CPA Exam — AUDForming Conclusions and ReportingHard
An auditor modifies an unmodified opinion by adding an other-matter paragraph. This paragraph should address matters relevant to users' understanding of the audit, the auditor's responsibilities, or the auditor's report, and it typically appears:
- AImmediately after the Opinion paragraph, but before the Basis for Opinion paragraph.
- BImmediately after the Emphasis-of-Matter paragraph (if one exists), or after the Basis for Opinion paragraph.
- CImmediately after the Opinion paragraph.
- DImmediately after the Basis for Opinion paragraph.
Show answer & explanationAnswer & explanation
Correct answer: B. Immediately after the Emphasis-of-Matter paragraph (if one exists), or after the Basis for Opinion paragraph.
According to AU-C Section 706, an Other-Matter paragraph is placed immediately after an Emphasis-of-Matter paragraph (if one exists). If no Emphasis-of-Matter paragraph is necessary, the Other-Matter paragraph is placed immediately after the Basis for Opinion paragraph.
Why the other options are wrong
- A. This placement is incorrect and would disrupt the standard report structure.
- C. This placement is incorrect; the Basis for Opinion paragraph always follows the Opinion paragraph.
- D. This is incorrect; it's after the Basis for Opinion if there's no Emphasis-of-Matter, but after the Emphasis-of-Matter if it exists.
Other-Matter Paragraph Placement
An Other-Matter paragraph addresses 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, and has specific placement rules.
- Appears after Emphasis-of-Matter (if any).
- Otherwise, appears after Basis for Opinion.
- Does not affect auditor's opinion.
Memory trick: Report sections: Opinion, Basis, Emphasis, Other.