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.

---

Definitions:

Equivalent Units

Equivalent units are used in cost accounting to express the amount of work done on incomplete products in terms of fully completed units of output.

Materials

Raw items or components that are used to manufacture a finished product.

FIFO Method

First-In, First-Out methodology in inventory and cost accounting that assumes the first items produced or acquired are the first ones sold.

Equivalent Units

A concept used in cost accounting to denote the amount of finished goods units that could have been produced given the total amount of direct materials, labor, and overhead costs incurred.