 Hello and welcome to the session in which we will discuss the emphasis of other matters paragraph, which is part of the auditor's report. So it's very important to understand what is emphasis of other matters paragraph and what is not emphasis of other matters paragraph and what is simply put other matters because they are very similar emphasis of other matters and other matters. They sound the same, but we're going to have to clarify which is which. So what is emphasis of other matters paragraph? It's when the auditor wants you to pay attention. They want to raise attention to a certain item presented in the financial statements or the notes. So used when the auditor want to emphasize specific matter or matters regarding the financial statements and notes simply put additional communication when the auditor considered it's necessary. So it's basically on the auditor's discretion. So the auditor wants you to pay attention. They want to draw the user's attention to some matter or matters that is already disclosed. Again, I'm going to highlight this one more time, presented or disclosed. So it's already in the financial statements, but the auditor's believe it help you understand the financial statements better. So what are the financial report or the financial statements? Well, basically the basic financial statement income statement balance sheet statement of cash flows statements of shareholders equity and the notes. So it's already there, but we want you to hold on a second we're waving our hands we're highlighting this information that's already in the financial statements and you're going to see why I'm emphasizing this point again and again. So that's it's already in the financial statements. Now bear in mind that EOM is not critical audit matters or cam. So it's not that also bear in mind we are still giving a clean unqualified unmodified opinion. So this is not part of the opinion we're not changing the opinion. What we're doing is we're adding a separate paragraph to emphasize those other matters. So please keep that in mind. This is not part of the opinion. Now it's very important since we are talking emphasis of other matters, we need to know what is other matters or other matters paragraph. This paragraph, if it exists, it referred to matters not presented or disclosed in the financial statements. Now you see why I did all those highlighted before to kind of draw the attention that other matters is something that's not in the financial statements. Simply put, for example, auditors responsibilities related to laws and regulation. Maybe you want to clarify the auditors responsibility. Well, that's not something to do with the financial statements themselves. Now the best way to illustrate EOM is to actually discuss examples. What is EOM? What is emphasis of other matters? Before we do that, you are watching because you are either an accounting student taking an auditing course or a CPA candidate. And I'm glad you are because you arrived at the right place. Farhatlectures.com can help you because you're looking for help. That's why you end up on YouTube and found me. Go to Farhatlectures.com where you will find additional information about the auditing course about the CPA auditing exam. I don't replace your CPA review course. That's not my intent. I am supplemental material. I can help you do better. The mere fact that you're watching, it's because you got stuck on something. And that's why you went to YouTube. I have resources, lectures, multiple choice, all organized like your course, all organized like your college course or your CPA exam course like Becker, Roger, Gleam, Whitey. So I have everything broken down. So it's very easy for you to follow. I have thousands of multiple choice and 1500 of previously released AI CPA questions. 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It could be a major fire, a natural disaster, a major funding event, you're raising money, you're borrowing money. Well, disclose this because you think that's important and it happened after the balance sheet date. Three, additional explanation of matters affecting the comparability, not consistency. The comparability of the financial statements with those of the preceding year. So simply put, there's a comparability issue. Discuss it. Now, why do I say comparability, not consistency? Because you have to understand the comparability versus consistency. Changes and accounting principle is an example of comparability. For example, you want from FIFO to LIFO. This is not changes and estimate. Changes and estimate is consistency. You're not using the same method. That's consistency. So changes and accounting principle. Error correction involving accounting principle. You did not change your accounting principle. You were, you were misapplying your accounting principle. Okay, so you made an error and applying the accounting principles or one or many. Again, we're not talking about mathematical errors. This is a problem. An error in gap, not a math error. Three, changes in reporting entities. You have new, you have new consolidation, you added a new company, a new major company. Well, you may want to draw the user's attention to make sure the numbers that you're looking at, the revenues. You see a large jump because we are consolidating. We have new entities, not changes in company strategy. For example, if the company added a new R&D department or they are going into artificial intelligence. Well, that's not really changes in reporting entities. That's changes in the company's overall business direction. That's not the same. Four, information regarding major litigation or regulatory actions. Once again, this information is already in the notes. And I keep emphasizing this because emphasis of matters or of matter or matters, many matters or matter. It's important. That's the whole point is you're emphasizing. It's in the notes, but I just want to make you aware of it because I think it's important. Five, a major catastrophe that had or continue to have a significant effect on the entity's financial position. You think it's important. Therefore, what you do is you emphasize this point in the audit report. Now, bear in mind, I keep emphasizing the word already disclosed in the notes because if it's not disclosed in the notes, if not in the notes, what's going to happen is this. You either give a qualified opinion or you disclaim. So that's why emphasis of a matters. It's already you are giving an unqualified opinion because if they're not in the notes and the company refused to have them in the notes. You disclaim you say, you know what, if you're not going to disclose it, I'm not comfortable giving an opinion or you give a qualified opinion. So I just want to emphasize this point as much as possible. And the best way to illustrate this is to actually take a look at an example how it's disclosed as discussed in note X in the financial statements. The company has elected to change its policy for determining cash equivalent. So we're changing our policy of how we determine what's considered cash equivalent in year X8. Our opinion is not modified. We're not modifying anything. You just want to let you know the company changes its policy and how to account what's cash equivalent. What should you do now? Go to farhatlectures.com. Go to my auditing course or to my, you know, AUD CPA courses, work MCQs through false, invest in yourself. Don't shortchange yourself. I can help you along your auditing course and your CPA exam. Good luck, study hard. And of course, stay safe.