What is Other Matter paragraph and when is it used?


Other matter paragraph is an additional paragraph which auditor might add if in his eyes it is important to draw attention of user to a matter other than those disclosed or presented in the financial statements. As this is about matter other than the ones already discussed in the financial statements thus the name other matter paragraph

International Standards on Auditing defines Other Matter paragraph as follows:

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

From the above definition following points are noted:

  1. This paragraph highlights a matter other than those already presented or disclosed
  2. This is included based on auditor’s judgment of the matter
  3. This is included to clarify understanding of user about:
    1. audit
    2. auditor’s responsibilities
    3. auditor’s report

Other matter paragraph is added to the auditor’s report after opinion paragraph and any other emphasis of matter paragraph i.e. paragraphs are added in the following sequence

  1. opinion paragraph
  2. emphasis of matter paragraph
  3. other matter paragraph

Other matter paragraph may be added at other place in auditor’s report for example in other reporting responsibilities paragraph if it is related to auditor’s other reporting responsibilities.

However, it must be noted that such paragraph can only be added if relevant laws or regulations permit such inclusion. Addition of other matter paragraph does not qualify or modify auditor’s opinion.

Other matter paragraph can be added to auditor’s report in the following situations:

  1. In case non-compliance is identified and management and those charged with governance is not taking remedial actions. In such case if auditor is not allowed to withdraw from audit engagement then as an alternative course of action auditor include other matter paragraph in auditor’s report to highlight non-compliance
  2. In case a new or amended audit report has been issued after the discovery of subsequent events and also when management has restricted to amend the financial statements in this regard and law does not prohibit management from such restriction.
  3. In situations where auditor is unable to withdraw due to limitation on scope of his work placed and has restricted him from obtaining sufficient appropriate audit evidence. In this case he can add other matter paragraph explaining the reasons why withdrawal was not possible.
  4. In cases where auditor is engaged to report on two different sets of financial statement where each one is prepared under different general purpose framework.
  5. Where financial statements are prepared for specific purpose meant for specific users then auditor shall add other matter paragraph highlighting the fact that such financial statements are not meant for general users even if such financial statements are prepared under general purpose financial reporting framework