When an Entity Changes Its Method of Accounting for Income

question 16

Multiple Choice

When an entity changes its method of accounting for income taxes, which has a material effect on comparability, the auditor should refer to the change in an explanatory paragraph added to the auditor's report. This paragraph should identify the nature of the change and:

• A) Explain why the change is justified under generally accepted accounting principles.
• B) Describe the cumulative effect of the change on the audited financial statements.
• C) State the auditor's explicit concurrence with or opposition to the change.
• D) Refer to the financial statement note that discusses the change in detail.

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