Question

When there is a lack of consistent application in accounting principles, what should be done?

1) the nature and impact of the change should be adequately disclosed.
2) the auditor should discuss the nature of the change and point the reader to the footnote that discusses the change.
3) the materiality of the change is evaluated based on the current year effect of the change.
4) all of the above.

Answer 1

When there is a lack of consistent application in accounting principles, the nature and impact of the change should be adequately disclosed, the auditor should discuss the nature of the change and point the reader to the footnote that discusses the change, and the materiality of the change should be evaluated based on the current year effect of the change.

Step-by-step explanation:

The correct answer is 4) all of the above. When there is a lack of consistent application in accounting principles, it is important to take the following actions:

1. Adequately disclose the nature and impact of the change.
2. The auditor should discuss the nature of the change and point the reader to the footnote that discusses the change.
3. Evaluate the materiality of the change based on the current year effect of the change.

These steps ensure transparency and help stakeholders understand any deviations from consistent accounting principles.