ACCT 406 CH. 18

Match each situation with the appropriate type of opinion to be issued. Type of Opinions: -Disclaimer of Opinion -Unmodified Opinion -Adverse Opinion -Unqualified Opinion with an Emphasis-of-Matter Paragraph -Adverse Opinion Situation: -Auditors have obtained sufficiently appropriate evidence to conclude that the financial statements are not materially misstated -Auditors have doubt about a company's ability to continue as a going concern -The client has elected to not follow GAAP -A material misstatement is considered pervasive -Auditors determine that the possible effects on the financial statements of the inability to obtain sufficient evidence (i.e. a scope limitation) could be both material and pervasive

-Auditors have obtained sufficiently appropriate evidence to conclude that the financial statements are not materially misstated: unmodified opinion -Auditors have doubt about a company's ability to continue as a going concern: Unqualified Opinion with an Emphasis-of-Matter Paragraph -The client has elected to not follow GAAP: Adverse Opinion -A material misstatement is considered pervasive: Adverse Opinion -Auditors determine that the possible effects on the financial statements of the inability to obtain sufficient evidence (i.e. a scope limitation) could be both material and pervasive: Disclaimer of Opinion

Modified Wording: opinion based in part on the report of another auditor

-No disclosure of firm necessary -If don't do this, assume liability for their audit work -ASB opinion paragraph is "included" in PCAOB opinion section -ASB auditor's responsibility section is "included" in PCAOB basis for opinion section

Adjustments to the Standard Unqualified/Unmodified Audit Report (5)

1. Explanatory Paragraph: reference to report on audit of ICFR 2. Modified Wording: opinion based in part on the report of another auditor 3. Explanatory Paragraph: going concern 4. Explanatory Paragraph: Lack of comparability and consistency 5. Explanatory Paragraph (EOM): additional emphasis

Audit Reports Other Than Unqualified/Unmodified

1. Qualified ("except for") 2. Disclaimer 3. Adverse

Conditions for Departure from Unqualified/Unmodified Report (3)

1. Scope Limitation •Results from an inability to obtain sufficient appropriate evidence about some component of the financial statements. 2. Not in conformity with GAAP •Results when financial statements are materially affected by a departure from GAAP. 3. Auditor not independent •Results when auditor has some form of prohibited relationship with the entity.

An auditor includes a separate paragraph in an otherwise unmodified financial statement audit report to emphasize that the entity being reported upon had significant transactions with related parties. The inclusion of this separate paragraph A. Is appropriate and would not negate the unmodified opinion. B. Is considered an "except for" qualification of the opinion. C. Violates auditing standards if this information is already disclosed in footnotes to the financial statements. D. Necessitates a revision of the opinion paragraph to include the phrase "with the foregoing explanation."

A

Correction of a Material Misstatement in Previously Issued FS

A change from the inappropriate use or application of accounting principles to an acceptable accounting principle in the current year -ex: change from replacement cost to LIFO for inventory accounting A change from an incorrect to a correct classification of transactions or balances on the financial statements -ex: reclassifying cash flows from the operating activities category to the financing activities category, because those items were incorrectly classified in the previously issued financial statements An adjustment to account balances to correct a material error in previously issued financial statements -ex: correcting an erroneous overstatement of inventory due to clerical or systems errors.

Explanatory Paragraph: Lack of comparability and consistency

A fundamental principle of accounting, based on decision-usefulness, is that financial statements should be comparable between periods. Accounting principles should be consistently applied: FASB ASC 250 generally requires retrospective application of newly adopted principles to prior period FS unless it is impractical to determine the effects of the changes.

A going concern evaluation should include evaluation of __________ from the balance sheet date. A. one week B. one year C. one day D. two years E. one month

B

In which of the following situations would an auditor ordinarily issue an unqualified/unmodified financial statement audit opinion with no explanatory (or emphasis-of-matter/other-matter) paragraph? A. The auditor wishes to emphasize that the entity had significant related-party transactions. B. The auditor decides not to refer to the report of another auditor as a basis, in part, for the auditor's opinion. C. The entity issues financial statements that present financial position and results of operations but omits the statement of cash flows. D. The auditor has substantial doubt about the entity's ability to continue as a going concern, but the circumstances are fully disclosed in the financial statements.

B

When an auditor expresses an adverse opinion, the opinion paragraph should include: A. the principal effects of the departure from generally accepted accounting principles. B. a statement that the financial statements do not present fairly. C. the substantive reasons for the financial statements being misleading. D. a description of the uncertainty or scope limitation that prevents an unqualified opinion.

B

When items are identified that affect the going concern assumption, auditors must gather __________. A. intent B. evidence C. ideas D. funding E. interest

B

When reporting on comparative financial statements, which of the following circumstances should ordinarily cause the auditor to change the previously issued opinion on the prior year's financial statements? A. The prior year's financial statements are restated following the purchase of another company in the current year. B. A departure from generally accepted accounting principles caused an adverse opinion on the prior year's financial statements, and those prior year statements have been properly restated. C. A change in accounting principle causes the auditor to make a consistency modification in the current year's audit report. D. A scope limitation caused a qualified opinion on the prior year's financial statements, but the current year's opinion is properly unqualified.

B

A public entity changed from the straight-line method to the declining balance method of depreciation for all newly acquired assets. This change has no material effect on the current year's financial statements but is reasonably certain to have a substantial effect in later years. The client's financial statements contain no material misstatements and the auditor concurs that this change is justified. If the change is disclosed in the notes to the financial statements, the auditor should issue a report with a(n) A. "Except for," qualified opinion. B. Adverse opinion. C. Unqualified opinion. D. Consistency modification.

C

A(n) __________ opinion is appropriate if a material misstatement is considered pervasive. A. unmodified B. qualified C. adverse D. modified E. unqualified

C

An emphasis of a matter paragraph always follows the __________ paragraph. A. introduction B. first C. opinion D. second E. scope

C

For which of the following events would an auditor issue a report that does not include any reference to comparability? A. A change in the method of accounting for inventories. B. A change from an accounting principle that is not generally accepted to one that is generally accepted. C. A change in the service life used to calculate depreciation expense. D. A correction of a material misstatement in previously issued financial statements.

C

If the auditor believes that there is minimal likelihood that resolution of an uncertainty will have a material effect on the financial statements, the auditor would issue a(n): A. "except for" opinion. B. adverse opinion. C. unqualified opinion. D. disclaimer of opinion.

C

Limitations on the scope of an audit may create a situation in which the auditors are unable to obtain sufficient __________. A. balance sheets B. accounting C. evidence D. paragraphs E. financial statement

C

When an auditor is asked to express an opinion on an entity's rent and royalty revenues, he or she may A. Not accept the engagement because to do so would be tantamount to agreeing to issue a piecemeal opinion. B. Not accept the engagement unless also engaged to audit the full financial statements of the entity. C. Accept the engagement, provided the auditor's opinion is expressed in a special report that clearly states that only these specific accounts were audited. D. Accept the engagement, provided distribution of the auditor's report is limited to the entity's management.

C

When comparative financial statements are presented, the auditor's report should be considered to apply to the financial statements of the: A. periods presented plus the one preceding period. B. current period only. C. current period and those of the other periods presented. D. current and immediately preceding period only.

C

Change in Accounting Principle

Change in accounting principle: -Changing from one acceptable accounting principle to another acceptable accounting principle. -Changing from one acceptable accounting principle to a newly adopted accounting principle. -Changing the method of applying an acceptable accounting principle. Note disclosure about change in accordance with the appliable reporting framework. Emphasis-of-matter paragraph: Public = after opinion Private = after opinion

A predecessor auditor should complete the following before reissuing a report on statements presented on a comparative basis: A. read the financial statements of the current period. B. read the financial statements of the past five years. C. obtain a letter of representations from the current-year, successor auditor. D. read the financial statements of the current period and obtain a letter of representation from the management of the entity and from the current-year, successor auditor.

D

An auditor includes a separate paragraph in an otherwise unmodified report to emphasize that the entity being reported on had significant transactions with related parties. The inclusion of this separate paragraph: A. is considered an "except for" qualification of the opinion. B. violates generally accepted auditing standards if this information is already disclosed in footnotes to the financial statements. C. necessitates a revision of the opinion paragraph to include the phrase "with the foregoing explanation." D. is appropriate and would not negate the unqualified opinion.

D

An auditor was unable to obtain audited financial statements or other evidence supporting an entity's material investment in a large foreign subsidiary. Between which of the following reports should the auditor choose? A. Adverse and unqualified with an explanatory/emphasis-of-matter paragraph added. B. Disclaimer and unqualified with an explanatory/emphasis-of-matter paragraph added. C. Qualified and adverse. D. Qualified and disclaimer.

D

An auditor would issue an adverse opinion if: A. the audit was begun by other independent auditors who withdrew from the engagement. B. a qualified opinion cannot be given because the auditor lacks independence. C. a restriction on the scope of the audit was significant. D. the statements taken as a whole do not fairly present the financial condition and results of operations of the company.

D

Auditors are __________ required to perform procedures specifically designed to test the going concern assumption. A. sometimes B. always C. rarely D. not E. generally

D

Changes in accounting estimates __________ result in an explanatory paragraph. A. always B. should C. do D. do not E. eventually

D

If substantial doubt about a going concern exists, an __________ paragraph is the most common resolution. A. incorrect B. unqualified C. explanatory D. emphasis-of-matter E. inappropriate

D

In addition to an emphasis of a matter paragraph, auditors could issue a(n) __________ in a going concern situation. A. weakness B. adverse opinion C. exception D. disclaimer E. audit report

D

What specific items could Dillon CPA include in an emphasis-of-matter paragraph?

Dillon CPA could include the negative cash flow, the litigation, and/or the new product lines in its emphasis of matter paragraph.

A going concern is to be evaluated for a period not to exceed __________ beyond the date of the financial statements. A. one quarter B. one month C. one period D. one day E. one year

E

An emphasis-of-matter paragraph always __________ the opinion paragraph. A. precedes B. replaces C. overlaps D. includes E. follows

E

Qualified opinions are issued when the financial statements are __________ misstated. A. always B. constantly C. consistently D. not E. materially

E

Explanatory Paragraph: going concern

Explanatory Paragraph:MGMT has adequately disclosed financial problems Qualified or Adverse:Departure from GAAP (inadequate disclosure) DisclaimerExtreme/immediate financial distress Prior year explanatory paragraph goes away with subsequent issuance.

T/F: A change in accounting estimate is an example of an accounting change that affects comparability and requires an explanatory paragraph in the audit report.

F

T/F: An auditor may be unable to express an unqualified opinion if an immaterial departure from GAAP is present in the financial statements.

F

T/F: An opinion based in part on the report of another auditor requires an explanatory/emphasis-of-matter paragraph be added to the standard unqualified audit report.

F

Explanatory Paragraph (EOM): Additional emphasis

If the auditor wishes to draw special attention to a particular matter other than the ones discussed previously and the matter is properly presented or disclosed in the financial statements, the auditor may choose to include an emphasis paragraph in the auditor's report. Examples include: -Significant transactions with related parties -Important subsequent events -Accounting matters that affect the comparability of the financial statements with those of the preceding period (other than those involving a change in accounting principles) -Uncertainty relating to the future outcome of significant litigation or regulatory actions

What should the audit team include in its report if the auditors cannot get comfortable with Sunshine management's optimistic attitude?

If the auditors still consider substantial doubt to exist, an emphasis of matter paragraph should be added to the unmodified opinion, stating the auditors' doubt.

Auditor Not Independent: opinion to issue

Issue a disclaimer.

Scope Limitation: opinion to issue

Issue a qualified opinion or a disclaimer.

Not in Conformity with GAAP: opinion to issue

Issue a qualified opinion or adverse opinion.

Effect of Materiality: Pervasiveness (3)

Pervasive effects on the financial statements are those that: 1. Are not confined to specific elements, accounts, or items of the financial statements; 2. If so confined, represent or could represent a substantial proportion of the financial statements; or 3. With regard to disclosures, are fundamental to users' understanding of the financial statements. *Applying this guidance requires a lot of auditor judgment!*

T/F: A basic assumption that underlies financial reporting is that an entity will continue as a going concern.

T

The Standard Unmodified Report

The standard unmodified report is issued when the auditor has gathered sufficient evidence, the audit has been performed in accordance with GAAS, and the financial statements conform to GAAP.

The Standard Unqualified Report

The standard unqualified report is issued when the auditor has gathered sufficient evidence, the audit has been performed in accordance with PCAOB standards, and the financial statements conform to GAAP.

Required Elements: Unqualified (9) and Unmodified (9)

Unqualified: 1. Report title 2. Addressee 3. Opinion Section •Introduction •Opinion 4. Explanatory paragraph referring to the audit of ICFR 5. Basis For Opinion Section •MGMT vs Auditor Responsibility •Auditor's Independence •Scope paragraph 6. Critical Audit Matters (if applicable, when effective) 7. Name of auditor/Signature 8. Auditor Tenure 9. Audit report date Unmodified: 1. Report title 2. Addressee 3. Introductory paragraph 4. Management's responsibility 5. Auditor's responsibility 6. Scope paragraph 7. Opinion paragraph 8. Name of auditor 9. Audit report date

Match each paragraph with its corresponding reason for the emphasis-of-matter paragraph based on the hint provided. Situation: -As discussed in Note XX to the financial statements, the company adopted SFAS XXX as of December 31, 20XX. Our opinion is not modified with respect to this standard -The accompanying consolidated financial statements have been prepared assuming the company will continue as a going concern, but there is substantial doubt about its ability to continue as a going concern -As discussed in Note XX to the financial statements, the company is defendant in a lawsuit Reason: -Going Concern Opinion -Auditor Discretionary Circumstances -Principles Not Consistently Applied

-Going Concern Opinion: The accompanying consolidated financial statements have been prepared assuming the company will continue as a going concern, but there is substantial doubt about its ability to continue as a going concern -Auditor Discretionary Circumstances: As discussed in Note XX to the financial statements, the company is defendant in a lawsuit -Principles Not Consistently Applied: As discussed in Note XX to the financial statements, the company adopted SFAS XXX as of December 31, 20XX. Our opinion is not modified with respect to this standard

Paragraph Type: -Going Concern -Material justified change in accounting principle -Material Misstatement in proper financial statements is corrected -Special purpose framework -Change in audit opinon -Restrict use of report -Prior financial statements audited by prior auditor and prior auditor's report is not presented -Comparative financial statements where the current year is audited and prior period is not audited -Material inconsistency in other information -Report on supplementary information within auditors report -Refer to required supplementary information -Report on compliance included in auditors report Location Relative to Opinion Paragraph? (nonissue vs. issuer)

-Going Concern: Nonissuer: emphasis of matter - after Issuer: explanatory - after -Material justified change in accounting principle Nonissuer: emphasis of matter - after Issuer: explanatory - after -Material Misstatement in proper financial statements is corrected Nonissuer: emphasis of matter - after Issuer: explanatory - after -Special purpose framework Nonissuer: emphasis of matter - after Issuer: explanatory - after -Change in audit opinon Nonissuer: emphasis of matter - after OR other manner - after Issuer: explanatory - after -Restrict use of report Nonissuer: emphasis of matter - after Issuer: explanatory - after -Prior financial statements audited by prior auditor and prior auditor's report is not presented Nonissuer: emphasis of matter - after Issuer: explanatory - after -Comparative financial statements where the current year is audited and prior period is not audited Nonissuer: emphasis of matter - after Issuer: explanatory - after -Material inconsistency in other information Nonissuer: emphasis of matter - after Issuer: explanatory - after -Report on supplementary information within auditors report Nonissuer: emphasis of matter - after Issuer: explanatory - after -Refer to required supplementary information Nonissuer: emphasis of matter - after Issuer: explanatory - after -Report on compliance included in auditors report Nonissuer: emphasis of matter - after Issuer: explanatory - after

Circumstances for Explanatory Paragraph

-The auditor performs an integrated audit and issues separate reports on the company's financial statements and internal control over financial reporting (as discussed previously—see Exhibit 18-1); -The auditor decides to refer to the report of other auditors as the basis, in part, for the auditor's own report (as discussed previously—see Exhibit 18-2); -There is substantial doubt about the company's ability to continue as a going concern; -The financial statements are not comparable due to changes in the use of accounting principles between periods, or due to the correction of a material misstatement in previously issued financial statements; -Management is required to report on the company's internal controls over financial reporting but such report is not required to be audited, and the auditor has not been engaged to perform an audit of management's assessment of the effectiveness of the company's internal control over financial reporting.

Auditors __________ an opinion when they are unable to form an opinion. A. disclaim B. qualify C. concur D. withdraw E. agree

A

Eagle Company, a public company, had a computer failure and lost part of its financial data. As a result, the auditor was unable to obtain sufficient audit evidence relating to Eagle's inventory account. Assuming the inventory account is at least material, the auditor would most likely choose either A. A qualified opinion or a disclaimer of opinion. B. A qualified opinion or an adverse opinion. C. An unqualified opinion with no explanatory paragraph or an unqualified opinion with an explanatory paragraph. D. A qualified opinion with no explanatory paragraph or a qualified opinion with an explanatory paragraph.

A

If the principal auditor decides to make reference to the other auditor's audit, the opinion section must specifically indicate the: A. portion of the financial statements examined by the other auditor. B. name of the other auditor. C. name of the consolidated subsidiary examined by the other auditor. D. type of opinion expressed by the other auditor.

A

Tech Company has appropriately disclosed an uncertainty due to pending litigation. However, the auditor was unable to satisfy herself that all pending litigation had been identified. The auditor's decision to issue a qualified opinion on Tech's financial statements would most likely result from A. A lack of sufficient evidence. B. An inability to estimate the amount of loss. C. The entity's lack of experience with such litigation. D. A lack of insurance coverage for possible losses from such litigation.

A

When the audited financial statements of the prior year are presented together with those of the current year, the continuing auditor's report should cover: A. both years. B. only the current year. C. only the current year, but the prior year's report should be presented. D. only the current year, but the prior year's report should be referred to.

A

When there is significant doubt as to the ability to continue as a going concern, a(n) __________ paragraph may be added. A. emphasis-of-matter B. disclaimed C. modified D. qualified E. unqualified

A

Which of the following parties is responsible for the fairness of the representations made in financial statements? A. Entity's management. B. Independent auditor. C. Audit committee. D. AICPA.

A

Auditors may add an emphasis-of-matter paragraph that refers to a matter that is __________ presented or disclosed. A. incorrectly B. appropriately C. unfairly D. misleadingly E. wrongly

B

Comparative financial statements for a public company include the prior year's financial statements, which were audited by a predecessor auditor. The predecessor's report is not presented along with the comparative financial statements. If the predecessor's report was unqualified, the successor should A. Express an opinion on the current year's statements alone and make no reference to the prior year's statements. B. Indicate in the auditor's report that the predecessor auditor expressed an unqualified opinion. C. Obtain a letter of representations from the predecessor concerning any matters that might affect the successor's opinion. D. Disclaim an opinion.

B

In connection with the examination of the consolidated financial statements of Mott Industries, Frazier, CPA, plans to refer to another CPA's examination of the financial statements of a subsidiary company. Under these circumstances, Frazier's report must disclose: A. the name of the other CPA and the type of report issued by the other CPA. B. the portion of the financial statements examined by the other CPA. C. the nature of Frazier's review of the other CPA's work. D. in a footnote the portions of the financial statements that were covered by the examinations of both auditors.

B

When the auditor is unable to determine the amounts associated with the illegal acts of entity personnel because of an inability to obtain adequate evidence, the auditor should issue a(n): A. "subject to" qualified opinion. B. disclaimer of opinion. C. adverse opinion. D. unqualified opinion with a separate explanatory/emphasis-of-matter paragraph.

B

When the entity fails to include information that is necessary for the fair presentation of financial statements in the body of the statements or in the related footnotes, it is the responsibility of the auditor to present the nature and impact of the faulty accounting or misstatement in the auditor's report and express a(n): A. qualified opinion or a disclaimer of opinion. B. qualified opinion or an adverse opinion. C. adverse opinion or a disclaimer of opinion. D. qualified opinion or an unqualified opinion.

B

Which of the following best describes the auditor's responsibility for "other information" included in the annual report to stockholders that contains financial statements and the auditor's report? A. The auditor has no obligation to read the "other information." B. The auditor has no obligation to corroborate the "other information" but should read the "other information" to determine whether it is materially consistent with the financial statements. C. The auditor should extend the examination to the extent necessary to verify the "other information." D. The auditor must modify the auditor's report to state that the other information "is unaudited" or "is not covered by the auditor's report."

B

Which of the following situations will not result in modification of the auditor's report because of a scope limitation? A. Restriction imposed by the client. B. Reliance placed on the report of another auditor. C. Inability to obtain sufficient appropriate evidential matter. D. Restriction caused by the circumstance of the engagement.

B

Which of the following would be considered a change that affects comparability and requires an explanatory paragraph? A. Change in accounting estimate. B. Change in accounting principle. C. Change in classification from one acceptable classification to another. D. All of the other options are correct.

B

In which of the following circumstances would an auditor usually choose between issuing a qualified opinion or a disclaimer of opinion on a client's financial statements? A. Departure from generally accepted accounting principles. B. Inadequate disclosure of accounting policies. C. Inability of the auditor to obtain sufficient appropriate evidence. D. Unreasonable justification for a change in accounting principle.

C

King, CPA, was engaged to audit the financial statements of Chang Company, a private company, after its fiscal year had ended. King neither observed the inventory count nor confirmed the receivables by direct communication with debtors but was satisfied that both were fairly stated after applying appropriate alternative procedures. King's financial statement audit report most likely contained a(n) A. Qualified opinion. B. Disclaimer of opinion. C. Unmodified opinion. D. Unmodified opinion with an emphasis-of-matter paragraph.

C

Management believes, and the auditor is satisfied, that a material loss probably will occur when pending litigation is resolved. Management is unable to make a reasonable estimate of the amount or range of the potential loss, but fully discloses the situation in the notes to the financial statements. If the auditor wishes to call attention to the matter and management does not make an accrual in the financial statements, the auditor should issue a(an): A. qualified report due to a scope limitation. B. qualified report due to a departure from GAAP. C. unqualified report with an explanatory paragraph. D. standard unmodified auditor's report.

C

When reporting on financial statements prepared on the basis of accounting used for income tax purposes, the auditor should include in the report a paragraph that A. Emphasizes that the financial statements have not been examined in accordance with generally accepted auditing standards. B. Refers to a tutorial that explains the income tax basis of accounting. C. States that the income tax basis of accounting is a basis of accounting other than generally accepted accounting principles. D. Justifies the use of the income tax basis of accounting.

C

T/F: A correction of a material misstatement in previously issued financial statements is an example of an accounting change that affects comparability and requires an explanatory paragraph in the audit report.

T

T/F: A going concern issue requires an explanatory paragraph to be added to the standard unqualified audit report (public company).

T

T/F: A scope limitation results from an inability to obtain sufficient appropriate evidence about some component of the financial statements.

T

T/F: An auditor must disclaim an opinion when the auditor lacks independence.

T

T/F: Changes that affect comparability but that do not involve a change in accounting principle or the correction of a misstatement are normally disclosed in the footnotes but do not require an explanatory paragraph in the audit report.

T

T/F: The choice of which audit report to issue depends on the nature and the materiality of the condition giving rise to the departure.

T

Oftentimes, especially in challenging economic times, companies may not have positive financial results. The professional standards require that auditors evaluate whether there is substantial doubt about the company's ability to continue as a going concern for a reasonable period of time--a year from the balance sheet date. Tremendous judgment is involved in this phase of the audit. It should be noted that while auditors are not required to perform procedures to test the going concern assumption, they must evaluate the assumption in relation to the results of the audit procedures performed relative to the other components of the audit. Read the case and answer the questions that follow. Due to a variety of reasons, such as current economic conditions and individual operating results, companies may not have the ability to continue as a going concern. This assumption is of great interest to users of financial statements, as GAAP financial statements make the assumption the company will continue. Assets, for example, may be carried at a cost that is higher than liquidation value. Audit standards require that auditors consider whether the company under audit will be able to continue as a going concern. Auditors do not need to perform specific procedures, but they do need to use judgment in making an assessment. Items like the ability to pay debt, negative cash flow issues, legal situations, etc. all come into play. Dillon CPA is the auditor for Sunshine Industries, a manufacturer of widgets. Sunshine's cash flow has cash used in operations of an amount twice that from last year, a net loss and current liabilities exceed current assets by about 25 percent. Company management insists they are spending lots of money investing in new product development and expect to see profits from these new products in the next year. Additionally, according to the CEO of Sunshine Industries, a lawsuit from a former supplier is expected to be settled in the next year. What procedures should the Dillon CPA audit team consider based on these facts?

The Dillon CPA audit team should look further into Sunshine's new product development by looking for sales agreements, talking to sales people, etc. The team also should look at Sunshine's cash flow projections and talk to legal counsel about ramifications of the pending litigation.

Changes that impact comparability but do not [materially] impact consistency

These are disclosed in the footnotes and notpresented in an explanatory paragraph. -Changes in accounting principles with no material effect in CY but are expected to have a material effect in future years -Change in accounting estimates -Reclassification from an acceptable classification to another (ex. Building transferred from PP&E to investments when ready for sale)