What aspect does an emphasis-of-matter paragraph highlight in financial statements?

An emphasis-of-matter paragraph in an auditor's report serves to draw attention to specific issues or disclosures in the financial statements that are of fundamental importance. This paragraph is included in the auditor's report to highlight matters that are relevant to users' understanding of the financial statements.

For example, if there is substantial doubt about an entity's ability to continue as a going concern, or if there are significant uncertainties related to certain events, the emphasis-of-matter paragraph explicitly points these out. This allows users of the financial statements to pay particular attention to these critical issues, which may affect their decisions based on the financial statements.

Highlighting matters of fundamental importance is crucial because it ensures that stakeholders and users of the financial statements are fully informed about significant issues that may not be evident from the financial data alone. This practice enhances the transparency and usefulness of the financial reporting process.