Emphasis of Matter paragraph in auditor's reports on financial statements of listed companies in Bosnia and Herzegovina

Abstract

This paper analyses auditor's reports on financial statements of listed companies in Bosnia and Herzegovina. The goal of the research is to determine the frequency of the inclusion of the Emphasis of Matter paragraph in auditor's reports, as well as to identify the matters to which auditors most often draw the attention of users of financial statements within this paragraph. The research was conducted on a sample of 689 auditor's reports and covered the period from 2018 to 2021. The content analysis method was used. This research shows that the frequency of the inclusion of the Emphasis of Matter paragraph in auditor's reports was 22.5%. On average, auditors were more likely to include this paragraph in auditor's reports containing a modified audit opinion compared to auditor's reports containing an unqualified opinion. The auditors mostly drew the attention of the users of financial statements to the violation of the requirements defined by the International Accounting Standards, then to the uncertainty regarding the future outcomes of litigations, the amount and structure of certain types of assets, liabilities and income, poor performance of companies, non-compliance with laws and regulations, etc. The results show that there are indications that auditors in certain situations use the Emphasis of Matter paragraph instead of modifying the audit opinion.