Study guide
5.2 Emphasis, Other Matter, and Going Concern
Uniform CPA Examination Exam
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1 Chapter 1: CPA Exam Structure and Licensure Rules
1.1 CPA Evolution Model 1.2 Eligibility, Credit Window, and Scheduling Rules 1.3 Scoring, Pass Rates, and Blueprints
2 Chapter 2: CPA Scoring, Interface, and Exam Strategy
Score Scale and Testlets MCQ/TBS Weighting by Section Sample Test Interface Tools Exam-Day Time Management
3 Chapter 3: AUD Ethics, Independence, and Engagement Acceptance
3.1 Professional Responsibilities and Independence 3.2 Engagement Acceptance and Continuance 3.3 Audit Documentation and Quality Management 3.4 Audit Risk Foundations
4 Chapter 4: AUD Risk Assessment, Controls, and Evidence
4.1 Assertions and Risk Assessment 4.2 Internal Control Design and Operating Effectiveness 4.3 Substantive Procedures and Audit Evidence 4.4 Sampling, Analytics, and Estimates
5 Chapter 21: AUD Sampling, Analytics, and Accounting Estimates
21.1 Audit Sampling Risk and Sample Design 21.2 Substantive Analytical Procedures 21.3 Estimates, Fair Value, and Specialists 21.4 Data Analytics, Exceptions, and Follow-Up
6 Chapter 22: AUD Integrated Audits, IT Controls, and SOC Reliance
22.1 ICFR Integrated Audit Framework 22.2 IT General Controls and Application Controls 22.3 Service Organizations, SOC Reports, and CUECs 22.4 Control Deficiencies and Material Weaknesses
7 Chapter 5: AUD Reporting, Attestation, and Review Engagements
5.1 Audit Opinions and Modifications 5.2 Emphasis, Other Matter, and Going Concern 5.3 Review, Compilation, and Preparation Engagements 5.4 Attestation and Government Auditing Signals
8 Chapter 36: AUD Workbook - From Risk to Report
36.1 Risk-Assertion-Procedure Drill 36.2 Evidence Reliability Drill 36.3 Control Deficiency Classification Drill 36.4 Report Modification Decision Drill
9 Chapter 6: FAR Financial Statements and Reporting Framework
6.1 Conceptual Framework and Standard Setting 6.2 Financial Statement Presentation 6.3 Cash Flow Statement and Disclosures 6.4 Not-for-Profit Reporting Basics
10 Chapter 7: FAR Balance Sheet Accounts and Rollforwards
7.1 Cash, Receivables, and Reconciliations 7.2 Inventory and Cost Flow Errors 7.3 Property, Equipment, and Intangibles 7.4 Debt, Equity, and Contingencies
11 Chapter 8: FAR Selected Transactions and Measurement Models
8.1 Revenue Recognition: Five-Step Model 8.2 Leases, Income Taxes, and Impairment 8.3 Business Combinations and Consolidations 8.4 Accounting Changes, Errors, and Subsequent Events
12 Chapter 32: FAR Revenue, Leases, and Income Taxes Deep Dive
32.1 Revenue Contract Modifications and Variable Consideration 32.2 Lease Classification and Lessee Accounting 32.3 Deferred Tax Assets, Liabilities, and Valuation Allowances 32.4 Simulation Workflows for Revenue, Lease, and Tax Exhibits
13 Chapter 31: FAR Financial Instruments, Fair Value, and Derivatives
31.1 Financial Asset Classification and Measurement 31.2 Fair Value Hierarchy and Disclosures 31.3 Derivatives, Hedge Accounting, and Embedded Features 31.4 Foreign Currency and Comprehensive Income Signals
14 Chapter 24: FAR Consolidations, Equity Method, and Intercompany Workpapers
24.1 Consolidation Decision and Noncontrolling Interest 24.2 Acquisition-Date Measurement and Goodwill 24.3 Equity Method Income, Dividends, and Impairment 24.4 Intercompany Inventory, Debt, and Fixed Asset Eliminations
15 Chapter 9: FAR Governmental Accounting and Fund Reporting
9.1 Governmental Fund Types and Basis 9.2 Government-Wide Statements and Reconciliations 9.3 Budgetary Accounting and Encumbrances 9.4 Governmental and NFP Comparison Traps
16 Chapter 23: FAR Not-for-Profit and Special Reporting Topics
23.1 Not-for-Profit Net Assets and Restrictions 23.2 Contributions, Conditional Gifts, and Agency Transactions 23.3 Functional Expenses and Statement Presentation 23.4 Interim, Segment, and EPS Reporting Traps
17 Chapter 37: FAR Workbook - Journal Entries, Rollforwards, and Reconciliations
Adjusting Entry Workflow Account Rollforward Workflow Reconciliation and Error Correction Drill Statement Presentation Workpaper Drill
18 Chapter 10: REG Tax Procedure, Ethics, and Business Law
10.1 Tax Practice Ethics and Preparer Responsibilities 10.2 IRS Procedure, Statutes, and Penalties 10.3 Contracts, Agency, and Business Entities 10.4 Secured Transactions, Bankruptcy, and Priority
19 Chapter 11: REG Individual Federal Tax Workflows
11.1 Gross Income, Exclusions, and Adjustments 11.2 Filing Status, Dependents, and Deductions 11.3 Credits, Payments, and AMT Concepts 11.4 Retirement, Passive Activity, and Loss Limitations
20 Chapter 12: REG Property Transactions and Entity Taxation
12.1 Basis, Realized Gain, Recognized Gain, and Character 12.2 C Corporations and Shareholder Transactions 12.3 S Corporations, Partnerships, and Basis 12.4 Entity Tax Simulations and K-1 Workflows
21 Chapter 25: REG Entity Choice, Basis, and Owner Tax Consequences
25.1 C Corporation, S Corporation, and Partnership Comparison 25.2 Formation Contributions and Built-In Gain 25.3 Distributions, Redemptions, and Liquidations 25.4 Loss Limits: Basis, At-Risk, and Passive Rules
22 Chapter 26: REG Property Tax, Character, and Deferral Transactions
26.1 Capital, Ordinary, and Section 1231 Character 26.2 Depreciation Recapture and Unrecaptured Gain 26.3 Like-Kind Exchanges, Involuntary Conversions, and Installment Sales 26.4 Related-Party, Wash-Sale, and Imputed-Interest Traps
23 Chapter 33: REG Trusts, Estates, Gifts, and Exempt Organizations
33.1 Trust and Estate Income Tax Basics 33.2 Gift, Estate, and Beneficiary Planning Concepts 33.3 Tax-Exempt Organizations and Unrelated Business Income 33.4 Fiduciary K-1 and Distribution Simulation Workflows
24 Chapter 38: REG Workbook - Tax Return Schedules and Basis Workpapers
38.1 Individual Return Classification Drill 38.2 Property Basis and Character Workpaper 38.3 Pass-through K-1 and Owner Basis Workpaper 38.4 Business Law Issue Spotting Drill
25 Chapter 13: BAR Business Analysis, Economics, and Forecasting
13.1 Financial Statement Analysis and Ratios 13.2 Variance, Forecasting, and Budgeting 13.3 Cost Accounting and Performance Management 13.4 Economics, Finance, and Decision Models
26 Chapter 14: BAR Technical Accounting and Advanced Reporting
14.1 Revenue, Leases, and Complex Arrangements 14.2 Derivatives, Hedges, and Fair Value 14.3 Business Combinations and Consolidations 14.4 SEC Reporting and Public Company Context
27 Chapter 15: BAR State and Local Government Analysis
15.1 Governmental Fund Analysis 15.2 Government-Wide Conversion Workflows 15.3 Budgetary Reconciliation and CAFR/ACFR Reading 15.4 Government Simulation Strategy
28 Chapter 16: ISC Information Systems and Data Management
16.1 Systems Architecture and Data Flow 16.2 ERP, Accounting Systems, and Change Management 16.3 Data Governance, SQL, and Analytics 16.4 Availability, Backup, and Recovery Controls
29 Chapter 17: ISC Security, Privacy, and SOC Engagements
17.1 Security Threats and Control Selection 17.2 Privacy, Confidentiality, and Compliance Frameworks 17.3 SOC 1, SOC 2, SOC 3, and Cybersecurity Reports 17.4 Service Organization Exceptions and User Controls
30 Chapter 18: TCP Individual Tax Planning and Personal Financial Issues
18.1 Nonroutine Individual Income and Estimated Tax 18.2 Passive, At-Risk, and Investment Planning 18.3 Retirement, Education, and Insurance Planning 18.4 Gift, Estate, and Beneficiary Concepts
31 Chapter 19: TCP Entity Compliance and Planning
19.1 C Corporation Tax Planning 19.2 S Corporation Basis and Distributions 19.3 Partnership Tax Planning and Allocations 19.4 Trusts, Tax-Exempt, and International Signals
32 Chapter 34: TCP International and Advanced Entity Tax Topics
34.1 International Tax Signals and Source of Income 34.2 CFC, Foreign Tax Credit, and Permanent Establishment Concepts 34.3 Consolidated Returns and Affiliated Corporations 34.4 Advanced Partnership and S Corp Planning Scenarios
33 Chapter 35: Choosing and Preparing for BAR, ISC, or TCP
35.1 Discipline Fit Matrix by Background 35.2 BAR, ISC, and TCP Blueprint and Skill Comparison 35.3 Discipline Study Plans and Practice Balance 35.4 Switching Disciplines, Retake, and Score Interpretation
34 Chapter 39: CPA TBS Research, Authoritative Literature, and Document Review
39.1 Document Review Simulation Method 39.2 Research and Authoritative Literature Workflow 39.3 Exhibit Overload and Relevant Data Selection 39.4 Written Explanation and Professional Judgment Drills
35 Chapter 20: CPA Simulations, Retakes, and Final Review
20.1 TBS Exhibit Triage and Workpaper Method 20.2 Section-Specific Final Review Plans 20.3 Score Release, Retake, and Credit Window Decisions 20.4 Four-Section Study Roadmaps
36 Chapter 40: Discipline Workbook Drills for BAR, ISC, and TCP
40.1 BAR Ratio, Variance, and Government Drill 40.2 ISC Control Evidence and SOC Drill 40.3 TCP Basis Planning and Entity Drill 40.4 Discipline Final Mock and Review Log
5.2 Emphasis, Other Matter, and Going Concern
Key Takeaways Explain This Topic AI
Emphasis-of-matter paragraphs highlight a matter that is appropriately presented or disclosed in the financial statements and is fundamental to users' understanding.
Other-matter paragraphs address a matter not presented in the statements that is relevant to the audit, the auditor's responsibilities, or the report.
Neither paragraph modifies the opinion; they add emphasis or context only.
Substantial doubt about going concern is assessed for one year beyond the financial statement issuance date under AU-C 570, after evaluating management's plans.
If going-concern doubt remains but disclosure is adequate, a nonissuer auditor issues an unmodified opinion with a separate going-concern section.
Last updated: June 2026
Report Language That Does Not Modify the Opinion
The 2026 AUD Blueprint explicitly tests the appropriate use of emphasis-of-matter and other-matter paragraphs (under AU-C 706 for nonissuers). These are high-yield precisely because they look like modifications but are not. They add information or draw attention; they never change the auditor's conclusion. If the underlying matter is mishandled, the problem migrates back to the Section 5.1 opinion grid.
Emphasis vs. Other Matter
Paragraph type Points to Required vs. discretionary Common CPA examples
Emphasis-of-matter A matter presented or disclosed in the financial statements May be required or discretionary Going-concern uncertainty, major subsequent event, significant related-party transaction, special-purpose framework, justified change in accounting principle
Other-matter A matter not presented in the statements May be required or discretionary Prior-period statements audited by a predecessor, supplementary information responsibilities, restricted-use alert, required supplementary information
An emphasis-of-matter paragraph is used when a matter is so important it is fundamental to users' understanding. The auditor references the related note. The matter must be appropriately disclosed ; if disclosure is omitted or materially wrong, the issue becomes a GAAP departure and the opinion may be qualified or adverse. An other-matter paragraph gives context about the audit, the auditor's responsibilities, or the report itself, and never points to a matter inside the statements.
On the exam, deciding which paragraph applies is frequently the entire question, so always ask first: is this matter inside the financial statements or outside them?
Going Concern Decision Path
Under AU-C 570 , going concern begins as an evidence-and-disclosure issue, not an automatic modification. The auditor evaluates whether conditions and events, in the aggregate, raise substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time (one year beyond the date the financial statements are issued, or available to be issued).
Red-flag conditions include recurring operating losses, working-capital deficiencies, negative operating cash flows, loan-covenant defaults, denial of usual trade credit, restructuring of debt, loss of a key customer or franchise, or an uninsured catastrophe.
Next, evaluate management's plans . Plans are more persuasive when specific, feasible, and within management's control. A signed financing commitment, an executed asset-sale agreement, or a binding owner-support letter outweighs a vague intention to seek capital.
Reporting Outcomes
No substantial doubt after considering plans : issue the normal report.
Doubt remains, disclosure adequate : nonissuer auditor issues an unmodified opinion plus a separate Substantial Doubt About the Entity's Ability to Continue as a Going Concern section.
Doubt remains, disclosure inadequate : this is a GAAP departure - qualified or adverse depending on pervasiveness.
Evidence about going concern cannot be obtained : treat as a scope limitation - qualified or disclaimer.
For issuers , PCAOB standards (AS 2415) use an explanatory paragraph rather than the nonissuer "separate section" label, and the going-concern look-forward period is tied to one year from the financial statement date. CPA questions usually make the entity type explicit when the form differs.
Consistency and Comparability
A justified change in accounting principle that is properly accounted for and disclosed does not modify the opinion, but it does require an emphasis-of-matter paragraph referring to the change. By contrast, an unjustified change, or one accounted for incorrectly, is a GAAP departure affecting the opinion. Do not confuse consistency (same principles period to period) with comparability (presentation across periods).
Traps to Avoid
Do not use an emphasis paragraph to fix bad disclosure - inadequate disclosure modifies the opinion.
Do not modify the opinion solely because substantial doubt exists if disclosure is adequate .
Do not classify a matter as other-matter without first confirming it is not in the statements.
A going-concern paragraph is never a substitute for the auditor's responsibility to evaluate management's disclosures.
Worked Example: Same Doubt, Four Reports
A manufacturer has negative working capital, a defaulted loan covenant, and recurring losses. Substantial doubt clearly exists. Trace the four possible outcomes:
Management secures a signed refinancing and waiver from the bank before the report date; the auditor concludes the plans alleviate the doubt. Unmodified, no special section.
Doubt is not alleviated, but the note fully describes the conditions, plans, and the going-concern uncertainty. Unmodified with a separate going-concern section.
Doubt is not alleviated, and management refuses to disclose the uncertainty. This is a GAAP departure (inadequate disclosure) - qualified or adverse by pervasiveness.
The auditor cannot obtain evidence about the feasibility of the rescue plan. This is a scope limitation - qualified or disclaimer .
Notice the doubt is identical in all four; only the disclosure quality and evidence availability move the report.
Required Communications With Governance
When substantial doubt is identified, the auditor communicates to those charged with governance : whether the conditions raise substantial doubt, the auditor's evaluation of management's plans, the adequacy of disclosure, and the implications for the auditor's report. This communication is required even when disclosure is adequate and the opinion stays unmodified.
Other Information and the Report
Under AU-C 720, the auditor reads other information in documents containing the audited statements (for example, an annual report's management discussion). If there is a material inconsistency or a material misstatement of fact in the other information that management refuses to correct, the auditor describes it in a separate Other Information section. This does not modify the opinion on the financial statements, but it alerts users - a frequent exam contrast with emphasis and other-matter paragraphs.
Quick Reference Checklist
Is the matter inside the financial statements? If yes, candidate for emphasis-of-matter; if no, candidate for other-matter.
Is the relevant disclosure adequate ? If no, the opinion is modified, not emphasized.
For going concern, is doubt alleviated by feasible plans within management's control?
For a change in principle, is it justified and properly applied ? If yes, emphasize; if no, modify.