The following explanatory paragraph was included in an auditor's report to indicate a lack of consistency: "As discussed in note T to the financial statements, the company changed its method of computing depreciation in X0." How should the auditor report on this matter if the auditor concurred with the change? Type of Location of opinion explanatory paragraph.

Question

Quizplus · Accepted Answer

Choice "b" is correct. If the auditor concurred with the change, a lack of consistency in applying GAAP would result in an unqualified opinion with an explanatory paragraph following the opinion paragraph. Choice "c" is incorrect. If the change in accounting principle is not accounted for properly, then a qualified opinion would be appropriate and the explanatory paragraph would appear before the opinion paragraph. Choices "a" and "d" are incorrect, per the above rules.

The Following Explanatory Paragraph Was Included in an Auditor's Report