Changing from Average Cost to LIFO
Wade Corporation has been your audit client for several years. At the beginning of the current year, the company changed its method of inventory valuation from average cost to last in, first out (LIFO). The change, which had been under consideration for some time, was in your opinion a logical and proper step for the company to take. What effect, if any, will this situation have on your audit report for the current year? Remember to complete all parts of the problems.
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A change in estimate is changed in the current year and prospectively (no change to prior year financial statements). An error is fixed retroactively back to the date of the error (if material). A change in accounting principle must be reported retrospectively (back to the earliest period reported), justified in the footnote (give a reason for the change), and disclose the ...
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Your discussion is 236 words and a reference to the auditing standard that applies.