ExpertHard1 markMultiple Choice
CPA · Question 63 · Area IV: Reporting
An auditor is preparing an audit report for a nonissuer. The auditor decides to emphasize that the entity is a component of a larger business enterprise. This disclosure should be made in:
An auditor is preparing an audit report for a nonissuer. The auditor decides to emphasize that the entity is a component of a larger business enterprise. This disclosure should be made in:
Answer options:
A.
The opinion paragraph.
B.
An other-matter paragraph.
C.
An emphasis-of-matter paragraph.
D.
The introductory paragraph.
How to approach this question
EOM = Important stuff IN the notes. OM = Important stuff NOT in the notes. Related party/Component status is in the notes.
Full Answer
C.An emphasis-of-matter paragraph.✓ Correct
An emphasis-of-matter paragraph.
An Emphasis-of-Matter paragraph is used to draw attention to a matter appropriately presented or disclosed in the financial statements that is of such importance that it is fundamental to users' understanding. Being a subsidiary/component is a classic example of an EOM disclosure.
Common mistakes
Confusing EOM and OM paragraphs.
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