Question

When a company's financial statements contain a departure from GAAP with which the auditor concurs, the departure should be explained in?

1) the scope paragraph
2) an introductory paragraph
3) the opinion paragraph
4) a separate paragraph

Answer 1

An auditor-agreed departure from GAAP should be explained in a separate paragraph in the financial statements.

Step-by-step explanation:

When a company's financial statements contain a departure from GAAP (Generally Accepted Accounting Principles) with which the auditor concurs, the departure should be explained in a separate paragraph that precedes the opinion paragraph.

This ensures that users of the financial statements are aware of the departure and understand its nature, circumstances, and impact on the financial statements. The inclusion of this information is vital for the accurate interpretation of the financial state of the company by its stakeholders.