When an Entity Changes Its Method of Accounting for Income

Multiple Choice

When an entity changes its method of accounting for income taxes, which has a material effect on comparability, the auditor should refer to the change in an explanatory paragraph added to the auditor's report. This paragraph should identify the nature of the change and:

A) Explain why the change is justified under generally accepted accounting principles.
B) Describe the cumulative effect of the change on the audited financial statements.
C) State the auditor's explicit concurrence with or opposition to the change.
D) Refer to the financial statement note that discusses the change in detail.