CFE – Financial Transactions and Fraud Schemes — Question 19

Which of the following is NOT a justifiable reason to depart from generally accepted accounting principles (GAAP)?

Answer options

• A. Departing from GAAP will make the company appear more profitable.
• B. Adherence to GAAP would produce misleading results.
• C. It is a common industry practice to give particular transactions a specific accounting treatment.
• D. The transaction at issue is considered to be immaterial.

Correct answer: C

Explanation

Option C is correct because even if it's common practice in the industry to treat certain transactions differently, it does not justify departing from GAAP. The other options provide scenarios where deviation might be seen as reasonable, such as improving the representation of financial health or addressing misleading outcomes.