A company has changed its method of inventory valuation from an unacceptable one to one that complies with ASPE (Accounting Standards for Private Enterprises).The auditor's report on the financial statements of the year of the change should include
A)no reference to the item assuming that the change has been properly disclosed.
B)a reference to a change in accounting principles in the opinion paragraph.
C)an explanatory paragraph explaining the change.
D)a justification for making the change and the impact of the change on reported net income.

Question

Quizplus · Accepted Answer

When a company changes its method of inventory valuation from an unacceptable one to one that complies with ASPE and has properly disclosed this change, the auditor's report typically does not need to include a specific reference to this change. This is because the change is seen as a correction of an error rather than a change in accounting principle that needs to be highlighted in the auditor's report, assuming the new method is properly disclosed in the notes to the financial statements.

A Company Has Changed Its Method of Inventory Valuation from an Unacceptable