ISA 706 Emphasis of matter paragraphs and other matter paragraphs MCQs

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An Emphasis of Matter paragraph is used to refer to a matter that has been appropriately presented or disclosed in the financial statements by the directors
ISA 706, Emphasis of matter paragraphs and other matter paragraphs in the independent auditor’s report MCQs

ISA 706, Emphasis of matter paragraphs and other matter paragraphs in the independent auditor’s report

An Emphasis of Matter paragraph is used to refer to a matter that has been appropriately presented or disclosed in the financial statements by the directors. Here on MCQs.club we have prepared easy Multiple-Choice Questions (MCQs) on ISA 706 revised IFAC that fully cover the ISA 706 summary and definition, ISA 706 MCQs with answers, these MCQs are a basis of conclusions. These MCQ on SA 706 are helpful for Competitive exams, Professional Accountancy exams and Business management exams.

  1. Emphasis of Matter paragraph –
    1. An Emphasis of Matter paragraph is used to refer to a matter that has been appropriately presented or disclosed in the financial statements by the directors.
    2. The auditor’s judgment is that these matters are of such fundamental importance to the users’ understanding of the financial statements that the auditor should emphasise the disclosure.
    3. Both A&B
    4. None
  1. When the auditor includes an Emphasis of Matter paragraph in the auditor’s report, the auditor shall:
    1. Include it as a separate section in the auditor’s report
    2. Use any appropriate heading including the term “Emphasis of Matter”
    3. 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
    4. Indicate that the auditor’s opinion is not modified in respect of the matter emphasized.
    5. All of the above
  1. 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 either:
    1. The auditor expressing a modified opinion as per ISA 705 (Revised)
    2. Disclosures in the financial statements that the applicable financial reporting framework requires management to make.
    3. Reporting in accordance with ISA 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.
    4. All of the above
  1. Examples of fundamental matters as shown in Emphasis of Matter paragraph include:
    1. Where the financial statements have been prepared on a basis other than the going concern basis.
    2. A significant subsequent event occurs between the date of the financial statements and the date of the auditor’s report.
    3. Where the financial statements have been recalled and reissued or when the auditor provides an amended auditor’s report.
    4. All of the above
  1. The Emphasis of Matter paragraph is shown in:
    1. Above the Basis for Opinion section.
    2. Below the Basis for Opinion section.
    3. Above the Basis for Opinion and Key Audit Matters section
    4. None
  1. An Emphasis of Matter paragraph is not used to draw attention to immaterial misstatements.
    1. True
    2. False
  1. An Emphasis of Matter should not be used to highlight an issue already included in the Key Audit Matters section. The auditor must use judgment to determine which section they consider is the most appropriate to highlight the issue.
    1. The above statement is correct
    2. The above statement is incorrect

  1. An “Other Matter paragraph” is included in the auditor’s report if the auditor considers it necessary to communicate to the users regarding matters other than those presented or disclosed in the financial statements that, in the auditor’s judgment, are relevant to understanding the audit, the auditor’s responsibilities, or the auditor’s report.
    1. The above statement is correct
    2. The above statement is incorrect
  1. Examples of the use of Other Matter paragraph include:
    1. To communicate that the auditor’s report is intended solely for the intended users, and should not be distributed to or used by other parties.
    2. When law, regulation or generally accepted practice requires or permits the auditor to provide further explanation of their responsibilities.
    3. To communicate audit planning and scoping matters where laws or regulations require.
    4. All of the above
  1. Auditor is allowed to use “other matter paragraph” where:
    1. this is not prohibited by law or regulation
    2. the matter has not been determined to be a key audit matter to be communicated in the auditor’s report (ISA 701)
    3. Both A&B
    4. None
  1. Which of the following statement is correct?
    1. The Other Matter paragraph may be included in the Report on Other Legal and Regulatory Requirements section.
    2. The Other Matter paragraph may be included as a separate section following the Report on the Other Legal and Regulatory Requirements.
    3. Both A&B
    4. None

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