How is the compliance report best communicated in the auditor's report?

The best way to communicate the compliance report in the auditor's report is through an "other matter" paragraph. This approach allows the auditor to provide additional context about compliance matters that are not covered in the main body of the report. By including this information in an "other matter" paragraph, the auditor highlights its relevance and ensures that it is visible and distinct from the main conclusions regarding the financial statements.

This method is particularly effective because it emphasizes compliance issues while maintaining the integrity of the financial audit's focus. It ensures that stakeholders, such as investors and regulatory bodies, can recognize and understand the auditor’s assessments concerning compliance without diluting the primary financial audit findings.

Other methods, such as footnotes in the financial statements or an additional report, may not provide the same level of visibility regarding compliance issues. A footnote can easily be overlooked, while an additional report could lead to fragmentation of critical information. A summary paragraph, although it can encapsulate key points, may not provide the depth or clear separation needed for compliance-related disclosures. Thus, using an "other matter" paragraph effectively serves to highlight compliance issues while preserving the clarity of the audit report.