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L20 Notes_Part_13 - Audit Reporting Problem The CPA is...

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Auditor Agrees with a Departure from Promulgated Accounting Principles AU 508 In unusual circumstances financial statements may be misleading if a promulgated accounting principle was followed. Rule 203 of the Code of Professional Conduct allows the auditor, in such circumstances, to issue an unqualified opinion. An explanatory paragraph should describe the departure, the approximate effects of the departure, if practicable, and the reasons that compliance with the accounting principle results in misleading financial statements.
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Unformatted text preview: Audit Reporting Problem The CPA is examining the financial statements that are to be included in the annual report to the stockholders of Elm Corporation, a regulated company. Elm Corporation's financial statements are prepared as prescribed by a regulatory agency of the United States government, and some items are not presented in accordance with generally accepted accounting principles. The amounts involved are material and are adequately disclosed in footnotes to the financial statements....
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