Question

Under the AICPA Code of Professional Conduct a CPA may express an unqualified opinion on financial statements that contain a material departure from promulgated GAAP

A. when the auditor has a bona fide theoretical disagreement with an accounting standard promulgated by the FASB.
B. when there are conflicting industry practices.
C. if the auditor can demonstrate that due to unusual circumstances the financial statements would otherwise be misleading.
D. under no circumstances.

Answer 1

A CPA can express an unqualified opinion on financial statements with a GAAP departure if they can show the statements would otherwise be misleading due to unusual circumstances.

Step-by-step explanation:

The question pertains to the conditions under which a CPA may express an unqualified opinion on financial statements that deviate from Generally Accepted Accounting Principles (GAAP) according to the AICPA Code of Professional Conduct. Among the choices provided, option C is correct: a CPA may express an unqualified opinion if the auditor can demonstrate that due to unusual circumstances, the financial statements would otherwise be misleading. This is known as the 'departure from GAAP' provision, which allows for flexibility in rare cases when following GAAP to the letter would not accurately represent the financial situation of a company.