JenStar’s management team has decided that its income statement would be more useful if depreciation were calculated using the straight-line method instead of the double-declining-balance method. This change in accounting policy adds $156,000 to net income in the current year. As the auditor of the company, you are reviewing the decision to make the change in accounting policy. You review the equipment in question and realize that it is a piece of high-tech equipment and the risk of obsolescence in the near future is relatively high. You are also aware that all members of top management receive year-end bonuses based on net income.

As an auditor in this situation, would you support the change in policy or ask management to continue using the straight-line method? Justify your response.

  • CreatedJanuary 08, 2015
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