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Hi tutor,
I am a bit confused as to when I should use an Other matter (OM) paragraph instead of a modified audit opinion.
The BPP study text gives one example of a matter leading to the inclusion of an Other matter paragraph:
1) “The auditor is unable to withdraw from the engagement and yet is unable to obtain sufficient appropriate audit evidence”
Why should an OM paragraph be used in this situation?
2) If the directors’ report includes a vital piece of audit evidence not disclosed to the auditor nor included within the FS which could lead to a material misstatement in the FS, should I use an OM paragraph, or a modified opinion paragraph? Or can I include both of them in my auditor’s report? Is this allowed?
1 I’m not sure without knowing more about the situation. It would certainly lead to a modified opinion also because of lack of evidence.
2 If something is not in the FS that should be in the FS then there must be a modified opinion. The directors’ report is not part of the FS and disclosing something there that should be in the FS does not fix the problem.
I see. In the exam, if such a situation (example 2 above) comes up, can I disclaim an opinion (assuming the effects are pervasive) and include an OM paragraph explaining what was included in the directors’ report?
I don’t think you need the OM paragraph. The audit opinion would simply disclose the information was missing from the FS.
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