Question

When an auditor is trying to determine how changes can affect consistency and and/or comparability, he should keep in mind that?

1) changes that affect comparability but not consistency require an explanatory paragraph.
2) items that materially affect the comparability of financial statements requires a disclaimer of opinion.
3) changes that affect consistency require an explanatory paragraph if they are material.
4) changes that involve either comparability or consistency only need to be mentioned in the footnotes

Answer 1

An auditor must consider the impact of changes on consistency and comparability and follow specific guidelines for disclosure.

Step-by-step explanation:

When an auditor is trying to determine how changes can affect consistency and comparability, there are certain considerations to keep in mind:

1. Changes that affect comparability but not consistency require an explanatory paragraph. Comparability refers to the ability to compare financial statements from different periods, while consistency refers to the application of accounting principles consistently over time.
2. Items that materially affect the comparability of financial statements require a disclaimer of opinion. If certain items have a significant impact on comparability, the auditor may need to issue a disclaimer of opinion, which means they are unable to express an opinion on the financial statements.
3. Changes that affect consistency require an explanatory paragraph if they are material. If there are changes in accounting methods or principles that impact consistency, the auditor needs to disclose this in an explanatory paragraph, specifically if the changes are considered material.

Therefore, changes that involve either comparability or consistency need to be mentioned in the footnotes, and the specific requirements depend on whether the changes affect comparability, consistency, or both.