Question

Define the emphasis of matter paragraph.

A) A paragraph included in the auditor's report that is required by generally accepted auditing standards or is included at the auditor's discretion.
B) A paragraph that identifies the statements being audited and states the auditor's opinion.
C) A paragraph that states responsibilities and references registration with the Public Company Accounting Oversight Board (PCAOB).
D) A paragraph that briefly explains the process of conducting an audit and that the PCAOB standards were followed.

Answer 1

The emphasis of matter A) paragraph is a paragraph included in the auditor's report that highlights an important matter in the financial statements.

Step-by-step explanation:

The correct answer is A) A paragraph included in the auditor's report that is required by generally accepted auditing standards or is included at the auditor's discretion.

The emphasis of matter paragraph is a paragraph included in the auditor's report that highlights a matter in the financial statements that is of importance, but does not affect the auditor's opinion on the financial statements as a whole. It is required by generally accepted auditing standards or can be included at the auditor's discretion.

For example, if there is significant doubt about the company's ability to continue as a going concern, the auditor may include an emphasis of matter paragraph to draw attention to this issue.