Generally Accepted Auditing Standards (GAAS) and the Auditor's Responsibility

Posted In | Finance | Accounting Software

Generally Accepted Auditing Standards (GAAS) are a set of systematic guidelines used by auditors while conducting audits on companies' financial statements, ensuring the accuracy, consistency and verifiability of auditors' actions and reports. These standards are issued by professional organizations such as the American Institute of Certified Public Accountants (AICPA) and the International Auditing and Assurance Standards Board (IAASB).

 

Overview of GAAS

GAAS consists of three categories of standards: general standards, standards of fieldwork, and standards of reporting. These standards provide a framework for auditors to conduct high-quality, objective audits and ensure the credibility of the financial statements and the integrity of the profession.

 

General Standards

1. The auditor must have adequate technical training and proficiency to perform the audit.
    
2. The auditor must maintain independence (in fact and in appearance) in all matters relating to the audit.
    
3. The auditor must exercise due professional care during the performance of the audit and the preparation of the report.
    

Standards of Fieldwork

1. The auditor must adequately plan the work and must properly supervise any assistants.
    
2. 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.
    
3. The auditor must obtain sufficient appropriate audit evidence by performing audit procedures to afford a reasonable basis for an opinion regarding the financial statements under audit.
    

Standards of Reporting

1. The auditor must state in the auditor's report whether the financial statements are presented in accordance with the applicable financial reporting framework.
    
2. 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.
    
3. When the auditor determines that informative disclosures are not reasonably adequate, the auditor must so state in the auditor's report.
    
4. The auditor must either express an opinion regarding the financial statements, taken as a whole, or state that an opinion cannot be expressed, in the auditor's report. When the auditor cannot express an overall opinion, the auditor should indicate the reasons and, if practicable, the effects on the financial statements.
    

Auditor's Responsibility

The primary responsibility of an auditor is to express an opinion on the fairness and reliability of the company's financial statements. The auditor must follow GAAS while conducting the audit and must remain independent, unbiased, and objective throughout the process. Auditors are responsible for detecting material misstatements and fraud, and their work includes assessing the effectiveness of a company's internal controls, evaluating the appropriateness of accounting policies, and ensuring the financial statements are free from material misstatements.

 

In conclusion, GAAS are essential guidelines that auditors must follow while conducting financial statement audits. These guidelines ensure that auditors maintain a high level of professionalism and provide assurance to stakeholders, such as investors and regulators, that the financial statements are accurate and reliable. Auditors have a significant responsibility in maintaining the credibility of financial statements and the integrity of the profession.