The Rotter Company, a nonpublic company,changed accounting principles in 20X4 from those followed in 20X3.The auditor believes that the new principles are not in conformity with GAAP,and therefore that the 20X4 financial statements are misleading due to pervasive misstatements.The change (including its dollar effect)has been described in the notes to the 20X4 statements.Under these circumstances,in reporting on the 20X4 financial statements,the auditor should:
A)Express an adverse opinion with the basis for modification paragraph disclosing the reason (the accounting change)for the opinion.
B)Express an unmodified opinion with an emphasis-of-matter paragraph and disclose the accounting change from 20X3 and its effect on the financial statements.
C)Disclaim an opinion and explain all of the reasons therefore.
D)Express an adverse opinion regarding the 20X4 financial statements,without a basis for modification paragraph since the reason will be included in the notes to the statements.

Question

The Rotter Company, a nonpublic company,changed accounting principles in 20X4 from those followed in 20X3.The auditor believes that the new principles are not in conformity with GAAP,and therefore that the 20X4 financial statements are misleading due to pervasive misstatements.The change (including its dollar effect)has been described in the notes to the 20X4 statements.Under these circumstances,in reporting on the 20X4 financial statements,the auditor should:
A)Express an adverse opinion with the basis for modification paragraph disclosing the reason (the accounting change)for the opinion.
B)Express an unmodified opinion with an emphasis-of-matter paragraph and disclose the accounting change from 20X3 and its effect on the financial statements.
C)Disclaim an opinion and explain all of the reasons therefore.
D)Express an adverse opinion regarding the 20X4 financial statements,without a basis for modification paragraph since the reason will be included in the notes to the statements.

Quizplus · Accepted Answer

The auditor should express an adverse opinion, as the financial statements are significantly misleading due to pervasive misstatements. The auditor should also include a basis for modification paragraph disclosing the reason for the adverse opinion, which is the change in accounting principles that is not in conformity with GAAP.

The Rotter Company, a Nonpublic Company,changed Accounting Principles in 20X4 from Those