Running Head: GAAS PAPER 1

GAAS Paper
ACC/491












GAAS Paper

Running Head: GAAS PAPER 2

What is GAAS? GAAS also refers to as the generally accepted accounting standards and
defined as a set of guidelines used by auditors when conducting an audit on a businesss
finances. Additionally it ensures the accuracy, consistency and verifiability of auditors' actions
and reports, (GAAS, 2014). The auditing of an organization will provide that company with
accountability which is very important in a stakeholder or stockholders perspective. As an
investor you would not want to buy stock or loan capital to a company whose financial
statements were a mess or their financial health was poor. The auditing process is an important
part of the financial system. It gives a good outlook on what the companys overall financial
health is and investors can make their decision based on this. When conducting an audit the
auditor must take into consideration of the generally accepted accounting standards and abide by
regulations such as the Sarbanes-Oxley Act of 2002. This paper will discuss the elements
associated with GAAS as well as discuss how these standards apply to financial, operational, and
compliance audits. Additional there will be a discussion on the effect that the Sarbanes-Oxley
Act of 2002, and the Public Company Accounting Oversight Board (PCAOB)and what affect
they have on audits of publicly traded companies, as well as other requirements that are placed
on auditors from this Act, and the actions of the PCAOB.

Elements of GAAS
The Generally Accepted Accounting Standards has three main elements and these
include; General standards; Standards of fieldwork; Standards of reporting. Each is defined
below, (GAAS Elements, 2014).

General Standards
Running Head: GAAS PAPER 3

The auditor must have proper training to perform an audit.
The auditor must maintain independence in all matters relating to the audit.
The auditor must exercise due professional care in the performance of the audit
and the preparation of the report.
Standards of Field Work
The auditor must adequately plan the work and must properly supervise any
assistants.
The auditor must obtain a sufficient understanding of the entity and its
environment, including its internal control, to assess the risk of material
misstatement of the financial statements whether due to error or fraud, and to
design the nature, timing, and extent of further audit procedures.
The auditor must obtain appropriate audit evidence by performing audit
procedures to afford a reasonable basis for an opinion regarding the financial
statements under audit.
Standards of Reporting
The auditor must state in the auditor's report whether the financial statements are
presented in accordance with generally accepted accounting principles.
The auditor must identify in the auditor's report those circumstances in which
such principles have not been consistently observed in the current period in
relation to the preceding period.
When the auditor determines that informative disclosures are not reasonably
adequate, the auditor must so state in the auditor's report.
Running Head: GAAS PAPER 4

The auditor must either express an opinion regarding the financial statements, or
state that an opinion cannot be expressed, in the auditor's report.
Financial Statement audits are performed by CPAs or external auditors to obtain evidence
and evaluate the organizations financial position as well as the income statement and cash flows.
An Operational Audit involves obtaining and evaluating evidence about the efficiency and
effectiveness of an organization operating activities. A compliance audit is a comprehensive
review of an organization's adherence to regulatory guidelines. Auditors review security polices,
user access controls and risk management procedures over the course of a compliance audit.
Sarbanes-Oxley Act of 2002 & Public Company Accounting Oversight Board
The Public Company Accounting Oversight Board (also known as the PCAOB) is a
private-sector, nonprofit corporation created by the Sarbanes-Oxley Act of 2002 to oversee
accounting professionals who provide independent audit reports for publicly traded companies.
The PCAOB's responsibilities include the following: registering public accounting firms;
establishing auditing, quality control, ethics, independence, and other standards relating to public
company audits; conducting inspections, investigations, and disciplinary proceedings of
registered accounting firms; and enforcing compliance with Sarbanes-Oxley, (PCAOB, 2014).
Additionally the Sarbanes-Oxley Act of 2002 requires auditors of public companies to prepare
and maintain audit schedules and other information related to any audit report in sufficient detail
to support the auditors conclusions, for a period of not less than 7 years.



Running Head: GAAS PAPER 5

Conclusion
By relying on GAAS, auditors can minimize the probability of missing materially stated
information. An auditor must adequately plan the audit in advance, be independent of the client
at all times, and always obtain reliable evidence. The companies must present their financial
statements in accordance with GAAP, remain consistent in their reporting, and explicitly disclose
all pertinent information, (GAAS, 2014).

















Running Head: GAAS PAPER 6

References
GAAS Elements, (2014) Retrieved from;
http://www.aicpa.org

GAAS, (2014), Retrieved from;
http://www.investopedia.com/terms/g/gaas.asp

PCAOB, (2014) Retrieved from;
http://www.sec.gov