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The following is an extract from a recent technical article covering the revised audit reports formats:
“EMPHASIS OF MATTER AND OTHER MATTER PARAGRAPHS
Emphasis of Matter and Other Matter paragraphs are still retained in ISA 706 (Revised), Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor’s Report and the concepts involved have not been overridden by the new ISA 701 requirements.
The IAASB have noted that in some cases, matters which the auditor considers to be KAM will relate to issues that are presented and/or disclosed in the financial statements.
Therefore, communicating these as KAM under ISA 701 will serve as the most useful and meaningful mechanism for highlighting the importance of the matter.
Candidates should appreciate that when the auditor communicates matters as KAM, the intention is to provide additional information beyond that which would be included in an Emphasis of Matter paragraph.
In recognition of this ISA 706 (Revised) states:
The auditor is prohibited from using an Emphasis of Matter paragraph or an Other Matter paragraph when the matter has been determined to be a KAM.
To that end, the IAASB has emphasised that the use of an Emphasis of Matter paragraph is not a substitute for a description of individual KAM.
If a KAM is also determined to be fundamental to users’ understanding, the auditor may present this issue more prominently in the KAM section.
Alternatively, the auditor might also include additional information in the KAM description to indicate the importance of the matter.
There may be a matter which is not determined to be a KAM, but which, in the auditor’s judgement is fundamental to users’ understanding and for which an Emphasis of Matter paragraph may be considered necessary.”
I believe that answers your specific question but the link to the full article is here (and it’s well worth a read!)
OK?
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