Which of the following is an example of a situation where an emphasis of matter paragraph may be used?

An emphasis of matter paragraph is used in an audit report to draw attention to a specific aspect of the financial statements that is deemed to be of such importance that it is crucial for the readers’ understanding. In the context of this question, the situation where there is a material uncertainty concerning the outcome of litigation is a prime candidate for an emphasis of matter paragraph.

When there is significant uncertainty related to litigation, it can affect the completeness and accuracy of the financial statements. By including an emphasis of matter paragraph, the auditor highlights this uncertainty to ensure that users of the financial statements are fully aware of the potential implications, which may not be apparent from the financial statements themselves. This is crucial in maintaining transparency and aiding stakeholders in making informed decisions.

In contrast, the other options do not typically warrant the use of an emphasis of matter paragraph. Minor errors in numerical disclosures usually would be corrected without necessitating further emphasis, as they do not materially misrepresent the financial statements. Routine changes in accounting policies typically do not require special emphasis, as they are part of normal business practice and usually disclosed in the notes to the financial statements without additional emphasis. Disagreements with management regarding financial reporting might require other forms of disclosure, such as a modification of the audit opinion, rather