[Zach Zach]

Hey guys,

This is my first post so hope you all enjoy! 😛 Since I’ll be taking AUD next month, I have been going through the AUD Ninja notes like crazy (I read them all today, not to mention twice before in the past week) and something stood out to me. When outlining professional responsibilities, the topic of a “legitimate departure from GAAP” is mentioned as being OK if going along with GAAP would cause financial statements to be misleading but must be disclosed with an explanatory paragraph (I guess an emphasis of matter paragraph with Clarity standards). I could give the exact page # if people want… the wording is a little weird to me, but I recall wondering about this topic while in undergrad audit class…

Has anyone ever encountered a “legitimate departure from GAAP” in their experience and if so, what constituted it? I just received my BS and don’t have any actual hands-on, employment-related audit experience but I’d like to get some kind of clarification (though the topic itself is probably entirely trivial when compared to everything else in the AUD section).

Thanks!

DELAWARE

AUD: 74 (7/2014) 76 (11/2014) PASSED! USED YAEGER AND NINJA
BEC: 73 (9/2014) 76 (2/2014) SO FAR SO GOOD! USED NINJA AND WILEY
FAR: Will take after tax season (can't wait)
REG: Cue overly dramatic impending-doom music (will take in 2014)

[littlenumberrobot]

@Zach Zach – are you using any other review course? Wiley book has some examples that would entail a legitimate departure, but I believe the exam goes that much into detail based on the practice questions regarding the topic.

CA CPA - All because of the journey listed below
-----------------------------------------------------------------------
FAR - 53('10), 8/25/12 79 PASSED!
REG - 66('11), 69('12), 12/06/12 77 PASSED!!
BEC - 58('10), 74('12), 01/05/13 77 PASSED!!!
AUD - 43('11), 66('12), 69('13), 74('13) 7/29/13 85 PASSED!!!!!

(Combinations of Roger, Yaeger, Wiley Book, Wiley TB, & NINJA Notes)

Ethics 90%

[Zach Zach]

@ littlenumberrobot: I'm using Yaeger as well, which comes with the Wiley Test Bank and the Wiley AUD book (just doing the AUD section as of now). I'm actually just about to go over the reporting module which probably deals with GAAP departures. Do you know any page numbers / question numbers specifically?

DELAWARE

AUD: 74 (7/2014) 76 (11/2014) PASSED! USED YAEGER AND NINJA
BEC: 73 (9/2014) 76 (2/2014) SO FAR SO GOOD! USED NINJA AND WILEY
FAR: Will take after tax season (can't wait)
REG: Cue overly dramatic impending-doom music (will take in 2014)

[Tim_4]

From the Code of Conduct section 203:

Examples of circumstances that may justify a departure from GAAP are new legislation or the evolution of a new form of business transaction. An unusual degree of materiality or the existence of conflicting industry practices are examples of circumstances that would not ordinarily be regarded as unusual in the context of Rule 203 [sec. 203 par. .01].

Basically there are three types of situations where there would be a legitimate departure from GAAP:

1. New legislation requires a firm to depart from GAAP.

2. Accounting for a new type of transaction that does not have specific guidance.

3. Special treatment used by certain industries.

1 and 2 would likely only be temporary departures, as GAAP will eventually “catch up” to new laws and new types of transactions.

[Author]

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