Emphasis of matter and other matter paragraphs

Q: How do they differ from a modified opinion?

Emphasis of MatterOther MatterModified opinion Is the item in the accounts?Yes, and properly disclosedNoYes, but misstated, or evidence is lacking Does the opinion change?No, and the report says soNoYes: qualified, adverse or disclaimer Governing standardISA (UK) 706 paragraphs 8 and 9ISA (UK) 706 paragraphs 10 and 11ISA (UK) 705 Paragraph A7 is explicit that an Emphasis of Matter paragraph does not affect the opinion and is not a substitute for a modified opinion where one is required, for disclosures the framework requires management to make, or for going concern reporting under ISA (UK) 570. If the directors refuse to disclose a major lawsuit, the auditor cannot fix the omission by emphasising it; the deficient disclosure is a misstatement and leads to a modification. The types of modified opinion are explained in our guide to audit opinions. The two can appear together. Paragraph A17 refers to an illustrative report for an entity other than a listed entity that contains a qualified opinion and also an Emphasis of Matter paragraph about a different item.

Q: Does an emphasis affect filing, dividends or lenders?

Filing. Under section 444(5A) and (5B), a small audited company that does not file its profit and loss account must state in the notes to the filed balance sheet whether the auditor's report was qualified or unqualified and, if unqualified, refer to anything the auditor drew attention to by way of emphasis. The emphasis therefore appears on the public record even in filleted accounts. Dividends. Section 474(1) defines a qualified report as one that does not state the auditor's unqualified opinion that the accounts have been properly prepared. Section 837(4) requires the auditor's written statement on distributions only where the report was qualified, so an emphasis alone does not trigger it; see relevant accounts for distributions. Lenders. Facility agreements often require a "clean" or unqualified report. Read the definition: some are drafted to catch emphasis paragraphs too.

Q: What does one look like in practice?

Illustration only. A manufacturer faces a large claim from a former distributor. The directors cannot estimate the outcome, so note 18 describes the claim as a contingent liability, as the framework requires. The auditor agrees with the treatment but considers the claim fundamental to understanding the accounts. The report includes a section headed "Emphasis of Matter" stating: we draw attention to note 18, which describes the uncertainty over the outcome of the claim; our opinion is not modified in respect of this. The same company was audit exempt last year, so the report also contains an Other Matter section stating that the corresponding figures are unaudited. Had the directors left the claim out of the notes altogether, there would be no Emphasis of Matter. The auditor would consider a qualified or adverse opinion for inadequate disclosure instead. Solar Protect provides tax investigation insurance for businesses and fee protection schemes for accountancy practices. Read how our cover works or get a quote.

An Emphasis of Matter paragraph points readers to something already properly presented or disclosed in the accounts that the auditor considers fundamental to understanding them. An Other Matter paragraph deals with something that is not in the accounts but helps readers understand the audit or the auditor’s report. Under ISA (UK) 706 neither changes the opinion, which is the key difference from a qualified opinion, an adverse opinion or a disclaimer under ISA (UK) 705.

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What is an Emphasis of Matter paragraph?

Paragraph 7(a) of ISA (UK) 706 defines it as a paragraph in the auditor’s report that refers to an item appropriately presented or disclosed in the financial statements which, in the auditor’s judgment, is of such importance that it is fundamental to users’ understanding of them. The words “appropriately presented or disclosed” do the work: the auditor agrees with the accounting and the disclosure, but wants to make sure nobody misses it.

Paragraph 8 sets two conditions. The auditor would not be required to modify the opinion because of the item, and, where ISA (UK) 701 applies, the item has not been chosen as a key audit matter. Paragraph 9 then fixes the form:

it sits in a separate section with a heading that includes the term “Emphasis of Matter”;
it refers clearly to the item and to where the full disclosure can be found, and refers only to information in the financial statements; and
it states that the opinion is not modified in respect of the item.

There is a UK legal angle too. Section 495(4)(b) of the Companies Act 2006 requires the auditor’s report to refer to anything the auditor wishes to draw attention to by way of emphasis without qualifying the report. The UK application material in ISA (UK) 706 links that duty to paragraph 8, so an emphasis the auditor considers necessary must be given.

When will an auditor include one?

Paragraph A5 gives examples where an auditor may consider it necessary:

uncertainty over the outcome of exceptional litigation or regulatory action;
a significant event between the balance sheet date and the date of the report;
early application, where permitted, of a new accounting standard with a material effect; and
a major catastrophe that has had, or continues to have, a significant effect on the financial position.

Some are compulsory. Appendix 1 lists ISAs (UK) that require one: ISA (UK) 210 paragraph 19(b), where a framework prescribed by law would otherwise be unacceptable; ISA (UK) 560 paragraphs 12(b) and 16, where facts come to light after the report date and a new or amended report is issued; and ISA (UK) 800 paragraph 14, to alert users that accounts use a special purpose framework.

Paragraph A6 warns that widespread use of Emphasis of Matter paragraphs may diminish their effect. An auditor who emphasises routine disclosures every year is weakening the signal.

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What is an Other Matter paragraph?

Paragraph 7(b) defines it as a paragraph referring to something other than what is presented or disclosed in the financial statements that is relevant to users’ understanding of the audit, the auditor’s responsibilities or the auditor’s report. Under paragraph 10 it is included only if law or regulation does not prohibit it and, where ISA (UK) 701 applies, the item is not a key audit matter. Paragraph 11 requires a separate section headed “Other Matter” or another appropriate heading.

Typical uses in UK reports:

Unaudited comparatives. ISA (UK) 710 paragraph 14 requires an Other Matter paragraph stating that the corresponding figures are unaudited where the prior period was not audited. This is common in a company’s first audit after a period of audit exemption, and the auditor still has to obtain evidence on the opening balances; see first year audits and opening balances.
Predecessor auditor. Where the prior year was audited by another firm and the auditor chooses to refer to that report, ISA (UK) 710 paragraph 13 requires an Other Matter paragraph giving the type of opinion and the date of that report.
Restricted use. Paragraph A14 allows an Other Matter paragraph saying a report prepared for specific users should not be distributed to or used by others.
Two sets of accounts. Paragraph A13 covers an entity that prepares accounts under two general purpose frameworks and has both audited.
Inability to withdraw. Paragraph A10 covers the rare case where the auditor cannot withdraw despite a pervasive limitation on scope imposed by management.

Paragraph A15 adds limits: an Other Matter paragraph must not contain information management is required to provide, or information the auditor is prohibited from giving, such as confidential information.

How do they differ from a modified opinion?

	Emphasis of Matter	Other Matter	Modified opinion
Is the item in the accounts?	Yes, and properly disclosed	No	Yes, but misstated, or evidence is lacking
Does the opinion change?	No, and the report says so	No	Yes: qualified, adverse or disclaimer
Governing standard	ISA (UK) 706 paragraphs 8 and 9	ISA (UK) 706 paragraphs 10 and 11	ISA (UK) 705

Paragraph A7 is explicit that an Emphasis of Matter paragraph does not affect the opinion and is not a substitute for a modified opinion where one is required, for disclosures the framework requires management to make, or for going concern reporting under ISA (UK) 570. If the directors refuse to disclose a major lawsuit, the auditor cannot fix the omission by emphasising it; the deficient disclosure is a misstatement and leads to a modification. The types of modified opinion are explained in our guide to audit opinions.

The two can appear together. Paragraph A17 refers to an illustrative report for an entity other than a listed entity that contains a qualified opinion and also an Emphasis of Matter paragraph about a different item.

How does it fit with going concern and key audit matter reporting?

A material uncertainty related to going concern is not reported through an Emphasis of Matter paragraph. Paragraph A7(c) points to ISA (UK) 570, which has its own required section where the uncertainty is adequately disclosed and a modified opinion where it is not. The auditor’s side of this is covered in going concern and the auditor.

For audits where key audit matter reporting applies, paragraph A1 says an Emphasis of Matter paragraph is not a substitute for describing a key audit matter. If an item is both a key audit matter and fundamental, paragraph A2 suggests presenting it more prominently within that section, for example first. UK application material notes that law or regulation may require an item to be emphasised as well. An item that did not need significant audit attention, such as a subsequent event, can still be emphasised (paragraph A3).

On placement, paragraph A16 suggests an Emphasis of Matter paragraph about the reporting framework may go straight after the Basis for Opinion section, and that where a key audit matter section is presented the paragraph may go directly before or after it, with context added to the heading.

Do the directors get a say?

Paragraph 12 requires the auditor to tell those charged with governance if it expects to include either type of paragraph and to share the proposed wording. That is the point to check that the note being referred to is complete and that the wording matches it. Under paragraph A18, a recurring Other Matter paragraph need not be discussed again each year unless law or regulation requires it. The directors cannot veto the paragraph.

Does an emphasis affect filing, dividends or lenders?

Filing. Under section 444(5A) and (5B), a small audited company that does not file its profit and loss account must state in the notes to the filed balance sheet whether the auditor’s report was qualified or unqualified and, if unqualified, refer to anything the auditor drew attention to by way of emphasis. The emphasis therefore appears on the public record even in filleted accounts.
Dividends. Section 474(1) defines a qualified report as one that does not state the auditor’s unqualified opinion that the accounts have been properly prepared. Section 837(4) requires the auditor’s written statement on distributions only where the report was qualified, so an emphasis alone does not trigger it; see relevant accounts for distributions.
Lenders. Facility agreements often require a “clean” or unqualified report. Read the definition: some are drafted to catch emphasis paragraphs too.

What does one look like in practice?

Illustration only. A manufacturer faces a large claim from a former distributor. The directors cannot estimate the outcome, so note 18 describes the claim as a contingent liability, as the framework requires. The auditor agrees with the treatment but considers the claim fundamental to understanding the accounts. The report includes a section headed “Emphasis of Matter” stating: we draw attention to note 18, which describes the uncertainty over the outcome of the claim; our opinion is not modified in respect of this. The same company was audit exempt last year, so the report also contains an Other Matter section stating that the corresponding figures are unaudited.

Had the directors left the claim out of the notes altogether, there would be no Emphasis of Matter. The auditor would consider a qualified or adverse opinion for inadequate disclosure instead.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.