Generally Accepted Auditing Standards (GAAS) vs. International Standards on Auditing (ISA)

Posted In | Finance | Accounting Software

Auditing plays a critical role in the financial world by providing assurance to various stakeholders about the credibility of financial information presented by companies. To ensure consistency and reliability in the auditing process, there are two primary sets of standards that auditors follow: Generally Accepted Auditing Standards (GAAS) and International Standards on Auditing (ISA). This article will provide an overview of the two standards and discuss their similarities and differences.

 

Generally Accepted Auditing Standards (GAAS)

GAAS are the auditing standards that are followed in the United States. They are developed by the Auditing Standards Board (ASB), a division of the American Institute of Certified Public Accountants (AICPA). GAAS provides guidelines and procedures that auditors must adhere to while conducting audits of financial statements to ensure the accuracy and reliability of the financial information presented. GAAS comprises ten basic principles that are divided into three categories: general standards, standards of fieldwork, and standards of reporting. These principles provide a framework for auditors to follow while conducting an audit and aim to maintain the quality and consistency of audit procedures.

 

International Standards on Auditing (ISA)

ISA are developed by the International Auditing and Assurance Standards Board (IAASB), a division of the International Federation of Accountants (IFAC). These standards are intended to be applied globally and provide a uniform set of guidelines for auditors to follow when conducting audits of financial statements. ISA aims to promote consistency in the auditing process worldwide and facilitate the international convergence of auditing practices. Like GAAS, ISA covers various aspects of auditing, including planning, risk assessment, evidence gathering, and reporting. However, ISA comprises more than 30 individual standards, each addressing specific areas of the audit process.

 

Similarities between GAAS and ISA

Both GAAS and ISA aim to provide a framework for auditors to maintain consistency, reliability, and quality in the auditing process. They both cover similar aspects of auditing, such as risk assessment, evidence gathering, and reporting. Additionally, both sets of standards emphasize the importance of auditor independence, professional skepticism, and exercising professional judgment throughout the audit process.

 

Differences between GAAS and ISA

The primary difference between GAAS and ISA lies in their geographical applicability. GAAS is primarily followed by auditors in the United States, while ISA is designed for global application. Additionally, GAAS is developed by the ASB of the AICPA, while ISA is developed by the IAASB of the IFAC. The structure and organization of the two sets of standards also differ. GAAS comprises ten basic principles divided into three categories, while ISA comprises more than 30 individual standards, each addressing specific areas of the audit process. While both GAAS and ISA emphasize the importance of auditor independence, professional skepticism, and exercising professional judgment, ISA provides more detailed guidance and requirements in certain areas, such as risk assessment and quality control. This is due to the broader range of jurisdictions and variations in practices that ISA is designed to address.

 

Both Generally Accepted Auditing Standards (GAAS) and International Standards on Auditing (ISA) play essential roles in promoting consistency, reliability, and quality in the auditing process. While they share similarities in their objectives and coverage, they differ in their geographical applicability, structure, and organization. Auditors need to be familiar with the standards applicable to their jurisdiction and the specific requirements of the audits they perform to ensure the credibility and reliability of the financial information presented.