The auditors include an emphasis-of-matter paragraph in an otherwise unmodified report on the entity's financial statements to emphasize that the entity being reported on had significant transactions with related parties.The inclusion of this separate paragraph
A) is considered a qualification of the opinion.
B) violates generally accepted auditing standards if this information is already disclosed in footnotes to the financial statements.
C) necessitates a revision of the opinion paragraph to include the phrase "with the foregoing explanation."
D) is appropriate and would not otherwise affect the unmodified opinion.

Question

Quizplus · Accepted Answer

Including an emphasis-of-matter paragraph to draw attention to significant transactions with related parties is appropriate and would not impact the unmodified opinion on the financial statements. This is because the auditors are not modifying the opinion or altering the financial statements, but merely highlighting a key aspect that readers should take into account when assessing the financial position and performance of the entity. The presence of this paragraph does not amount to a qualification or a revision of the opinion paragraph. However, if the information about related party transactions is not adequately disclosed in the footnotes to the financial statements, the auditors may need to modify their opinion, as this information would then be considered a material misstatement that affects the fairness of the financial statements.

The Auditors Include an Emphasis-Of-Matter Paragraph in an Otherwise Unmodified