A Comprehensive Guide on Generally Accepted Auditing Standards

The auditor's reports and reviews are held in high respect by public and private companies. All the concerned parties should accept the final report. When the auditor reviews any company's financial data, the final statement should be according to some set standards and guidelines. These standards and guidelines are termed Generally Accepted Auditing Standards (GAAS). GAAS are created by the Auditing Standard Board (ASB). These standards' sole purpose is to ensure consistency, accuracy, and accountability across the audit report. Different businesses should learn about these standards since they come in three different categories. Excited to know? Great! Walk with us to know more!

What are the Generally Accepted Auditing Standards (GAAS)?

GAAS is the most acknowledged set of rules and standards across the world of accounting and auditing. These inspecting guidelines were made by the Auditing Standards Board (ASB) of the American Institute of Certified Public Accountants (AICPA). These rules were intended to guarantee a particular norm of consistency, exactness, and responsibility across any auditor's survey and coming about reports.

Why Need It?

All the public and private companies are required to be reviewed and audited by external auditors. The financial statements of each business will differ greatly, based on the diversity in operations. However, the final reports are required to be compliant with auditing standards (GAAS). With this in mind, the ASB and Security Exchange Commission (SEC) requires all the public and private firms to undergo the audit process, and the result should be GAAS-compliant.

Generally Accepted Auditing Standards Categories:

There are three broad categories of generally accepted auditing standards. Inside each category, there are subcategories or sub-points, making the entire number of categories ten. From broad to narrow, we will touch every point. Keep scrolling to learn more!

1. General Standards:

The general standards incorporate the factors like the auditor's qualification, proficiency, independence, and due care of an auditor. The main subpoints are discussed in the coming lines:

a) Adequate technical competency:

The standard requires an auditor to be technically proficient and competent. He/she should have the required set skills and knowledge to perform different types of audits. The technical adequacy of an auditor can be determined from the following factors.

• Formal education to enter the profession

• Consistent professional education

• Technical training

b) Independence:

The auditor should be independent in mental attitude. It means that there should be no influence of the client over the auditor while performing the audit. The final report should be based on the facts and figures and not be influenced by any discriminatory action.

c) Professional due care:

The auditor should pay attention to detail and perform the audit based on due diligence. No negligence is acceptable in the audit process, according to the GAAS.

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2. Standards of Fieldwork:

The second category of SAAS is fieldwork. As the name suggests, these standards are related to the client's workspace where the audit will take place. Following are some of the subparts of fieldwork standards.

a) Sufficient planning:

The auditor must conduct adequate planning of the client's workspace where the audit is to be conducted. Moreover, the auditor is also responsible for supervising the audit team.

b) Research:

Before starting the audit process, the auditor is required to conduct thorough research about the business environment and model. Strong insight into internal controls is necessary since it can impact an audit's outcomes, irrespective of the business size and nature.

c) Ample evidential matters:

During the audit, the auditor is required to use different audit procedures to gather evidential matters. The audit procedures could be different based on the matter at hand. The data could be collected through inspection, observation, and inquiries. The final report should be prepared based on these pieces of evidence.

3. Standards of Reporting:

Once the audit process is complete, the auditor is required to report the findings in compliance with the following standards.

a) GAAP-compliant reports:

The auditor, under the SAAS, is required to accept the Generally Accepted Accounting Principles (GAAP) as the set reporting standards. The final report should b according to these standards.

b) Inconsistency identifications:

it is the responsibility of the auditor to identify the circumstances where the standards are not followed. Be it GAAS or GAAP in the reporting process; if there are inconsistencies, they should immediately be corrected.

c) Opinion expression:

The final step in the process should be the expression of the auditor's opinion. The auditor should express his/her opinion about the financial statement. If not, he/she must state a reason. Do you need an expert auditing firm for your business? Get in touch with the top audit firms in Dubai and take your business to new standards.

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