If a Change in Accounting Principle Has a Material Effect

question 116

Short Answer

If a change in accounting principle has a material effect on the comparability of the financial statements, then AU-C 708 requires auditors to add an_______ paragraph to the auditor's report.

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Definitions:

Level Of Risk

A measure of the potential for loss in an investment or business situation.

Variance

Variance is a statistical measurement that describes the spread of numbers in a data set, indicating how much the numbers differ from the average value.

Average Return

The mean amount of profit or loss generated by an investment over a given period.

Semi-strong-form Efficient

Semi-strong-form efficiency is a class of market efficiency that posits that all public information is already reflected in stock prices, making it impossible to consistently achieve higher returns by trading on that information.