If Management Fails to Provide Adequate Justification for a Change

question 25

Multiple Choice

If management fails to provide adequate justification for a change from one generally accepted accounting principle to another,the auditors should

• A) Add an additional paragraph and express a qualified or an adverse opinion on the entity's financial statements for lack of conformity with generally accepted accounting principles.
• B) Disclaim an opinion on the entity's financial statements because of uncertainty.
• C) Disclose the matter in a separate explanatory paragraph but not modify the opinion paragraph on the entity's financial statements.
• D) Neither modify the opinion on the entity's financial statements nor disclose the matter because both principles are generally accepted accounting principles.

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Definitions:

Excavation

The process of removing soil, rock, or other materials from a site to form a hole, cavity, or to uncover something buried.

Preexisting Legal Obligation

An obligation that existed before the current situation or agreement, which may affect the validity of a new contract.

Outputs Contract

An agreement in which the seller agrees to sell all of the production at its facility to a buyer, who agrees to purchase it, often used in industrial or farming contexts.

Oral Modify

The act of making changes or amendments to an existing contract through spoken agreement, as opposed to written modifications.