Sign Up for Discounts
This form does not yet contain any fields.

    Home >> Accounting Principles

     

    The Consistency Principle


    The consistency principle states that, once you adopt an accounting principle or method, continue to follow it consistently in future accounting periods. Only change an accounting principle or method if the new version in some way improves reported financial results. if you make such a change, fully document its effects and include this documentation in the notes accompanying the financial statements.

    Auditors are especially concerned that their clients follow the consistency principle, so that the results reported from period to period are comparable. This means that some audit activities will include discussions of consistency issues with the management team. An auditor may refuse to provide an opinion on a client's financial statements if there are clear and unwarranted violations of the principle.

    The consistency principle is most frequently ignored when the managers of a business are trying to report more revenue or profits than would be allowed through a strict interpretation of the accounting standards. A telling indicator of such a situation is when the underlying company operational activity levels do not change, but profits suddenly increase. 

    Similar Terms

    The consistency principle is also known as the consistency concept.

    Related Topics

    Accrual principle
    Conservatism principle
    Cost principle
    Economic entity principle
    Full disclosure principle
    Going concern principle
    Matching principle
    Materiality principle
    Monetary unit principle
    Reliability principle
    Revenue recognition principle
    Time period principle
    What are accounting principles?
    What is a going concern qualification?
    What is the prudence concept in accounting?