Generally Accepted Auditing Standards Paper
Generally Accepted Auditing Standards
In this paper, we will describe the elements of the Generally Accepted Auditing Standards (GAAS). We will also discuss how these standards apply to financial, operational, and compliance audits. Then we will explain how the Sarbanes-Oxley Act of 2002 and the Public Company Accounting Oversight Board (PCAOB) will have an effect on publicly traded companies. The additional requirements that are placed on audits from the SOX Act and PCAOB will also be discussed.
Generally Accepted Auditing Standards (GAAS) is a set of systematic guidelines by auditors when conducting audits on companies’ finances, ensuring the accuracy, consistency and verifiability of auditors’ actions and reports (Investopedia, 2012). These standards are set by the American Institute of Certified Public Accountants (AICPA). They are provided to assist businesses on how to conduct audits the correct way. There are ten GAAS that are in three categories. These categories are general standards, standards of field work, and standards of reporting. Usually these audits are conducted by a CPA or field auditor and they have to follow each of these categories when conducting the audit.
Financial, Operational and Compliance Audits
There are three types of government audits that are identified under the Government Auditing Standards. These government audits are Financial Audits, Operational Audits and, Compliance Audits. Financial audits are performed in coordination with GAAP criteria. This audit entails of the operation and cash flows using a financial analysis. According to general standards, CPA’s are only used to conduct financial audits. An external auditor may also be used by the company to make sure the GAAS are being used.
Operational audits are utilized to test production operations for its efficiency and effectiveness. These audits may be conducted by either an internal employee like a staff accountant or an external auditor that has experience in the specific company’s operational procedures. Operational audits are based on objective opinions to improve the workflow or cost allocation process with the result of quick turnaround times.
Compliance audits are conducted to make sure a company is in compliance with the rules and regulations under the Sarbanes-Oxley Act of 2002 (SOX). This type of audit requires a company to have an audit in which both the financial statements and the management’s assertion meets criteria.
Publicly Traded Companies
The Sarbanes-Oxley Act (SOX) and the Public Company Accounting Oversight Board (PCAOB)