Generally Accepted Auditing Standards (GAAS) are the most identifiable auditing standards. They are ten broad statements that are used as guidance when conducting audits. These standards provide a measure of quality and ensure the accuracy of an audit. The 10 GAAS are grouped into three categories; General Standards, Standards of Field Work and Standards or Reporting.
According to chapter 2 in the text, general standards relates to the qualifications of the auditor and to the quality of the auditors work. There are three general standards. The first general standard is “Adequate Technical Training and Proficiency.” This general standards declares each professional accountant, must have the required formal education for entry into the profession. Sufficient training and experience in the field, and each professional must continue with their professional education throughout their career as mandated.
The second general standard is called “Independence in Mental Attitude.” The auditor must be free of any influence other than their own professional judgment. An auditor is renowned to be an unbiased expert. Managements influence should have no bearing on the conduction of the audit or the reporting of the findings. Auditors are also required to meet the independence requirements in the AICPA’s Code of Professional Conduct.
The last general standard is known as, “Due Professional Care.” An auditor vows to act in good faith and to not be careless in an audit. All work done by those less experienced should be reviewed. No audits should be taking lightly and all should be cautiously completed.
The second category the generally accepted auditing standards are grouped into is known as “standards of field work.” They concern the demeanor of the audit. The first standard in this category and fourth out of the ten is called “Adequate Planning and Proper Supervision.” You would expect to have the most memorable party of the year without planning months prior, right? Same goes for auditing, in order for the audit to be both effective and efficient, it must be properly planned. Many times large portions of the audit are done by less experience staff, GAAS requires the audit to have appropriate supervision.
Next: “understanding the entity and its environment, including internal control.” There are several factors that influence the risk of material misstatement, whether due to error or fraud. It is essential for the auditor to understand the entity and its environment. According to chapter two in the text this standard require the auditor to understand the entities industry, regulatory, and other external factors. An auditor must understand the nature of the entity, the entities objectives and strategies and related business risks as well as its risks assessment. The entities measurement and review of financial performance and lastly, the auditor must