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

In the case of an unjustified accounting change, how would an auditor treat this in an unmodified opinion?

1. Include it in an "except for" qualification.

2. Not add any emphasis-of-matter paragraphs.

3. Add substantial emphasis on it in the audit report.

4. Negate the unmodified opinion due to this change.

The correct answer is: Include it in an "except for" qualification.

In the case of an unjustified accounting change, the auditor should address this issue prospectively and assess the materiality of the impact that the change may have on the financial statements. When an accounting change is deemed unjustified, it signifies that the change does not comply with the applicable financial reporting framework or lacks sufficient justification from a conceptual or regulatory standpoint. An "except for" qualification can be included in the audit report to signify that, while the financial statements are otherwise presented fairly, there is a specific issue (the unjustified accounting change) that deviates from generally accepted accounting principles (GAAP) or the relevant framework being used. This qualification allows the auditor to express that the financial statements are generally in order, but one particular aspect—the accounting change—raises concerns. This approach maintains the integrity of the audit opinion by conveying that while the overall financial statements meet the required standards, there is a caveat that stakeholders should be aware of. Avoiding an unmodified opinion in such cases is crucial, as it informs users of the financial statements about potential misrepresentation or misapplication of accounting standards due to the unjustified change. This transparency is essential for users relying on the audit report to make informed decisions based on the financial statements.