The client switched its depreciation method from straight-line to written-down value, noting this in the financial statements. While the current impact is negligible, the shift is anticipated to significantly impact future periods. Which opinion should the auditor render?
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Answer: A. Unqualified opinion
Explanation
Proper accounting treatment and transparent disclosure allow the auditor to issue a clean opinion. A change with negligible current impact does not materially distort the current financial statements. Future implications do not invalidate current financial statements if the policy change is disclosed. Companies occasionally alter depreciation methods to better reflect the consumption pattern of fixed assets. Accounting standards require clear disclosure of any changes in accounting policies within the financial statements. Materiality guides the auditor in deciding whether a policy change warrants modifying the audit report.
Depreciation method shifts are common operational decisions that impact long-term asset book values. Financial statement users must be informed about policy shifts to project future earnings accurately. Auditors review these policy modifications to ensure compliance with relevant financial reporting frameworks. A qualified opinion is reserved for material misstatements or unresolved scope limitations. A disclaimer of opinion is used when the auditor cannot obtain sufficient appropriate audit evidence. An adverse opinion is required only when financial statements are pervasively and severely misstated.
- Subject
- Accounting and Finance
- Category
- Auditing
- Topic
- —
- Difficulty
- medium
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