An Emphasis of Matter Is Not a Modified Opinion, and Never an Alternative to One

Two of the most common errors in audit reporting are the same error in different clothes: treating an emphasis of matter paragraph as a kind of modification, and reaching for one instead of modifying.

Neither is available. An emphasis of matter never modifies the opinion, and under ISA 706 it is not permitted at all where the matter would require a modification. It is not a softer option. It is a different instrument for a different situation.

What ISA 706 actually defines

Paragraph 7 gives two definitions, and the difference between them is the whole of the standard.

An emphasis of matter paragraph is a paragraph included in the auditor's report that refers to a matter appropriately presented or disclosed, that in the auditor's judgement is of such importance that it is fundamental to users' understanding of the financial statements.

An other matter paragraph is a paragraph that refers to a matter other than those presented or disclosed in the financial statements, that in the auditor's judgement is relevant to users' understanding of the audit, the auditor's responsibilities or the auditor's report.

So there are two tests running at once, and they both have to be applied:

• Is the matter in the financial statements, or not? An emphasis of matter points at something that is in them. An other matter points at something that is not.
• Is it about the accounts, or about the audit? An emphasis of matter is fundamental to understanding the financial statements. An other matter is relevant to understanding the audit, the auditor's responsibilities or the report.

Collapse those two tests into one and you get the usual muddle, where anything the auditor wants to draw attention to gets labelled an emphasis of matter.

Neither touches the opinion

Paragraph 9(c) requires the auditor to indicate that the opinion is not modified in respect of the matter emphasised. Paragraph A7 says it directly: the inclusion of an emphasis of matter paragraph in the auditor's report does not affect the auditor's opinion.

That is not a presentational nicety. It is the point of the paragraph. The opinion stands; the auditor is directing the reader somewhere within financial statements that already give a true and fair view.

And it is never an alternative to modifying

This is the part that gets people into real difficulty, and it is a gate rather than a preference. Paragraph 8 makes an emphasis of matter available only where the auditor would not be required to modify the opinion under ISA 705 as a result of the matter.

So the sequence runs one way only. Decide first whether the matter requires a modification. If it does, modify — an emphasis of matter is unavailable, not merely inferior. If it does not, and the matter is nonetheless fundamental to understanding the financial statements, an emphasis of matter is open to you.

An auditor who uses an emphasis of matter to avoid a difficult conversation about a qualified opinion has not softened the report. They have failed to comply with ISA 705 and ISA 706 at the same time. For how the modification decision itself works, see our guide to picking the right modified opinion.

Placement and wording

Paragraph 9(a) requires the paragraph to sit within a separate section of the report under a heading that includes the term Emphasis of Matter. Paragraph 9(b) restricts its content: it shall refer only to information presented or disclosed in the financial statements. Paragraph A16 leaves the position in the report to judgement, depending on the nature of the information communicated.

For an other matter paragraph, paragraph 10 adds two gates — that it is not prohibited by law or regulation, and that the matter is not one required to be communicated as a key audit matter — and paragraph 11 requires a separate section headed Other Matter or another appropriate heading.

Where else an emphasis of matter is required

Appendix 1 lists other standards that require one, which is worth knowing because they arrive without the auditor choosing: ISA 210 at paragraph 19(b) on agreeing the terms of audit engagements; ISA 560 at paragraphs 12(b) and 16 on subsequent events; and ISA 800 at paragraph 14 on special purpose frameworks.

Going concern: also not a modification, and also not an emphasis of matter

The material uncertainty related to going concern section is a third thing again, and conflating it with an emphasis of matter is the single most frequent error in this area.

It is a separate section with its own heading — Material uncertainty related to going concern — and the opinion is not modified. ICAEW's illustrative wording spells it out: our opinion is not modified in respect of this matter.

One point of precision on placement. ISA (UK) 570 does not specify where the section goes. Both ICAEW's illustration and ACCA's technical material place it directly after the basis for opinion section and before key audit matters. That is convention, and good convention, but it is not a requirement, and marking a report down for placing it elsewhere is marking against a rule that does not exist.

The three outcomes, in the right order

This is the table to learn, because the ordering is what gets failed:

• Material uncertainty exists and is adequately disclosed. Opinion unmodified. A separate material uncertainty related to going concern section, stating expressly that the opinion is not modified.
• Material uncertainty exists and is inadequately disclosed. Opinion qualified or adverse, chosen by the materiality and pervasiveness of the disclosure deficiency under ISA 705. A basis for qualified or adverse opinion section.
• The going concern basis of accounting is inappropriate but has been used. Opinion adverse. A basis for adverse opinion section.

Note what moves between the first two: not the existence of the uncertainty, which is the same in both, but the adequacy of the disclosure. The auditor is not modifying because the company might fail. They are modifying because the accounts do not say so properly.

There is also a UK-only addition worth knowing. ISA (UK) 570 paragraph 21-1 requires statements that the directors' use of the going concern basis is appropriate, which may sit either in the material uncertainty section or in a separate section headed Conclusions relating to going concern. Public interest entities and other specified entities must additionally explain how the auditor evaluated management's assessment. ISA (UK) 700 cross-refers to that section by name. Our guide to what material uncertainty related to going concern actually requires covers the underlying judgement.

A quick way to keep the four apart

Four instruments, four questions.

Modification — is something wrong with the financial statements, or could I not get the evidence? If yes, ISA 705, and nothing else will do.

Emphasis of matter — is something in the financial statements so important that a reader would misunderstand them without having it pointed out, and does it not require a modification? If yes, ISA 706 paragraph 8 onwards.

Other matter — is there something not in the financial statements that a reader needs in order to understand the audit or my report? If yes, ISA 706 paragraph 10 onwards.

Material uncertainty related to going concern — does a material uncertainty exist, and has it been adequately disclosed? If both, its own section and an unmodified opinion.

One last currency note. ISA (UK) 705 and 706 were not revised in the FRC's 2026 programme, so the content above is stable in the UK — but Ireland did revise both, with ISA (Ireland) 705 and 706 (Revised May 2026) effective for periods beginning on or after 15 December 2026. If you audit in both jurisdictions, see our guide to the May 2026 revisions and the two live editions.