| The FASB has indicated it will reconsider the present requirements for disclosing the effects of changing prices after experience has been gathered with the present standard. Comprehensive adjustment of the financial statements for the effects of changing prices may be required and the auditor's responsibility may be expanded to include an opinion on the adjusted financial statements or the supplementary disclosures.; To determine whether the disclosures of the effects of changing prices could be successfully subjected to the audit process it was necessary to examine the methods of employing audit evidence for historical cost based financial statements. By using the assertion classifications contained in SAS No. 31, the study examined the types of evidence available to prove an assertion. The assertions which change significantly are those of valuation and allocation.; A case study of a large multinational manufacturing company was made to determine what types of audit evidence could be gathered. The company failed to adequately expand its system of internal accounting control to encompass the preparation of the disclosures.; Only minor difficulties were encountered with the inventory disclosures and an unqualified opinion on the inventory would probably have been possible. Major problems were encountered with the property, plant, and equipment disclosures. The company used indexes in compiling the disclosures of the effects of changing prices. The bases of the indexes, prepared by a private valuation service, were apparently misunderstood by the company.; If the auditor is to render an opinion on the disclosures of the effects of changing prices, any indexes used in the computation must be verified. In addition, a method must be developed to determine which index of the myriad available is appropriate for a company to use. |
