Types of Audit Opinions A CPA has completed an audit of the financial statements of a long-haul trucking company for the year ended December 31, 2014 . Prior to 2014, the company depreciated its trucks over 10 years. However, during 2014, the company
determined that a more realistic estimated life for its trucks was 8 years and computed the 2014 depreciation on the basis of the revised estimate. The CPA is satisfied that the 8 year estimate is reasonable, but the change will have a material effect on the comparability of the company's financial statements. The company adequately disclosed the change in estimated useful lives of its trucks and the effect of the change on 2014 income in a note to the financial statements. REQUIRED: Which type of audit report would you suggest be issued on the 2014 financial statements and why?
The auditor should issue an unqualified standard audit report with an explanatory paragraph following the opinion paragraph without modifying the three standard paragraphs. This is because there is a lack of consistency, since there is a change of estimated life that results in a material effect as far as comparability and is not a change in accounting principles. As the scenario notes, adequate disclosure is provided.
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