SAS 77 Section 544 Lack of Conformity With Generally Accepted Accounting Principles

The basic postulates and broad principles of accounting comprehended
in the term «generally accepted accounting principles» which pertain to business
enterprises in general apply also to companies whose accounting practices
are prescribed by governmental regulatory authorities or commissions. (For example,
public utilities and insurance companies.) Accordingly, the first reporting
standard is equally applicable to opinions on financial statements of such
regulated companies presented for purposes other than filings with their respective
supervisory agencies; and material variances from generally accepted
accounting principles, and their effects, should be dealt with in the independent
auditor’s report in the same manner followed for companies which are not
regulated.  Ordinarily, this will require either a qualified or an adverse opinion
on such statements. An adverse opinion may be accompanied by an opinion
on supplementary data which are presented in conformity with generally accepted
accounting principles. [As amended, effective periods ending on or after
December 31, 1974, by Statement on Auditing Standards No. 2. As amended
by Statement on Auditing Standards No. 62, effective for reports issued on or
after July 1, 1989.]