Generally Accepted Auditing Standards - Explained
What are Generally Accepted Auditing Standards?
Written by J. Mance Gordon
Updated at April 18th, 2024
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What are Generally Accepted Auditing Standards?
Generally Accepted Auditing Standards generally termed as GAAS is a step by step guideline that auditors use while performing audits. The audits are of the financial records of the companies. They make sure that the audit is conforming correctness and compatibility. They submit the detailed report of the auditors so that their performance can be verified. The AICPA (American Institute of Certified Public Accountants) formed a board, commonly called ASB (Auditing Standards Board). This board introduced GAAS.
How are Generally Accepted Auditing Standards Used?
GAAS (Generally Accepted Auditing Standards contains ten standards, which have the following 3 categories:
- General Standards require the auditors to be technically trained and properly conduct the audit.
- They should be mentally independent in all affairs pertaining to audit.
- They should perform the audit and prepare the report professionally with great care.
Standards of Field Work
The Standards of Field Work ensure that the auditors do proper planning on how to work. They should supervise the helpers in an appropriate manner. They should have enough understanding of the business entity and the environment of the company. It includes internal control because there is a risk of a wrong statement or misinformation of the financial statements. There can be any reason for that, such as mistakes in the record, fraud, etc. The auditors must understand the timing, regular audit reports and nature of the records. They should conduct an audit systematically to get enough evidence properly. Then, they are able to give their opinion on the financial statements after auditing.
Standards of Reporting
The auditors have to state in the report that the financial statements comply the Generally Accepted Accounting Standards or not. They also have to identify the cases or instances in which the company has not followed the rules and the current record is not consistent with the previous one. If the auditor finds that the company does not disclose the information adequately, he must mention it in the audit report. Either the auditor has to state in the report his opinion about the financial statements or mention that he cannot express his opinion in the report. In the latter case, the auditor must explain why he cannot express his opinion about the financial statements of the company. The name of the auditor is linked with financial statements. So, he must clearly point out the function performed by him. Also, he should mention in the report about the extent of responsibility he has taken.