[HelpHelpHelp :)]

Hi everyone!

The procedure, “The accountant should modify the accountant’s report if there is a change in accounting principles that is adequately disclosed,” is:

A. not required for a compilation or a review.
B. required for a review only.
C. required for both a compilation and review.
D. not required for a compilation but required for a review.

The answer is C… I thought if it’s adequately disclosed, no modification is necessary? Especially for a compilation/review?

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[Anonymous]

From a practical point of view, I can't see something having an accounting principle change and not being actually changed in the financials, even if there is a disclosure… Sometimes, they will give you a grace period for adoption of the new pronouncement, in which case you would disclose you are adopting it in the future period, but not change the financials, I believe. Could be wrong…

[HelpHelpHelp :)]

What do you mean by change the financials? The statements themselves would be changed to reflect the new principle regardless of the accountant's report.

The happiest people don't have the best of everything, they just MAKE the best of everything!

We can do it!! 🙂

[S6]

i've been having the same issue for this particular MCQ…
not sure if i am right but this is the only logical explanation i have for it

the underlying factor is the use of the word “should” .. since it is at the accountant's discretion to modify the report if a change in accounting principle is adequately disclosed, then he should modify it if he chooses

Now if we replace the word “should” with “must”, then answer A would be right since it was adequately disclosed. Idk feel free to correct me if im wrong ..

[CageTheCPA]

Hmm… *insert suspicious look here*

I'm pretty sure that answer is wrong and “A” s/b correct:

“A change in accounting principle is a change from one accounting principle in accordance with the applicable financial reporting framework to another accounting principle in accordance with the applicable financial reporting framework when (1) two or more accounting principles apply or (2) the accounting principle formerly used is no longer in accordance with the applicable financial reporting framework. A change in the method of applying an accounting principle also is considered a change in accounting principle.”

While changes in accounting principle having a material effect on the financial statements for an audit require the addition of an emphasis-of-matter paragraph in the independent auditor's report, the same is not required for a compilation or a review.

Changes in accounting principles need to be disclosed, but the SSARSs do not directly address any report
modifications for them. Changes in accounting principles are not to be placed in an emphasis paragraph in the accountant's report. Absent specific guidance for this situation, the accountant should follow the guidance for departures from the applicable financial reporting framework. If management adequately discloses the change(s) in accounting principles (for example, in the notes to the financial statements), it is not necessary to modify the accountant's report.”

From A-AR-C 708.A4 and Ninja Book/MCQ. I think there's a Gleim video where they discuss report modification for Compilations and Reviews too, but I can't pinpoint which one.

[Anonymous]

I agree with Cage, this is how I always thought, but cannot find a proof in AR-C…
What is “A-AR-C 708.A4”?

[CageTheCPA]

Sorry, AR-C 708.A4, the AICPA codification for SSARS.

[benboccio]

This one doesn't make sense to me either.

[Spartans92]

I too think A should be the answer. WTF

BEC- PASS

[Author]

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