[jahnesta8]

Question:
“When management does not provide reasonable justification that a change in accounting principle is preferable and it presents comparative financial statements, the auditor should express a qualified opinion:

Answer choices:

a. Only if the change is to an accounting principle that is not generally accepted.
b. Each year that the financial statements initially reflecting the change are presented.
c. Only in the year of the accounting principle change.
d. Each year until management changes back to the accounting principle formerly used.

Becker’s Solution:
Choice “b” is correct. When management does not provide reasonable justification that a change in accounting principle is preferable and it presents comparative FS, the auditor should express a qualified opinion each year that the FS initially reflecting the change are presented.
Choices “c”, “d”, and “a” are incorrect, per the rule stated above.

My question lies in the difference between answer choices B and C as they relate to the question. Maybe I thought the answer was B because I assumed the the change in accounting principle took place in the current year. Any thoughts would be great.

 

 

[Anonymous]

Let's say that the client presents 5 years of comparative statements and makes an accounting principle change in 2012. If you're auditing their 2013 financial statements, then according to C., you can express an unqualified opinion on the comparative statements, because then change was made the year before. But according to B, you will express a qualified opinion this year (just like you did last year) and will also do so next year etc., until the 2012 statements are no longer part of the comparative statements. Does that help to explain the difference?

[Anonymous]

Let's say that the client presents 5 years of comparative statements and makes an accounting principle change in 2012. If you're auditing their 2013 financial statements, then according to C., you can express an unqualified opinion on the comparative statements, because then change was made the year before. But according to B, you will express a qualified opinion this year (just like you did last year) and will also do so next year etc., until the 2012 statements are no longer part of the comparative statements. Does that help to explain the difference?

[jahnesta8]

Yup, I think I was just being dense. Thank you!

[jahnesta8]

Yup, I think I was just being dense. Thank you!

[Author]

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