Various types of accounting changes can affect the auditor's report.

a. Briefly describe the rationale for having accounting changes affect the auditor's report and the auditor's responsibility in such cases.

b. For each of the changes listed below (1. through 8.), indicate the type of change and its effect on the audit report.

1. A change from the completed-contract method to the percentage-of-completion method of accounting for long-term construction contracts.

2. A change in the estimated useful life of previously recorded fixed assets. (The change is based on newly acquired information.)

3. Correction of a mathematical error in inventory pricing made in a prior period.

4. A change from full absorption costing to direct costing for inventory valuation (which is non-GAAP).

5. A change from presentation of statements of individual companies to presentation of consolidated companies.

6. A change from deferring and amortizing preproduction costs to recording such costs as an expense when incurred, because future benefits of the costs have become doubtful.

(The new accounting method was adopted in recognition of the change in estimated future benefits.)

7. A change from amortizing goodwill to testing for impairment each year. (The change was in response to an accounting pronouncement from the FASB.)

8. A change from including the employer's share of FICA taxes with other taxes to including the employer's share of FICA taxes as retirement benefits on the income statement.