The Rotter Company, a Nonpublic Company,changed Accounting Principles in 20X4 from Those

question 21

Multiple Choice

The Rotter Company, a nonpublic company,changed accounting principles in 20X4 from those followed in 20X3.The auditor believes that the new principles are not in conformity with GAAP,and therefore that the 20X4 financial statements are misleading due to pervasive misstatements.The change (including its dollar effect) has been described in the notes to the 20X4 statements.Under these circumstances,in reporting on the 20X4 financial statements,the auditor should:

• A)Express an adverse opinion with the basis for modification paragraph disclosing the reason (the accounting change)for the opinion.
• B)Express an unmodified opinion with an emphasis-of-matter paragraph and disclose the accounting change from 20X3 and its effect on the financial statements.
• C)Disclaim an opinion and explain all of the reasons therefore.
• D)Express an adverse opinion regarding the 20X4 financial statements,without a basis for modification paragraph since the reason will be included in the notes to the statements.

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Definitions:

Learning To Fear

The process through which fear responses are acquired through experiences or observations of certain stimuli.

Anxiety Sensitivity

The tendency to catastrophically misinterpret arousal-related bodily sensations because one believes the sensations to have harmful consequences, such as death, insanity, or loss of control.

Arousal-Related Bodily Sensations

Physical sensations linked to the body's state of alertness, often experienced during excitement or stress.

Panic Catastrophizing

An exaggerated negative reaction to or anticipation of distressing events, often seen in anxiety disorders, where the individual believes the worst-case scenario will happen.