Acc/491 - Generally Accepted Auditing Standards (gaas)

Generally Accepted Auditing Standards

Brenna Hogue

ACC/491

David Mancina

October 19, 2015

Generally Accepted Auditing Standards

        The Generally Accepted Auditing Standards (GAAS) are a set of guidelines used to ensure the audits of a company’s finances are unbiased and accurate.  In April 2003 the Public Company Accounting Oversight Board (PCAOB) implemented the GAAS, which was also later adopted by the Auditing Standards Board of the American Institute of Certified Public Accountants (Boynton & Johnson, 2006).  The Generally Accepted Auditing Standards are made up of three categories: general standards, standards of fieldwork, and standards of reporting.  The general standards outline the qualifications needed to be an auditor and the professional manner in which the work is to be performed.  The next three standards make up the standards of fieldwork, which govern how auditors carry out their duties, including adequate planning and obtaining evidence.  The last four GAAS must be considered by auditors before issuing a report, as these standards call for the auditor’s opinion as to the accuracy of financial statements.

        In financial audits, the auditor must collect and analyze all evidence (financial statements, source documents, etc.) to determine whether the company’s financial records comply with the GAAP (Generally Accepted Accounting Principles).  Auditors must ensure that the company’s representation of its financial position, cash flows, and results of operations all comply with those standards.  Most corporations hire an outside auditing firm to help ensure all standards are met, and most states require a CPA to handle audits.  Once the audit is complete, the information is then distributed to financial users such as stockholders, creditors, and regulatory agencies.

        Compliance audits are performed to determine whether a company’s financial and operating activities meet the rules and regulations set forth by the Sarbanes-Oxley Act of 2002 (SOX).  The SOX requires that all companies have a dual-purpose audit.  This means that companies will not only have its financial statements audited, but management’s compliance with internal control procedures shall also be audited (Boynton & Johnson, 2006).  Once the compliance audit is performed, an independent auditor must report on the adequacy of the company’s current internal controls.  During the operational audit of a company, the auditor evaluates the firm’s efficiency and effectiveness of their operating activities in relation to their specific objectives.  The auditor’s assessment will be included in the reports, as well as any recommendations for improving the efficiency or effectiveness of operations.