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Generally Accepted Auditing Standards Paper

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Write a 700- to 1,050-word paper in which you explain the nature and functions of auditing. Relate your explanation to the audit functions in your organization, or an organization with which you are familiar. In your paper, be sure to address the following: Describe the elements of the Generally Accepted Auditing Standards (GAAS). Broad rules and guidelines promulgated by the AICPA’s AuditingStandards Board. CPAs employ GAAS in preparing for and performing audits of a client’s financial statements.

The guidelines include references to the auditor’s qualifications (general standards), audit field work (statements of field work), and reporting the audit results (standards of reporting).

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The broad standards are backed by detailed interpretative literature. An auditor unable to express an opinion on the financial statements must give reasons. A CPA who does not conduct an examination in accordance with GAAS can be held in violation of the AICPA’s Code of Professional Ethics and face legal action by affected parties. Read more: http://www. answers. om/topic/generally-accepted-auditing-standards#ixzz2MuPoCqV3 A set of systematic guidelines used by auditors when conducting audits on companies’ finances, ensuring the accuracy, consistency and verifiability of auditors’ actions and reports. Read more: http://www. investopedia. com/terms/g/gaas. asp#ixzz2MuQZ4v4a

* Describe how these standards apply to financial, operational, and compliance audits. By relying on GAAS, auditors can minimize the probability of missing material information. GAAS are divided into these main sections: 1) General standards ) Standards of fieldwork 3) Standards of reporting Each section is littered with requirements that the auditor and the subject company must meet. In short, an auditor must adequately plan the audit in advance, be independent of the client at all times, and always obtain reliable evidence. The companies must present their financial statements in accordance with GAAP, remain consistent in their reporting, and explicitly disclose all pertinent information. Read more: http://www. investopedia. com/terms/g/gaas. asp#ixzz2MuQfHhfg Financial, Operational and Compliance Audits Financial statement audits are performed in coordination with GAAP and other established criteria when obtaining evidence about a company’s presentation of its financial position. Evidence evaluated includes results of operations and cash flows for the purpose of conveying an opinion for users of the financial data.

To ensure independence in mental attitude, as noted under GAAS general standards, most states have enacted laws so that only certified public accountants (CPAs) can perform financial statement audits. To further enforce this GAAS element, many corporations hire an external audit firm. * An operational audit evaluates a company’s efficiency and effectiveness in regard to operational activities in relation to specified objectives. The standards of field work area of auditing plays an important role in operational audits. A high degree of importance is placed on the auditor’s efficiency and effectiveness reports and the auditor’s recommendations for improvement by the entity. * * A compliance audit determines if a company is acting in accordance with rules and regulations in financial and operationalactivities.

This type of audit demonstrates a standards of reporting element of GAAS and a requirement under SOX. “The Sarbanes-Oxley Act of 2002 requires companies to have a dual-purpose audit that audits both the financial statements and management’s assertion as to whether it has complied with criteria regarding an adequate system of internal control over financial reporting”. * Explain the effect that the Sarbanes-Oxley Act of 2002, and the Public Company Accounting Oversight Board (PCAOB), will have on audits of publicly traded companies.

Sarbanes-Oxley Act and the Public Company Accounting Oversight Board SOX greatly affects how auditors are to perform their jobs. Most notably, specific procedures must be followed when obtaining evidence to opine on. In addition, SOX outlines how internal controls are audited, as the auditor’s job is to offer an opinion on the effectiveness of the entity’s internal control over financial reporting. In effort to enhance the efficiency and effectiveness of audits, auditing techniques used by many industry professionals prior to SOX, were no longer deemed acceptable.

For example, when auditing some financial statements, auditors would often choose to perform procedures of practical importance rather than conducting a full test of the controls. Post SOX, the effectiveness of management’s internal control over financial reporting is reported on annually, whereas prior to SOX this function was often performed under cycle rotation. The PCAOB currently has six auditing standards for auditors to comply with. Auditing conducted under PCAOB Auditing Standard No. must properly evaluate consistency of financial statements. This standard affects today’s auditing procedures by ensuring auditors properly identify consistency matters which may affect the report. For example, when presented with several years of comparative financial statements prepared by different auditors, the successor auditor is to evaluate consistency between his or her report and the immediate preceding period. *

* Discuss the additional requirements that are placed on auditors from this Act, and the actions of the PCAOB. Additional Requirements Placed On Auditors * In addition to PCAOB Auditing Standard No. 6, auditors must comply with other requirements, such as: auditing internal controls over financial reporting that is integrated with an audit of financial statements, presenting specific documentation to provide a written record of the basis for the auditor’s conclusions, and reporting on previously documented materials. Additional requirements by SOX include restricting auditing companies from providing additional, non-auditing, services.

* The need for improved regulation over publicly traded corporations forced new laws to be passed and procedures to be followed by both management and auditors of an entity. Many of the standards required by auditors today are due to newly established criteria by the GAAS, the SOX act passing into law, and PCAOB standards. The introduction of this auditing criteria aids users of an entity’s financial data on not only making more informed decisions, but also instills a degree of confidence that was once lost with Wall Street corporate scandals. *

Cite this Generally Accepted Auditing Standards Paper

Generally Accepted Auditing Standards Paper. (2016, Oct 06). Retrieved from https://graduateway.com/generally-accepted-auditing-standards-paper/

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