The entity changed from one generally accepted

The entity changed from one generally accepted accounting principle to another
generally accepted accounting principle.
2.
A shared report involving the use of other auditors.
3-10 When another CPA has performed part of the audit, the primary auditor issues one of
the following types of reports based on the circumstances.
1.
No reference is made to the other auditor. This will occur if the other auditor
audited an immaterial portion of the statement, the other auditor is known or
closely supervised, or if the principal auditor has thoroughly reviewed the other
auditor's work.
2.
Issue a shared opinion in which reference is made to the other auditor. This type
of report is issued when it is impractical to review the work of the other auditor or
when a portion of the financial statements audited by the other CPA is material in
relation to the total.
3.
The report may be qualified if the principal auditor is not willing to assume any
responsibility for the work of the other auditor. A disclaimer may be issued if the
segment audited by the other CPA is highly material.
3-11 Even though the prior year statements have been restated to enhance comparability, a
separate explanatory paragraph is required to explain the change in generally accepted
accounting principles in the first year in which the change took place.
3-12 Changes that affect the consistency of the financial statements may involve any of the
following:
a. Change in accounting principle
b. Change in reporting entity
c. Corrections of errors involving accounting principles.
An example of a change that affects consistency would be a change in the method of
computing depreciation from straight line to an accelerated method. A separate explanatory
paragraph is required if the amounts are material.
Comparability refers to items such as changes in estimates, presentation, and events
rather than changes in accounting principles. For example, a change in the estimated life of a
depreciable asset will affect the comparability of the statements. In that case, no explanatory
paragraph for lack of consistency is needed, but the information may require disclosure in the
statements.
10

3-13 The three conditions requiring a departure from an unqualified opinion are:
1. The scope of the audit has been restricted . One example is when the client will
not permit the auditor to confirm material receivables. Another example is when
the engagement is not agreed upon until after the client's year-end when it may
be impossible to physically observe inventories.
2. The financial statements have not been prepared in accordance with generally
accepted accounting principles . An example is when the client insists upon using
replacement costs for fixed assets.
3. The auditor is not independent . An example is when the auditor owns stock in
the client's business.