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Changes in Accounting Principles

If management fails to provide adequate justification for a change from one generally accepted accounting principle to another, the auditor should
A)Add an explanatory paragraph and express a qualified or an adverse opinion on the company's financial statements for lack of conformity with generally accepted accounting principles.
B) Disclaim an opinion on the company's financial statements because of uncertainty.
C)Disclose the matter in a separate explanatory paragraph(s) but not modify the opinion paragraph on the company's financial statements.
D)Neither modify the opinion on the company's financial statements nor disclose the matter because both principles are generally accepted.

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18) C

From the AICPA:

Reporting Voluntary Changes in Accounting Principles

When financial statements include a voluntary change in accounting principle that
has a material effect on the financial statements, such change ...

Solution Summary

This solution identifies the correct course of action for the Auditor and justifies why by referencing from the AICPA.

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