The CPA must comply with the GAAS of reporting when he prepares his opinion on the client's financial statements. One of the reporting standards relates to consistency.

Required:

a. Discuss the statement regarding consistency that the CPA is required to include in his opinion. What is the objective of requiring the CPA to make this statement about consistency?

b. Discuss what mention of consistency, if any, the CPA must make in his opinion relating to his first audit of the financial statements of the following companies:

1. A newly organized company ending its first accounting period.

2. A company established for a number of years.

c. Discuss whether the changes described in each of the cases below would require recognition in the CPA's opinion as to consistecy. (Assume the amounts are material.)

1. The company disposed of one of its three subsidiaries that had been included in its consolidated statements for prior years.

2. After two years of computing depreciation under the declining balance method for income tax purposes and under the straight line method for reporting purposes, the declining balance method was adopted for reporting purposes.

3. The estimated remaining useful life of plant property was reduced because of obsolescence.