In short
When a change in accounting principle, or the correction of a material misstatement, has a material effect on the financial statements, the auditor adds a paragraph to the report drawing attention to it.
Key takeaways
- If the change is properly accounted for and disclosed, the opinion isn't modified.
- If the new principle isn't generally accepted or the change isn't justified, the opinion is qualified or adverse.
- A change in accounting estimate doesn't require the paragraph.
Where it's tested
AUD: Audit Reports — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
An auditor is unable to observe the physical inventory count or satisfy themselves through alternative procedures, and inventory represents 60% of total assets. What opinion is appropriate?