SA 706 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
SA 706 deals with two extra paragraphs an auditor may add to the report. An Emphasis of Matter paragraph points to something already disclosed in the statements that users must not miss. An Other Matter paragraph points to something outside the statements that helps users understand the audit or the report.
SA 706 (Revised), as effective for audits of financial statements for periods beginning on or after 1 April 2018, applies to every audit report where the auditor considers such a paragraph necessary or another SA requires one. ICAI may revise standards, so check icai.org for the current text. Well-drafted notes, which compliance advisory review can help with, decide how much emphasis is needed.
An Emphasis of Matter paragraph draws attention to a matter properly presented or disclosed in the statements and fundamental to users' understanding of them. An Other Matter paragraph covers a matter not presented or disclosed in the statements that is relevant to understanding the audit, the auditor's responsibilities or the report. Neither can be used where the matter calls for a modified opinion, and where a matter is a key audit matter it is described there instead. An Emphasis of Matter paragraph says that the opinion is not modified for the matter.
Scope and definitions (paragraphs 1-7)
The standard covers additional communication in the auditor's report that draws users' attention to (a) a matter in the statements of such importance that it is fundamental to understanding them, or (b) a matter other than those in the statements that is relevant to understanding the audit, the auditor's responsibilities or the report (paragraph 1). Going concern and other information are dealt with in SA 570 and SA 720 (paragraph 3), and key audit matters in SA 701 (paragraph 2).
| Term (paragraph 7) | Plain meaning |
|---|---|
| Emphasis of Matter paragraph | Refers to a matter appropriately presented or disclosed in the statements that, in the auditor's judgement, is fundamental to users' understanding |
| Other Matter paragraph | Refers to a matter other than those presented or disclosed in the statements, relevant to users' understanding of the audit, the auditor's responsibilities or the report |
Emphasis of Matter (paragraphs 8-9)
The auditor includes an Emphasis of Matter paragraph if it is necessary to draw attention to a matter fundamental to users' understanding, provided that (paragraph 8):
- the matter does not require a modified opinion under SA 705; and
- where SA 701 applies, the matter has not been determined to be a key audit matter.
When included, the paragraph (paragraph 9):
- sits in a separate section with a heading containing the term "Emphasis of Matter";
- clearly refers to the matter and to where the relevant disclosures are in the statements, and refers only to information presented or disclosed in the statements; and
- indicates that the opinion is not modified in respect of the matter.
The application material gives examples where a paragraph may be needed: uncertainty about the outcome of exceptional litigation or regulatory action, a significant subsequent event between the balance sheet date and the report date, early application (where permitted) of a new accounting standard with a material effect, and a major catastrophe with a significant effect on financial position (A5). Widespread use dilutes its effect (A6). It does not replace a modified opinion, disclosures the framework requires, or going concern reporting under SA 570 (A7).
SA 706 lists circumstances in other SAs where an Emphasis of Matter paragraph is required: where a framework prescribed by law would be unacceptable but for the law, to alert users to a special purpose framework, and in a new or amended report after facts become known after the report date (A4).
Other Matter (paragraphs 10-11)
The auditor includes an Other Matter paragraph if it is necessary to communicate a matter other than those in the statements that is relevant to users' understanding of the audit, the auditor's responsibilities or the report, provided (paragraph 10):
- it is not prohibited by law or regulation; and
- where SA 701 applies, the matter has not been determined to be a key audit matter.
The paragraph goes in a separate section headed "Other Matter" or another appropriate heading (paragraph 11).
Examples in the application material:
| Situation | Why an Other Matter paragraph may be used |
|---|---|
| Planning and scoping matters | The planned scope or application of materiality are unlikely to be key audit matters, but law may require, or the auditor may consider it necessary, to explain them (A9) |
| Withdrawal not possible | Where the possible effect of a management-imposed scope limitation is pervasive but the auditor cannot withdraw, to explain why (A10) |
| Elaboration on responsibilities | Where law, regulation or practice requires or permits it (A11) |
| More than one set of statements | Where the same entity has also prepared statements under another general purpose framework and the auditor has reported on them (A13) |
| Restriction on use | For statements prepared for specific users under a general purpose framework, stating the report is solely for those users (A14) |
An Other Matter paragraph does not deal with other reporting responsibilities (see SA 700 part 2), or with additional specified procedures or opinions on specific matters (A12). Its content makes clear that the matter is not required to be disclosed in the statements, and it excludes information the auditor may not give, for example because of confidentiality rules, and information that management should provide (A15).
Where the paragraphs go (paragraphs 9 and 11, A16-A17)
| Paragraph | Placement guidance |
|---|---|
| Emphasis of Matter on the framework, including a framework prescribed by law that is otherwise unacceptable | May go immediately after the Basis for Opinion section, to give context to the opinion |
| Emphasis of Matter where a Key Audit Matters section exists | Directly before or after that section, based on relative significance; the heading can be extended, for example "Emphasis of Matter - Subsequent Event" |
| Other Matter where a Key Audit Matters section exists | The heading may be extended, for example "Other Matter - Scope of the Audit" |
| Other Matter on other reporting responsibilities | May go in the Report on Other Legal and Regulatory Requirements section |
| Other Matter relevant to all the auditor's responsibilities or the report | A separate section after both reports |
Relationship with key audit matters (paragraphs 2, 8(b), A1-A3)
An Emphasis of Matter paragraph is not a substitute for describing a key audit matter. A key audit matter that is also fundamental to users' understanding can be shown more prominently, for example first, or with added information (A2). A matter that did not need significant auditor attention, and so is not a key audit matter, but is fundamental, such as a subsequent event, belongs in an Emphasis of Matter paragraph (A3). See SA 701.
Communication with governance (paragraph 12)
If the auditor expects to include either paragraph, the auditor tells those charged with governance the expectation and the wording, so they can understand the matters to be highlighted and seek clarification (A18). If an Other Matter paragraph recurs each year, repeated communication may be unnecessary unless law requires it.
Appendices
The standard's appendices list the SAs that require such paragraphs, and give illustrative reports. In summary:
| Requirement | SAs and paragraphs |
|---|---|
| Emphasis of Matter required | SA 210 (paragraph 19(b)); SA 560 (paragraphs 12(b) and 16); SA 800 (paragraph 14) |
| Other Matter required | SA 560 (paragraphs 12(b) and 16); SA 710 (paragraphs 13-14, 16-17 and 19) |
Two illustrative reports show the interaction of the three elements and a qualified opinion with an Emphasis of Matter paragraph; they are not reproduced here. For subsequent events, see SA 560, and for comparative information, see SA 710.
Illustrative example
Vertex Chemicals Ltd is an invented listed company; all figures are illustrative. A fire destroyed a warehouse after the balance sheet date but before the report date. Note 32 describes it and the insurance claim. It did not need significant auditor attention and is not a key audit matter, but it is fundamental to understanding the statements, so the auditor adds a section headed "Emphasis of Matter - Subsequent Event" that refers to Note 32 and says the opinion is not modified. Separately, the company also prepared a set of statements under another framework for its overseas parent and the auditor reported on it; an "Other Matter" paragraph mentions this fact.
Need help with disclosures that may draw an emphasis?
Notes on litigation, subsequent events and new standards are easier to draft well before sign-off. TaxClue's compliance advisory team can help your finance team review disclosures so the audit report does not need to highlight avoidable gaps.
Key takeaways
- An Emphasis of Matter points to something already properly disclosed and fundamental to understanding.
- An Other Matter points to something outside the statements that helps understand the audit or the report.
- Neither replaces a modified opinion or a key audit matter description.
- Emphasis paragraphs must state that the opinion is not modified.
- Governance is told the expectation and the wording.
Read next
- SA 705: modifications to the opinion
- SA 570 part 2: going concern reporting
- SA 710: comparative information
- SA 701: key audit matters
Disclaimer: Based on the Standards on Auditing and quality standards issued by the Institute of Chartered Accountants of India, in the versions named in the article, and ICAI's announcement of 31 March 2026 on SQM 1 and SQM 2, as consulted on 3 October 2026. ICAI revises standards from time to time; check the current text and effective dates on icai.org. This article is general information, not legal advice; check the official text before acting.