[Jchen]

Can someone please help this question:

An auditor most likely would express an unqualified opinion and would not add explanatory language to the report if the auditor:

a. Wishes to emphasize that the entity had significant transactions with related parties.

b. Concurs with the entity’s change in its method of computing depreciation.

c. Discovers that supplementary information required by FASB has been omitted.

d. Believes that there is a probable likelihood of a material loss resulting from an uncertainty that is

sufficiently supported and disclosed.

Choice “d” is correct. An auditor most likely would express an unqualified opinion and would not add explanatory language to the report if the auditor believes that there is a probable likelihood of a material loss resulting from an uncertainty that is sufficiently supported and disclosed.

Why B is not the answer since I think change in method of depreciation is change estimate which don’t need explanatory paragraph.

Thank you in advance.

[rybread7293]

@Jchen a change in depreciation method and a change TO LIFO are both the exceptions to the rule. They are considered changes in estimates that are inseparable in from changes in accounting principles.

According to audit standards, changes in estimates inseparable from changes in accounting principles should be treated as though they are changes in accounting principles (so says AU-C 708.10). Therefore, an emphasis-of-matter paragraph would be required.

Keep on keepin' on.

FAR (4/21/16) - 91
AUD (5/23/16) - 97
REG - 7/26/16
BEC - 8/24/16

[Jchen]

hi rybread7293,

Thanks a lot for your response.

so is “A change in the useful life used to calculate the provision for depreciation expense” is inseparable or separable?
can you provide some example that is separable?

Thank you very much!!

[Author]

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