Generally Accepted Auditing Standards Definition

Cite this article as:"Generally Accepted Auditing Standards Definition," in The Business Professor, updated March 16, 2019, last accessed July 6, 2020, https://thebusinessprofessor.com/lesson/generally-accepted-auditing-standards-definition/.

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Generally Accepted Auditing Standards Definition

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.

A Little More on What is the Generally Accepted Auditing Standards

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.

References for Generally Accepted Auditing Standards (GAAS)

Academic Research on the Generally Accepted Auditing Standards (GAAS)

  • Auditor liability: A review of recent cases involving generally accepted accounting principles and generally accepted auditing standards, Gormley, S. P., Porcano, T. M., & Staton, W. (2003). Research in Accounting Regulation, 16, 61-85. SEC (The Securities and Exchange Commission) is the main regulatory entity. Financial markets perform the functions in the supervision of the SEC. This commission makes it compulsory for the trading companies to conduct audits annually. This is known as a systematic procedure of checking whether the financial statements fairly measure up to the GAAP (Generally Accepted Accounting Principles) or not. The auditors conduct audits using guidelines of GAAS (Generally Accepted Accounting Standards) to collect the evidence and ensure the reliability of the accounting system. The businessmen and their advisors make decisions of investment based on the audit reports.of the financial statements. So, auditors play a vital role in the financial markets and community. They should be industrious in performing their duty. If they show negligence towards their responsibilities, misleading and wrong data.will be collected.
  • More on generally accepted auditing standards, Donohue, J. R., Rosenberg, N., & Wolfgang, J. E. (1983). The CPA Journal (pre-1986), 53(000002), 79. This research highlights the performance of companies that they comply with the Generally Accepted Auditing Standards (GAAS) or not.
  • Generally Accepted Auditing Standards, Audit Planning and Engagement Quality Review, Lessambo, F. I. (2018). In Auditing, Assurance Services, and Forensics (pp. 41-67). Palgrave Macmillan, Cham. The audit planning comprises of a thorough audit policy to engage and create a plan of auditing. It contains, specifically, a course of action involving a pre-planned risk evaluation and reactions to the risks of wrong financial statements. The auditors must strictly keep in view the auditing standards of AICPA (American Institute of Certified Public Accountants) and PCAOB (Auditing Standards Board).

 

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