An auditor’s report provides essential information to third party users. Their evaluation of a business’ financial statements and internal controls help third party users make quality decisions. The Generally Accepted Auditing Standards was created to ensure the quality of performance and the overall objectives to be achieved in a financial statement audit. GAAS provides a guideline to auditors and a basis to evaluate an auditor’s work.
The elements of the Generally Accepted Auditing Standards (GAAS) are divided into three different categories: General Standards, Standards of Field Work, and Standards of Reporting. The general standards relate to the adequate technical training and proficiency, independence in mental attitude, and due professional care. Adequate technical training and proficiency includes formal university education. Independence in mental attitude requires the auditor to be free of management’s influence in any process of the audit. Due professional care requires an auditor to be diligent in performing an audit and efficient in its reporting. Standards of field work consist of having the appropriate planning and supervision, understanding the entity and its environment, and acquiring competent audit evidence. Standards of reporting require auditors to meet financial statements presented in accordance with GAAP, Statements of Auditing Standards (SAS), and Public Companies Accounting Oversight Boards (PCAOB) Auditing Standards. “Management is responsible for the oversight of those charged with governance, to ensure that the entitys operations are conducted in accordance with the provisions of laws and regulations, including compliance with the provisions of laws and regulations that determine the reported amounts and disclosures in an entitys financial statements” (AU-C Section 250 Consideration of Laws and Regulations in an Audit of Financial Statements. n.d.). Management not only has to oversee the others but also by example and follow any processes set in place.
Effect of Sarbanes-Oxley of 2002 and Public Company Accounting Oversight BoardThe Sarbanes-Oxley Act was enacted in 2002 as a response to fraudulent activity and financial reporting from large companies, including Enron and WorldCom. The need to reduce the risk of fraudulent financial reporting from publicly traded companies was essential to all the parties affected by this information. Through the enactment of the SOX Act, government hoped to ensure the trust on annual reports by third parties, such as investors and creditors. Through a team effort between audit committees, auditing profession, and corporate management, the SOX Act has held businesses accountable. Section 103 of the SOX Act created the Public Company Accounting Oversight Board (PCAOB) to establish items such
s of trustworthiness, and section 104, which was recently reclassified to the National Securities Litigation Reform Act , now provides for a special supervisory and anti-scandal task force to identify and investigate allegations that are the focus of systemic fraud, by conducting interviews and conducting investigation, and conducting audits of any allegations of fraud by such supervisory authority. The PCAOB is composed of three independent members: Executive Branch employees and boards of directors; auditors; and internal controls. The committee reviews internal and external audit reports (OAS). The committee reviews the findings and recommendations of its OAS, which were subsequently adopted, and the results of its audit report. The committee reviews the GAO audited reports and recommendations of OAS members and determines which of the records, statements, and reports made in its report are the best and safest. For example, in the case of the company’s consolidated financial statements the auditor did not recommend an OA, but instead selected the statements based on which of the audited reports contained additional, significant information. To identify and investigate errors, the OAS reviews and releases to the public under section 12(d)(3) and section 12(c) the audit reports, which are the primary source of internal audit information in the case of certain audits conducted under the statute. The GAO determines the appropriate remedy to remedy all errors. The Office of Inspector General is a non-partisan, non-partisan and wholly-owned agency of the Department of Labor serving the U.S. Treasury, the U.S. Department of Agriculture and the Department of Health and Human Services.
2. Summary of Reports and Recommendations. 1. All reports and recommendation are prepared under oath and are not in writing. They are released solely by the government and do not reflect the opinions of the Board and are not an accurate representation of the Government. To avoid conflicts of interest, all reports and recommendation are prepared in confidence by any person, with the expectation that they will not be shared by any person outside the Office, including with other governmental agencies of the U.S. Government. 2. The Board shall not disclose any audit findings or conclusions relating to an audit of the Board or the financial condition of any agency or of the stockholders of any other entity or the ownership of any company, except as required by the Board. 3. The Board shall not receive any special benefit whatsoever or any compensation from any individual for which performance or performance-related compensation is not specifically requested by the Department of the Treasury or by the Stockholders of any other entity, except if such benefits are expressly stated in their terms and conditions of employment, as defined in Section 3 above. 4. The Board shall not consider any financial statement disclosure made by the entity that is not disclosed to the Board. 5. Employees of the Board shall not disclose to persons outside the Board any information that is not required to be disclosed by the Board. 6. None of the information contained in the SOX Act or in any of its regulations or rules or regulations is or was related to the employment relationship which may exist between the Board, any individual outside the Board or any other individual,