$On$ January $2,2024,$ the Retail Auto Parts Company received a notice from its primary supplier that effective immediately, all wholesale prices will $be$ increased $by10$ percent. $On$ the basis $of$ the notice, Retail Auto Parts revalued its December $31,2023,$ inventory $to$ reflect the higher costs. The inventory constituted a material proportion $of$ total assets; however, the effect $of$ the revaluation was material $to$ current assets but not $to$ total assets $or$ net income. The increase $in$ valuation $is$ adequately disclosed $in$ the footnotes.

Failure $to$ follow GAAP

Material

$5.$

A CPA has completed the audit $of$ the financial statements $of$ a bus company for the year ended December $31,2023.$ Prior $to2023,$ the company depreciated its buses over $a10-$year period. During $2023,$ the company determined that a more realistic estimated life for its buses was $12$ years and computed the $2023$ depreciation $on$ the basis $of$ the revised estimate. The CPA has satisfied that the $12-$year life $is$ reasonable. The company has adequately disclosed the change $in$ estimated useful lives $of$ its buses and the effect $of$ the change $on2023$ income $in$ a note $to$ the financial statements.

$6.$

$E-$Lotions.com, Inc., $isan$ online retailer $of$ body lotions and other bath and body supplies. The company records revenues $at$ the time customer orders are placed $on$ the website, rather than when the goods are shipped, which $is$ usually two days after the order $is$ placed. The auditor determined that the amount $of$ orders placed but not shipped $asof$ the balance sheet date $is$ not material.