Accounting & Auditing
Consistency and Comparability Concepts
The best summary is:
A. Similar things should be treated similarly over time, with justified changes transparently explained
B. All entities must report identical numbers
C. Policies can never change
D. Comparatives are optional in all cases
Correct Answer: A
Consistency and comparability support meaningful analysis without requiring artificial uniformity.
Accounting & Auditing
Consistency and Comparability Concepts
A change in policy with no disclosure most directly harms:
A. Comparability and transparency
B. Cash custody
C. Physical inventory
D. Payroll authorization
Correct Answer: A
Users cannot properly interpret trends if significant method changes are concealed.
Accounting & Auditing
Consistency and Comparability Concepts
Consistency does not prevent:
A. Improvement in accounting when justified
B. Use of the same policy
C. Comparative presentation
D. Disclosure
Correct Answer: A
Accounting can and should change when standards or better information justify it.
Accounting & Auditing
Consistency and Comparability Concepts
Comparability requires users to have at least:
A. Two items or periods to compare
B. One cash receipt only
C. No prior information
D. One ledger account only
Correct Answer: A
Comparison inherently involves at least two sets/items of information.
Accounting & Auditing
Consistency and Comparability Concepts
Which disclosure best helps users adjust comparisons after a policy change?
A. Quantified effect of the change where required and practicable
B. Company slogan
C. Auditor's address only
D. Number of employees only
Correct Answer: A
Quantifying the effect helps users understand how the change affected reported figures.
Accounting & Auditing
Consistency and Comparability Concepts
A policy should not be changed merely to:
A. Manipulate reported profit
B. Comply with a new standard
C. Provide more reliable and relevant information
D. Correct an inappropriate policy
Correct Answer: A
Changing methods to achieve a desired profit undermines faithful reporting and comparability.
Accounting & Auditing
Consistency and Comparability Concepts
Consistency is especially important for competitive exam questions involving:
A. Repeated application of the same accounting treatment over time
B. Physical verification only
C. Bank signatures
D. Tax collection only
Correct Answer: A
The core exam concept is stable application of accounting policies/methods from one period to the next.
Accounting & Auditing
Consistency and Comparability Concepts
Which is an example of comparability across entities?
A. Comparing return on assets of two banks using similarly defined figures
B. Comparing cash with profit
C. Comparing one invoice with a law
D. Comparing salary with share capital
Correct Answer: A
Comparable definitions and measurements support cross-entity analysis.
Accounting & Auditing
Consistency and Comparability Concepts
If reporting periods differ in length, useful disclosure should:
A. Explain the reason and comparability limitation
B. Hide the difference
C. Restate cash only
D. Omit dates
Correct Answer: A
Users need context to understand why figures are not directly comparable.
Accounting & Auditing
Consistency and Comparability Concepts
Changing the reporting period from 12 months to 9 months can affect comparability because:
A. Periods are of different lengths
B. Assets disappear
C. Liabilities become revenue
D. Cash cannot be recorded
Correct Answer: A
Different reporting-period lengths can make performance figures less directly comparable.
Accounting & Auditing
Consistency and Comparability Concepts
Which is most likely to impair inter-period comparison?
A. Frequent unexplained changes in accounting methods
B. Stable accounting policies
C. Clear reconciliations
D. Consistent reporting dates
Correct Answer: A
Unexplained method changes can make trends misleading.
Accounting & Auditing
Consistency and Comparability Concepts
Presenting prior-year figures next to current-year figures is called:
A. Comparative information
B. Prudence
C. Accrual
D. Substance over form
Correct Answer: A
Comparative information places prior-period amounts alongside current-period amounts.
Accounting & Auditing
Consistency and Comparability Concepts
Consistent terminology in financial statements helps:
A. Comparability and understandability
B. Reduce equity
C. Increase liabilities
D. Eliminate audit evidence
Correct Answer: A
Stable labels make it easier for users to track items across periods.
Accounting & Auditing
Consistency and Comparability Concepts
Correction of a material prior-period error is not the same as:
A. A voluntary policy change
B. Restatement where required
C. Correcting misinformation
D. Improving comparatives
Correct Answer: A
Errors and policy changes have different causes and accounting treatment.
Accounting & Auditing
Consistency and Comparability Concepts
A change from straight-line to another depreciation method based on changed consumption pattern is generally treated as:
A. A change in accounting estimate
B. A prior-period error automatically
C. A change in entity
D. Revenue recognition
Correct Answer: A
A change in depreciation method reflecting a revised consumption pattern is generally treated prospectively as an estimate change under IAS 8.
Accounting & Auditing
Consistency and Comparability Concepts
Disclosure of significant accounting policies assists users in:
A. Understanding and comparing financial statements
B. Calculating only cash
C. Avoiding all judgments
D. Determining physical inventory
Correct Answer: A
Policy disclosure explains how reported amounts were measured and presented.
Accounting & Auditing
Consistency and Comparability Concepts
Comparability across entities may still be limited by:
A. Different business models and legitimate accounting choices
B. Disclosure
C. Common currency
D. Audited statements
Correct Answer: A
Economic differences and permitted choices can limit direct comparison.
Accounting & Auditing
Consistency and Comparability Concepts
When accounting standards require a new policy, consistency means the entity should:
A. Adopt the required policy and explain the change as required
B. Ignore the standard
C. Continue old policy forever
D. Use both methods secretly
Correct Answer: A
Compliance with a new requirement overrides mechanical continuation of the old policy.
Accounting & Auditing
Consistency and Comparability Concepts
A user comparing gross margin for five years particularly relies on:
A. Consistency and comparability
B. Going concern only
C. Entity concept only
D. Money measurement only
Correct Answer: A
Stable measurement and presentation make multi-year margin trends interpretable.
Accounting & Auditing
Consistency and Comparability Concepts
Which action reduces comparability?
A. Changing inventory cost formula without valid reason
B. Using consistent policies
C. Disclosing changes
D. Presenting prior-year figures
Correct Answer: A
Unjustified method changes make period-to-period comparison less meaningful.