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 and the wording of this paragraph. (Ref: Para. A18)

***

Application and Other Explanatory Material

The Relationship between Emphasis of Matter Paragraphs and Key Audit Matters in the Auditor’s
Report (Ref: Para. 2, 8(b))
A1. Key audit matters are defined in ISA 701 as those matters that, in the auditor’s professional
judgment, were of most significance in the audit of the financial statements of the current
period. Key audit matters are selected from matters communicated with those charged with
governance, which include significant findings from the audit of the financial statements of
the current period.4 Communicating key audit matters provides additional information to
intended users of the financial statements to assist them in understanding those matters that,
in the auditor’s professional judgment, were of most significance in the audit and may also
assist them in understanding the entity and areas of significant management judgment in the
audited financial statements. When ISA 701 applies, the use of Emphasis of Matter
paragraphs is not a substitute for a description of individual key audit matters.
A2. Matters that are determined to be key audit matters in accordance with ISA 701 may also
be, in the auditor’s judgment, fundamental to users’ understanding of the financial
statements. In such cases, in communicating the matter as a key audit matter in accordance
with ISA 701, the auditor may wish to highlight or draw further attention to its relative
importance. The auditor may do so by presenting the matter more prominently than other
matters in the Key Audit Matters section (e.g., as the first matter) or by including additional
information in the description of the key audit matter to indicate the importance of the
matter to users’ understanding of the financial statements.
A3. There may be a matter that is not determined to be a key audit matter in accordance with
ISA 701 (i.e., because it did not require significant auditor attention), but which, in the
auditor’s judgment, is fundamental to users’ understanding of the financial statements (e.g.,
a subsequent event). If the auditor considers it necessary to draw users’ attention to such a
matter, the matter is included in an Emphasis of Matter paragraph in the auditor’s report in
accordance with this ISA.

Circumstances in Which an Emphasis of Matter Paragraph May Be Necessary (Ref: Para. 4, 8)

A4. Appendix 1 identifies ISAs that contain specific requirements for the auditor to include
Emphasis of Matter paragraphs in the auditor’s report in certain circumstances. These
circumstances include:
• When a financial reporting framework prescribed by law or regulation would be

4
ISA 260 (Revised), Communication with Those Charged with Governance, paragraph 16

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 ISA 706 (REVISED), EMPHASIS OF MATTER PARAGRAPHS AND OTHER MATTER PARAGRAPHS IN THE INDEPENDENT
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unacceptable but for the fact that it is prescribed by law or regulation.

• To alert users that the financial statements are prepared in accordance with a special
purpose framework.
• When 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 (i.e., subsequent events).5
A5. Examples of circumstances where the auditor may consider it necessary to include an
Emphasis of Matter paragraph are:
• 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.6
• 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.
A6. However, a widespread use of Emphasis of Matter paragraphs may diminish the
effectiveness of the auditor’s communication about such matters.

Including an Emphasis of Matter Paragraph in the Auditor’s Report (Ref: Para. 9)

A7. The inclusion of an Emphasis of Matter paragraph in the auditor’s report does not affect the
auditor’s opinion. An Emphasis of Matter paragraph is not a substitute for:
(a) A modified opinion in accordance with ISA 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 ISA 570 (Revised)7 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.
A8. Paragraphs A16–A17 provide further guidance on the placement of Emphasis of Matter
paragraphs in particular circumstances.

Other Matter Paragraphs in the Auditor’s Report (Ref: Para. 10–11)

Circumstances in Which an Other Matter Paragraph May Be Necessary
Relevant to Users’ Understanding of the Audit
A9. ISA 260 (Revised) requires the auditor to communicate with those charged with governance
about the planned scope and timing of the audit, which includes communication about the

5
ISA 560, Subsequent Events, paragraphs 12(b) and 16
6
ISA 560, paragraph 6
7
ISA 570 (Revised), paragraphs 22–23

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 ISA 706 (REVISED), EMPHASIS OF MATTER PARAGRAPHS AND OTHER MATTER PARAGRAPHS IN THE INDEPENDENT
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significant risks identified by the auditor.8 Although matters relating to significant risks may
be determined to be key audit matters, other planning and scoping matters (e.g., the
planned scope of the audit, or the application of materiality in the context of the audit) are
unlikely to be key audit matters because of how key audit matters are defined in ISA 701.
However, law or regulation may require the auditor to communicate about planning and
scoping matters in the auditor’s report, or the auditor may consider it necessary to
communicate about such matters in an Other Matter paragraph.
A10. In the rare circumstance where the auditor is unable to withdraw from an engagement even
though the possible effect of an inability to obtain sufficient appropriate audit evidence due
to a limitation on the scope of the audit imposed by management is pervasive,9 the auditor
may consider it necessary to include an Other Matter paragraph in the auditor’s report to
explain why it is not possible for the auditor to withdraw from the engagement.

Relevant to Users’ Understanding of the Auditor’s Responsibilities or the Auditor’s Report

A11. Law, regulation or generally accepted practice in a jurisdiction may require or permit the
auditor to elaborate on matters that provide further explanation of the auditor’s
responsibilities in the audit of the financial statements or of the auditor’s report thereon.
When the Other Matter section includes more than one matter that, in the auditor’s
judgment, is relevant to users’ understanding of the audit, the auditor’s responsibilities or the
auditor’s report, it may be helpful to use different sub-headings for each matter.
A12. An Other Matter paragraph does not deal with circumstances where the auditor has other
reporting responsibilities that are in addition to the auditor’s responsibility under the ISAs
(see Other Reporting Responsibilities section in ISA 700 (Revised)10), or where the auditor
has been asked to perform and report on additional specified procedures, or to express an
opinion on specific matters.

Reporting on more than one set of financial statements

A13. An entity may prepare one set of financial statements in accordance with a general purpose
framework (e.g., the national framework) and another set of financial statements in
accordance with another general purpose framework (e.g., International Financial Reporting
Standards), and engage the auditor to report on both sets of financial statements. If the
auditor has determined that the frameworks are acceptable in the respective circumstances,
the auditor may include an Other Matter paragraph in the auditor’s report, referring to the
fact that another set of financial statements has been prepared by the same entity in
accordance with another general purpose framework and that the auditor has issued a
report on those financial statements.

Restriction on distribution or use of the auditor’s report

A14. Financial statements prepared for a specific purpose may be prepared in accordance with a
general purpose framework because the intended users have determined that such general
purpose financial statements meet their financial information needs. Since the auditor’s
report is intended for specific users, the auditor may consider it necessary in the
circumstances to include an Other Matter paragraph, stating that the auditor’s report is

8
ISA 260 (Revised), paragraph 15
9
See paragraph 13(b)(ii) of ISA 705 (Revised) for a discussion of this circumstance.
10
ISA 700 (Revised), Forming an Opinion and Reporting on Financial Statements, paragraphs 42–44

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intended solely for the intended users, and should not be distributed to or used by other
parties.

Including an Other Matter Paragraph in the Auditor’s Report

A15. The content of an Other Matter paragraph reflects clearly that such other matter is not
required to be presented and disclosed in the financial statements. An Other Matter
paragraph does not include information that the auditor is prohibited from providing by law,
regulation or other professional standards, for example, ethical standards relating to
confidentiality of information. An Other Matter paragraph also does not include information
that is required to be provided by management.

Placement of Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Auditor’s Report
(Ref: Para. 9, 11)
A16. The placement of an Emphasis of Matter paragraph or Other Matter paragraph in the
auditor’s report depends on the nature of the information to be communicated, and the
auditor’s judgment as to the relative significance of such information to intended users
compared to other elements required to be reported in accordance with ISA 700 (Revised).
For example:

Emphasis of Matter Paragraphs

• When the Emphasis of Matter paragraph relates to the applicable financial reporting
framework, including circumstances where the auditor determines that the financial
reporting framework prescribed by law or regulation would otherwise be
unacceptable,11 the auditor may consider it necessary to place the paragraph
immediately following the Basis of Opinion section to provide appropriate context to
the auditor’s opinion.
• When a Key Audit Matters section is presented in the auditor’s report, an Emphasis of
Matter paragraph may be presented either directly before or after the Key Audit
Matters section, based on the auditor’s judgment as to the relative significance of the
information included in the Emphasis of Matter paragraph. The auditor may also add
further context to the heading “Emphasis of Matter”, such as “Emphasis of Matter –
Subsequent Event”, to differentiate the Emphasis of Matter paragraph from the
individual matters described in the Key Audit Matters section.

Other Matter Paragraphs

• When a Key Audit Matters section is presented in the auditor’s report and an Other
Matter paragraph is also considered necessary, the auditor may add further context to
the heading “Other Matter”, such as “Other Matter – Scope of the Audit”, to
differentiate the Other Matter paragraph from the individual matters described in the
Key Audit Matters section.
• When an Other Matter paragraph is included to draw users’ attention to a matter
relating to Other Reporting Responsibilities addressed in the auditor’s report, the
paragraph may be included in the Report on Other Legal and Regulatory
Requirements section.

11
For example, as required by ISA 210, Agreeing the Terms of Audit Engagements, paragraph 19 and ISA 800, Special
Considerations—Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks, paragraph 14

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 ISA 706 (REVISED), EMPHASIS OF MATTER PARAGRAPHS AND OTHER MATTER PARAGRAPHS IN THE INDEPENDENT
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• When relevant to all the auditor’s responsibilities or users’ understanding of the

auditor’s report, the Other Matter paragraph 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.
A17. Appendix 3 is an illustration of the interaction between the Key Audit Matters section, an
Emphasis of Matter paragraph and an Other Matter paragraph when all are presented in
the auditor’s report. The illustrative report in Appendix 4 includes an Emphasis of Matter
paragraph in an auditor’s report for an entity other than a listed entity that contains a
qualified opinion and for which key audit matters have not been communicated.

Communication with Those Charged with Governance (Ref. Para. 12)

A18. The communication required by paragraph 12 enables those charged with governance to be
made aware of the nature of any specific matters that the auditor intends to highlight in the
auditor’s report, and provides them with an opportunity to obtain further clarification from
the auditor where necessary. Where the inclusion of an Other Matter paragraph on a
particular matter in the auditor’s report recurs on each successive engagement, the auditor
may determine that it is unnecessary to repeat the communication on each engagement,
unless otherwise required to do so by law or regulation.

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 Appendix 1
(Ref: Para. 4, A4)

List of ISAs Containing Requirements for Emphasis of Matter Paragraphs

This appendix identifies paragraphs in other ISAs that require the auditor to include an Emphasis
of Matter paragraph in the auditor’s report in certain circumstances. The list is not a substitute for
considering the requirements and related application and other explanatory material in ISAs.
• ISA 210, Agreeing the Terms of Audit Engagements – paragraph 19(b)
• ISA 560, Subsequent Events – paragraphs 12(b) and 16
• ISA 800, Special Considerations—Audits of Financial Statements Prepared in Accordance
with Special Purpose Frameworks – paragraph 14

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Appendix 2
(Ref: Para. 4)

List of ISAs Containing Requirements for Other Matter Paragraphs

This appendix identifies paragraphs in other ISAs that require the auditor to include an Other
Matter paragraph in the auditor’s report in certain circumstances. The list is not a substitute for
considering the requirements and related application and other explanatory material in ISAs.
• ISA 560, Subsequent Events – paragraphs 12(b) and 16
• ISA 710, Comparative Information—Corresponding Figures and Comparative Financial
Statements – paragraphs 13–14, 16–17 and 19
• ISA 720, The Auditor’s Responsibilities Relating to Other Information in Documents
Containing Audited Financial Statements – paragraph 10(a)

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Appendix 3
(Ref: Para. A17)

Illustration of an Auditor’s Report that Includes a Key Audit Matters Section, an Emphasis of Matter
Paragraph, and an Other Matter Paragraph
For purposes of this illustrative auditor’s report, the following circumstances are assumed:
• Audit of a complete set of financial statements of a listed entity using a fair presentation
framework. The audit is not a group audit (i.e., ISA 6001 does not apply).
• The financial statements are prepared by management of the entity in accordance with
International Financial Reporting Standards (IFRSs) (a general purpose framework).
• The terms of the audit engagement reflect the description of management’s responsibility
for the financial statements in ISA 210.
• The auditor has concluded an unmodified (i.e., “clean”) opinion is appropriate based on
the audit evidence obtained.
• The relevant ethical requirements that apply to the audit are those of the jurisdiction.
• Based on the audit evidence obtained, the auditor has concluded that a material
uncertainty does not exist related to events or conditions that may cast significant doubt on
the entity’s ability to continue as a going concern in accordance with ISA 570 (Revised).
• Between the date of the financial statements and the date of the auditor’s report, there was
a fire in the entity’s production facilities, which was disclosed by the entity as a subsequent
event. In the auditor’s judgment, the matter is of such importance that it is fundamental to
users’ understanding of the financial statements. The matter did not require significant
auditor attention in the audit of the financial statements in the current period.
• Key audit matters have been communicated in accordance with ISA 701.
• Corresponding figures are presented, and the prior period’s financial statements were
audited by a predecessor auditor. The auditor is not prohibited by law or regulation from
referring to the predecessor auditor’s report on the corresponding figures and has decided
to do so.
• Those responsible for oversight of the financial statements differ from those responsible for
the preparation of the financial statements.
• In addition to the audit of the financial statements, the auditor has other reporting
responsibilities required under local law.

INDEPENDENT AUDITOR’S REPORT

To the Shareholders of ABC Company [or Other Appropriate Addressee]

Report on the Audit of the Financial Statements2

Opinion
We have audited the financial statements of ABC Company (the Company), which comprise the

1
ISA 600, Special Considerations—Audits of Group Financial Statements (Including the Work of Component Auditors)
2
The sub-title “Report on the Audit of the Financial Statements” is unnecessary in circumstances when the second sub-title “Report
on Other Legal and Regulatory Requirements” is not applicable.

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statement of financial position as at December 31, 20X1, and the statement of comprehensive income,
statement of changes in equity and statement of cash flows for the year then ended, and notes to the
financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying financial statements present fairly, in all material respects, (or give a
true and fair view of) the financial position of the Company as at December 31, 20X1, and (of) its
financial performance and its cash flows for the year then ended in accordance with International
Financial Reporting Standards (IFRSs).

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit
of the Financial Statements section of our report. We are independent of the Company in accordance
with the ethical requirements that are relevant to our audit of the financial statements in [jurisdiction],
and we have fulfilled our other ethical responsibilities in accordance with these requirements. We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.

Emphasis of Matter3
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.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the financial statements of the current period. These matters were addressed in the context of
our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
[Description of each key audit matter in accordance with ISA 701.]

Other Matter
The financial statements of ABC Company for the year ended December 31, 20X0, were audited
by another auditor who expressed an unmodified opinion on those statements on March 31,
20X1.

Responsibilities of Management and Those Charged with Governance for the Financial
Statements4
[Reporting in accordance with ISA 700 (Revised) – see Illustration 1 in ISA 700 (Revised).]

Auditor’s Responsibilities for the Audit of the Financial Statements

[Reporting in accordance with ISA 700 (Revised) – see Illustration 1 in ISA 700 (Revised).]

3
As noted in paragraph A16, an Emphasis of Matter paragraph may be presented either directly before or after the Key Audit
Matters section based on the auditor’s judgment as to the relative significance of the information included in the Emphasis of
Matter paragraph.
4
Throughout these illustrative auditor’s reports, the terms management and those charged with governance may need to be
replaced by another term that is appropriate in the context of the legal framework in the particular jurisdiction.

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Report on Other Legal and Regulatory Requirements

[Reporting in accordance with ISA 700 (Revised) – see Illustration 1 in ISA 700 (Revised).]
The engagement partner on the audit resulting in this independent auditor’s report is [name].
[Signature in the name of the audit firm, the personal name of the auditor, or both, as appropriate
for the particular jurisdiction]
[Auditor Address]
[Date]

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Appendix 4
(Ref: Para. A8)

Illustration of an Auditor’s Report Containing a Qualified Opinion Due to a Departure from the
Applicable Financial Reporting Framework and that Includes an Emphasis of Matter Paragraph
For purposes of this illustrative auditor’s report, the following circumstances are assumed:
• Audit of a complete set of financial statements of an entity other than a listed entity using a
fair presentation framework. The audit is not a group audit (i.e., ISA 600 does not apply).
• The financial statements are prepared by management of the entity in accordance with
IFRSs (a general purpose framework).
• The terms of the audit engagement reflect the description of management’s responsibility
for the financial statements in ISA 210.
• A departure from the applicable financial reporting framework resulted in a qualified
opinion.
• The relevant ethical requirements that apply to the audit are those of the jurisdiction.
• Based on the audit evidence obtained, the auditor has concluded that a material
uncertainty does not exist related to events or conditions that may cast significant doubt on
the entity’s ability to continue as a going concern in accordance with ISA 570 (Revised).
• Between the date of the financial statements and the date of the auditor’s report, there was
a fire in the entity’s production facilities, which was disclosed by the entity as a subsequent
event. In the auditor’s judgment, the matter is of such importance that it is fundamental to
users’ understanding of the financial statements. The matter did not require significant
auditor attention in the audit of the financial statements in the current period.
• The auditor is not required, and has otherwise not decided, to communicate key audit
matters in accordance with ISA 701.
• Those responsible for oversight of the financial statements differ from those responsible for
the preparation of the financial statements.
• In addition to the audit of the financial statements, the auditor has other reporting
responsibilities required under local law.

15
 ISA 706 (REVISED), EMPHASIS OF MATTER PARAGRAPHS AND OTHER MATTER PARAGRAPHS IN THE INDEPENDENT
AUDITOR’S REPORT

INDEPENDENT AUDITOR’S REPORT

To the Shareholders of ABC Company [or Other Appropriate Addressee]

Report on the Audit of the Financial Statements1

Qualified Opinion
We have audited the financial statements of ABC Company (the Company), which comprise the
statement of financial position as at December 31, 20X1, and the statement of comprehensive
income, statement of changes in equity and statement of cash flows for the year then ended, and
notes to the financial statements, including a summary of significant accounting policies.
In our opinion, except for the effects of the matter described in the Basis for Qualified Opinion
section of our report, the accompanying financial statements present fairly, in all material respects,
(or give a true and fair view of) the financial position of the Company as at December 31, 20X1,
and (of) its financial performance and its cash flows for the year then ended in accordance with
International Financial Reporting Standards (IFRSs).

Basis for Qualified Opinion

The Company’s short-term marketable securities are carried in the statement of financial position
at xxx. Management has not marked these securities to market but has instead stated them at cost,
which constitutes a departure from IFRSs. The Company’s records indicate that had management
marked the marketable securities to market, the Company would have recognized an unrealized
loss of xxx in the statement of comprehensive income for the year. The carrying amount of the
securities in the statement of financial position would have been reduced by the same amount at
December 31, 20X1, and income tax, net income and shareholders’ equity would have been
reduced by xxx, xxx and xxx, respectively.
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit
of the Financial Statements section of our report. We are independent of the Company in accordance
with the ethical requirements that are relevant to our audit of the financial statements in [jurisdiction],
and we have fulfilled our other ethical responsibilities in accordance with these requirements. We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our qualified opinion.

Emphasis of Matter – Effects of a Fire

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.

Responsibilities of Management and Those Charged with Governance for the Financial
Statements2
[Reporting in accordance with ISA 700 (Revised) – see Illustration 1 in ISA 700 (Revised).]

1
The sub-title “Report on the Audit of the Financial Statements” is unnecessary in circumstances when the second sub-title “Report
on Other Legal and Regulatory Requirements” is not applicable.
2
Or other terms that are appropriate in the context of the legal framework of the particular jurisdiction

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 ISA 706 (REVISED), EMPHASIS OF MATTER PARAGRAPHS AND OTHER MATTER PARAGRAPHS IN THE INDEPENDENT
AUDITOR’S REPORT

Auditor’s Responsibilities for the Audit of the Financial Statements

[Reporting in accordance with ISA 700 (Revised – see Illustration 1 in ISA 700 (Revised).]

Report on Other Legal and Regulatory Requirements

[Reporting in accordance with ISA 700 (Revised) – see Illustration 1 in ISA 700 (Revised).]
[Signature in the name of the audit firm, the personal name of the auditor, or both, as appropriate
for the particular jurisdiction]
[Auditor Address]
[Date]

17
Dewan Akauntan
No. 2, Jalan Tun Sambanthan 3
Brickfields, 50470 Kuala Lumpur
Malaysia
[phone] +603 2279 9200 [fax] +603 2273 1016
[web] www.mia.org.my [email] technical@mia.org.my