What is the impact of non-compliance with GAAP on financial statements?

Non-compliance with Generally Accepted Accounting Principles (GAAP) can significantly impact financial statements, primarily by affecting the integrity and reliability of those statements. If a company does not adhere to GAAP, it may present financial information that does not accurately reflect its financial position or results of operations. This discrepancy can lead auditors to issue an adverse opinion in their audit report, indicating that the financial statements are not presented fairly in accordance with GAAP. An adverse opinion signals to stakeholders, such as investors and creditors, that the information they are relying on may be misleading, which could affect their decision-making.

Furthermore, an adverse opinion can have broader implications for the company, including potential regulatory scrutiny and loss of investor confidence. In contrast, the other options do not accurately reflect the seriousness of non-compliance with GAAP. For instance, stating that financial statements remain unaffected minimizes the potential consequences of not following established accounting standards. Similarly, while auditors may issue disclaimers under certain circumstances, the assumption that all auditors will do so in every instance of non-compliance is inaccurate. Lastly, characterizing non-compliance as a minor issue downplays its significance and the risks associated with it.