When an Auditor Is Trying to Determine How Changes Can

question 125

Multiple Choice

When an auditor is trying to determine how changes can affect consistency and and/or comparability,he should keep in mind that

• A)changes that affect comparability but not consistency require an explanatory paragraph.
• B)items that materially affect the comparability of financial statements requires a disclaimer of opinion.
• C)changes that affect consistency require an explanatory paragraph if they are material.
• D)changes that involve either comparability or consistency only need to be mentioned in the footnotes.

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Definitions:

Allocation Base

The criteria or standard used for distributing overhead costs to various cost objects, such as products, services, or departments.

Assembly Department

A specific section in a manufacturing facility where components are assembled into finished goods.

Machine Hours

A measure of the time machines are in operation, used to allocate machine-related expenses to production activities.

Finishing Department

The section within a manufacturing process where products are completed, polished, or packaged.