The auditors include an emphasis-of-matter paragraph in a nonpublic company audit report with an unmodified opinion in order to emphasize that the entity being reported upon is a subsidiary of another business enterprise.The inclusion of this paragraph:
A)Is appropriate and would not negate the unmodified opinion.
B)Is considered a qualification of the opinion.
C)Is a violation of generally accepted reporting standards if this information is disclosed in notes to the financial statements.
D)Necessitates a revision of the opinion paragraph to include the phrase "with the foregoing explanation."

Question

Quizplus · Accepted Answer

Including an emphasis-of-matter paragraph in a nonpublic company audit report with an unmodified opinion is appropriate and would not negate the unmodified opinion. The purpose of the emphasis-of-matter paragraph is to draw the reader's attention to a specific matter, such as the fact that the entity being reported upon is a subsidiary of another business enterprise. This information does not impact the audit opinion and therefore, is not considered a qualification of the opinion. Additionally, it is not a violation of generally accepted reporting standards to include this information in an emphasis-of-matter paragraph rather than in the notes to the financial statements. The opinion paragraph does not require revision, as the unmodified opinion still applies.

The Auditors Include an Emphasis-Of-Matter Paragraph in a Nonpublic Company