How auditors report on comparative financial statements, prior periods, predecessor auditors, and consistency matters.
Comparative financial statements create reporting questions because more than one period appears in the same reporting package. The auditor must decide which periods are covered by the current opinion, whether a predecessor auditor’s report is reissued or referenced, and whether changes in accounting principles or prior-period presentation affect consistency.
For AUD, the key is to separate current-period responsibility from prior-period responsibility. A successor auditor may audit the current period while referring to a predecessor auditor for a prior audited period, but the report must not imply the successor audited a period that was audited, reviewed, compiled, or unaudited by someone else.
flowchart LR
A["Comparative statements presented"] --> B{"Same auditor for all periods?"}
B -- "Yes" --> C["Express opinion on each audited period presented"]
B -- "No" --> D{"Predecessor report reissued?"}
D -- "Yes" --> E["Predecessor report accompanies prior period"]
D -- "No" --> F["Successor refers to predecessor auditor"]
F --> G["State predecessor report date and opinion type"]
Comparative statements help users evaluate trends, consistency, and changes across periods. The auditor’s report must make clear which periods are audited and what level of assurance applies.
| Presentation fact | Reporting implication |
|---|---|
| Same auditor audited all periods shown | Auditor may express an opinion on each period presented |
| Current auditor is a successor auditor | Report must address predecessor involvement or unaudited prior periods |
| Prior period was reviewed or compiled | Report should identify the lower level of service and avoid implying audit assurance |
| Prior period was unaudited | Report should clearly state that no opinion is expressed on that period |
| Accounting principle changed materially | Auditor evaluates consistency, accounting, disclosure, and possible emphasis or explanatory language |
The report should avoid ambiguity. Users should know whether each period was audited, who audited it, and whether any prior-period opinion or reporting issue matters to current users.
When a predecessor auditor audited the prior period, there are two common reporting paths.
| Path | What happens |
|---|---|
| Predecessor reissues report | The predecessor performs limited procedures and reissues the prior-period report to accompany the comparative statements |
| Successor refers to predecessor | The successor’s report states that the prior period was audited by another auditor and identifies the predecessor report date and opinion type |
Before reissuing a report, the predecessor ordinarily performs limited procedures such as reading the current financial statements, comparing the prior-period statements to those previously reported on, and obtaining a representation letter from the successor auditor or management as appropriate under the circumstances.
If the successor refers to the predecessor rather than having the predecessor reissue, the successor is not expressing an audit opinion on the prior period. The reference tells users that another auditor reported on that period.
If comparative prior-period information was not audited, the report must prevent users from assuming audit assurance exists.
| Prior-period status | Reporting point |
|---|---|
| Reviewed | Identify that a review was performed and that review assurance is lower than audit assurance |
| Compiled | Identify that a compilation was performed and no assurance was provided |
| Unaudited | State that no opinion or assurance is expressed on the unaudited period |
| Omitted or incomplete prior data | Evaluate whether presentation is misleading or framework requirements are unmet |
The auditor should also consider whether unaudited prior-period information is clearly marked. If comparative columns are not labeled, users may incorrectly infer that all periods were audited.
Consistency deals with whether accounting principles are applied consistently between periods. A justified change in accounting principle can still require emphasis or explanatory language when it materially affects comparability and is properly accounted for and disclosed.
| Change | Audit response |
|---|---|
| Justified accounting principle change, properly disclosed | Consider emphasis or explanatory language for consistency |
| Accounting principle change not justified or not properly applied | Evaluate qualified or adverse opinion for framework departure |
| Reclassification for comparability | Verify disclosure explains nature and effect when material |
| Prior-period error correction | Evaluate restatement, disclosure, and effect on comparative reporting |
The auditor should not modify the opinion solely because there was a justified and disclosed change in accounting principle. The issue is whether the change was appropriate, accounted for properly, and disclosed adequately.
Dual dating can occur when a subsequent event is identified after the original report date and the auditor wants to limit responsibility for subsequent events to that specific event. In comparative reporting, this may arise when a predecessor reissues a prior report or when later information affects a prior period.
Dual dating limits the auditor’s additional responsibility to the specific later event. If the auditor instead uses a single later date, responsibility extends through that later date for all subsequent events.
Do not imply the successor auditor audited the predecessor period unless the successor actually performed an audit of that period.
Do not ignore the predecessor’s opinion type. A prior qualified, adverse, or disclaimer opinion may need clear reference.
Do not treat a justified accounting change as a GAAP departure. Proper accounting and disclosure may lead to emphasis or explanatory language, not modification.
Do not forget to label unaudited, reviewed, or compiled periods clearly.