Modern Auditing

Modern Auditing

Kory VanSpeybroeck

ACC/490

June 12, 2011

Curtis Binney

Modern Auditing

In the current business environment, it is customary for management to visibly shudder when they learn of an audit taking place. Also, it is a common misconception that audits take place because a problem with fraud exists or a crime has been committed. To rectify this misconception, an understanding of the purposes of an audit and the functions of such must be brought to light. Furthermore, the Generally Accepted Auditing Standards, or GAAS, must be understood and how they apply to financial, operational, and compliance audits. Additionally, the effect of the Sarbanes-Oxley Act and the Public Company Accounting Oversight Board, PCAOB, on audits and the additional requirements that must be met by publicly traded companies, should be explained.

To begin with, most individuals have experienced or heard about the situations briefly described earlier. To eliminate the previous misconceptions, one must realize the purpose of an audit and the auditor. To define auditing, “a systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between those assertions and established criteria and communicating the results to interested users (Boynton & Johnson, 2006, p. 6).” To simplify, auditing is the process of evaluating financial or nonfinancial events to obtain an understanding between the relation of events and established standards and to communicate the results to interested parties. To further understand this definition, one must explore the elements of GAAS.

Generally Accepted Auditing Standards, GAAS, is comprised of 10 elements. The elements are then classified into the following three categories: general standards, standards of field work, and standards of reporting (AICPA, n.d.). The first category, general standards, defines that...