Audit and Assurance Practice Exam 2025 – Complete Prep Resource

The reason a change in an accounting estimate due to an accounting principle does not require the auditor to add a paragraph to the audit report lies in the nature of accounting estimates themselves. Accounting estimates are inherently subjective and based on the best information available at the time of preparation. When auditors assess changes in estimates, they recognize that these adjustments are part of the normal course of financial reporting. As such, these changes do not typically warrant the additional disclosure in the audit report, as they are not indicative of a change in the underlying accounting principles applied by the entity.

In contrast, changes in accounting policies or methods of application usually reflect a revised approach to financial reporting that can impact comparability and the understanding of the financial statements. These changes require emphasis in the audit report to inform users about the implications of such modifications.