Auditing and Attestation- Certified Public Accountant (CPA) Practice Exam -

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How should an auditor report on a change in the method of computing depreciation if they concur with the change?

Qualified VS. After opinion paragraph
Unmodified VS. Before opinion paragraph
Qualified VS. Before opinion paragraph
Unmodified VS. After opinion paragraph

The correct answer is: Unmodified VS. After opinion paragraph

When an auditor concurs with a change in the method of computing depreciation, the appropriate way to report this in the audit opinion is to issue an unmodified opinion and include an explanatory paragraph after the opinion paragraph. This structure indicates that while the financial statements are fairly presented in accordance with generally accepted accounting principles (GAAP), there is an important matter related to the change in accounting policy that should be communicated to the users of the financial statements. The explanatory paragraph serves to clarify the nature and reasons for the change, providing transparency without implying any material misstatement or limitation in the audit scope. This maintains the integrity of the financial reporting while still drawing attention to the significant accounting policy alteration. This handling aligns with the auditor's responsibilities to inform users of any relevant and significant changes within the financial statements that could affect decision-making. By placing the explanatory paragraph after the opinion paragraph, it emphasizes that the auditor’s overall opinion on the financial statements remains unmodified despite the change, ensuring clarity and completeness in the report.