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    PracticeCPA®CPA AUD Practice Exam 5Question 63
    Hard1 markMultiple Choice
    Area IV: ReportingAUDReportingEmphasis of Matter

    CPA · Question 63 · Area IV: Reporting

    An auditor is preparing an audit report for a nonissuer. The auditor decides to emphasize that the entity is a component of a larger business enterprise. This disclosure should be made in:

    Answer options:

    A.

    The opinion paragraph.

    B.

    An other-matter paragraph.

    C.

    An emphasis-of-matter paragraph.

    D.

    The introductory paragraph.

    How to approach this question

    EOM = Important stuff IN the notes. OM = Important stuff NOT in the notes. Related party/Component status is in the notes.

    Full Answer

    C.An emphasis-of-matter paragraph.✓ Correct
    An Emphasis-of-Matter paragraph is used to draw attention to a matter appropriately presented or disclosed in the financial statements that is of such importance that it is fundamental to users' understanding. Being a subsidiary/component is a classic example of an EOM disclosure.

    Common mistakes

    Confusing EOM and OM paragraphs.
    Question 62All questionsQuestion 64

    Practice the full CPA AUD Practice Exam 5

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