Generally Accepted Auditing Standards

Generally Accepted Auditing Standards

Auditing plays a vital role in business, government, and our economy. The current paper shall discuss the nature and functions of auditing and relate them to the audit functions. The paper shall also address the elements of the Generally Accepted Auditing Standards (GAAS) and how these standards apply to financial, operational, and compliance audits, 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, and discuss the additional requirements that are placed on auditors from this Act as well as the actions of the PCAOB.

Elements of the GAAS

By relying on GAAS, auditors can minimize the probability of missing material information. GAAS are divided into these main sections:

1) General standards.

2) Standards of fieldwork.

3) Standards of reporting.

Each section has requirements that the auditor and the subject company must meet. 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. Generally Accepted Auditing Standards are those guidelines which auditors must adhere to while conducting an audit of a company's or government entity's financial statements. It must also be stated in the audit report that the audit was conducted following Generally Accepted Auditing Standards. This has been required since 1941 after the investigation of a large drug company, McKesson & Robbins, Inc., which had had funds embezzled by its president and his three brothers (Irwin, et al. 1991).

Application

There are three standards of field work. They address proper planning and supervision, examination and evaluation of internal controls, and collecting sufficient and...