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  • Explanatory Paragraph

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    dina maryana
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    The explanatory paragraph is an optional additional paragraph in an independent auditor's report that provides further explanation for the auditor's opinion. It can be included either before or after the opinion paragraph. Explanatory paragraphs are used to justify departures from GAAP, disclose inconsistent application of GAAP, express substantial doubt about a company's ability to continue as a going concern, or emphasize important matters like subsequent events, risks, contingencies, or estimates. The explanatory paragraph provides additional context for the reader of the financial statements regarding the auditor's opinion.

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    The explanatory paragraph is an optional additional paragraph in an independent auditor's report that provides further explanation for the auditor's opinion. It can be included either before or after the opinion paragraph. Explanatory paragraphs are used to justify departures from GAAP, disclose inconsistent application of GAAP, express substantial doubt about a company's ability to continue as a going concern, or emphasize important matters like subsequent events, risks, contingencies, or estimates. The explanatory paragraph provides additional context for the reader of the financial statements regarding the auditor's opinion.

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    34 views5 pages

    Explanatory Paragraph

    Uploaded by

    dina maryana
    The explanatory paragraph is an optional additional paragraph in an independent auditor's report that provides further explanation for the auditor's opinion. It can be included either before or after the opinion paragraph. Explanatory paragraphs are used to justify departures from GAAP, disclose inconsistent application of GAAP, express substantial doubt about a company's ability to continue as a going concern, or emphasize important matters like subsequent events, risks, contingencies, or estimates. The explanatory paragraph provides additional context for the reader of the financial statements regarding the auditor's opinion.

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    Explanatory Paragraph

    by:
    Bambang Leo Handoko (D5271)
    Explanatory Paragraph
    • Additional paragraph in independent auditor’s report
    • Often described as fourth paragraph
    • Modified independent auditor’s report

    miborg.uk
    Two Kinds of explanatory paragraph
    • Before Opinion Paragraph • After Opinion Paragraph
    • When the opinion is other • Used when the auditor
    than unqualified opinion discovers certain things
    in the client's financial
    statements
    Explanatory Language

    – Justified departure from GAAP


    – Inconsistent application of GAAP
    – Substantial doubt about client being a going
    concern
    – Emphasis of some matter, such as unusually
    important subsequent events, risks, or
    uncertainties associated with contingencies or
    significant estimates
    – Reference to other auditors (group audits and
    component auditors)
    Both explanatory language

    • Possible
    • When opinion is other than unqualified and
    additional information is needed to be informed by
    auditor to the user of financial statement

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