Submitted by: Submitted by Patriot
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Category: Business and Industry
Date Submitted: 10/17/2010 08:47 AM
Generally Accepted Auditing Standards
Auditors hold a position of trust. The companies who hire auditors and the public rely on auditors’ opinions and reasonable assurances when making financial decisions. Generally Accepted Auditing Standards (GAAS) have been implemented to help ensure consistency and quality performance. In response to accounting scandals, some of which can be traced to the auditing industry, the Sarbanes Oxley Act (SOX) of 2002 was passed. One major provision of SOX was to establish the Public Company Accounting Oversight Board (PCAOB).
The American Institute of Certified Public Accountants approved the 10 GAAS in 1940 that have since been incorporated into the Statements on Auditing Standards. The 10 GAAS are organized into three categories; general standards, standards of field work, and standards of reporting (Louwers et al, 2007, p. 50).
The first three standards are general standards. They deal with the qualifications and quality of an auditors work. An audit must be performed by those that have adequate technical training and proficiency as an auditor. The auditors need to maintain an independent mental attitude in all matters relating to the assignment. Additionally, professional care needs to be exercised in the performance of the audit and the preparation of the audit report (Louwers et al, 2007, p. 50). For example, Pinnacle Realty established an independent internal auditing office that is not only geographically separated from the corporate offices but also has an independent management team. Each auditor working in the field is required to have a Certified Public Accountant (CPA) license. They must have worked with the company for a specified amount of time before authorized to do independent field work. Those who do not work in the field must have a minimum of a bachelors degree and be supervised by a CPA.
The next three standards regard standards of field work. An audit must be adequately planned and any...