When there is a significant change in accounting principle, an auditor's report should refer to the lack of consistency in:

Question

Quizplus · Accepted Answer

Choice "D" is correct. When there is a significant change in accounting principle, the auditor's report should refer to the lack of consistency in an explanatory paragraph following the opinion paragraph. The explanatory paragraph should identify the change and refer to the note in the FS that discusses the change in detail. The auditor's concurrence with the change in GAAP is implicit, unless he or she takes exception. Choice "A" is incorrect. Lack of consistency is not a scope limitation. Choice "B" is incorrect. An explanatory paragraph is often inserted between the second paragraph and opinion paragraph. However, where a change is accounted for in accordance with GAAP, the explanatory paragraph should follow the unqualified opinion paragraph. Choice "C" is incorrect. The lack of consistency would not be disclosed in an opinion paragraph unless the auditor does not concur and wishes to qualify the opinion. In such case an explanatory paragraph would precede the opinion paragraph and the opinion paragraph would be qualified.

When There Is a Significant Change in Accounting Principle, an Auditor's