Area IV: Forming Conclusions and Reporting — CPA Practice Question 20

How to approach this question

Change in Principle (LIFO to FIFO) = Consistency Issue. If justified + material = Emphasis-of-Matter paragraph.

Full Answer

C.Issue an unmodified opinion and include an emphasis-of-matter paragraph following the opinion paragraph.✓ Correct

When there is a change in accounting principle that has a material effect on the financial statements, and the auditor agrees with the change, the auditor should issue an unmodified opinion but include an emphasis-of-matter paragraph describing the change and referring to the note disclosure.

Common mistakes

Confusing Emphasis-of-Matter (for disclosed items) with Other-Matter (for undisclosed items).

How to approach this question

Full Answer

Common mistakes

Practice the full CPA AUD Practice Exam 2

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