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:

Marginal Cost Curve

A graphical representation showing how the cost to produce one additional unit changes as more units are produced.

Price Taker

An economic entity that does not have the market power to set the price of a good or service but must accept the market price as given.

Market Price

The present rate at which a service or asset is available for purchase or sale in a market.

Average Variable Cost

The total variable cost divided by the number of units produced.