Generally Accepted Auditing Standards

Almost all professions have a standard code of conduct which consists of standard guidelines that the professional needs to follow while rendering his or her services. The Generally Accepted Auditing Standards (GAAS) are a pre-defined set of standards by which all the certified public accountants must abide by. These standards determine the quality and the efficiency of the audits done by the accountants, be it of a private firm or a government entity! They are also followed when it comes to making a judgment on the work done by an auditor.

Who Established the Generally Accepted Auditing Standards?

There was a great need to develop some basic set of standards which would be followed by all the certified public accountants. In the United States, there are 10 generally accepted auditing standards which were established by the American Institute of Certified Public Accountants (AICPA) in 1947. Although, with time, there have been minor changes in these standards, but the basic rules still apply.

10 Generally Accepted Auditing Standards

The generally accepted auditing standards listed below consists of standards based on the general working standards, the standards related to field work, and also the standards related to the interpretations and the reporting. Have a look.

The General Standards

• In order to perform an audit, the auditor must possess adequate amount of proficiency through technical training. It is only when the auditor has enough training that he/she can perform an audit.
• It is also necessary for the auditor to consistently keep an independent approach in terms of mental attitude when it comes to the matters related to performing the audit.
• While performing the audit and preparing the reports, it is important for the auditor to exercise due professional care.

The Standards of Field Work

• Efficient planning of the work and proper supervision of the assistants must be done by the auditor.
• It is also important for the auditor to understand the entity and its environment thoroughly in order to assess the possibility of fraud or error when it comes to material misstatement. This also helps the auditor to further design the audit procedure, keeping in mind the nature and the time that would be needed.
• Obtaining audit evidences while performing the procedure of auditing also helps the auditor to base his/her opinion about the financial statements that have or are being audited.

The Standards of Reporting

• Once the field work has been done, it is mandatory for the auditor to state in the auditor's report whether or not the financial statements that are presented follow the Generally Accepted Accounting Principles (GAAP).
• If it is found that the generally accepted accounting principles have not been followed consistently during the current period in relation with the preceding period, then the auditor must mention those circumstances in the auditor's report.
• The auditor must present the adequate informative disclosures in the auditor's report. If they are not sufficiently adequate, then the auditor needs to state that in the report.
• Also, the auditor must mention his overall opinion regarding the financial statements of the entity. If the auditor fails to do so, then he / she must mention the reason for the same. It is also important for the auditor to comment upon the character of the organization's auditor in terms of the work efficiency and the responsibility that the auditor is taking upon himself.

Generally Accepted Government Auditing Standards (GAGAS)

Now that you are aware of the GAAS, you must also know about the 5 generally accepted government auditing standards which are followed by the auditors auditing the financial and/or the performance audits of the government agencies. The GAGAS are also known as the Yellow Book and were established by the Government Accountability Office (GAO). These are as follows,

• Independence: Very similar to the GAAS, independence is the standard which states that the auditor must obtain organizational independence from its management as this would help the auditor to perform an uninterrupted and unrestricted evaluation of all the activities of all the organizational personnel, which also includes the management.
• Supervision: The next GAGAS, would be to carry out a well planned and effective supervision of the assistants as well as the entire auditing process. This helps to complete the entire auditing process in a more systematic and efficient manner.
• Continuing Professional Education (CPE): CPE is the medium through which the members of a professional group can help the professionals of the organization to improve and brush up on their professional skills and qualities. In terms of auditing, the AICPA offers many courses for the certified public accountants to help them brush on their auditing skills.
• Due Care: When it comes to any professional task that requires a person to follow certain standard in order to investigate the loopholes, it is always important to work with due care and diligence.
• Quality Control: The auditor must also be sure to keep a constant check on the quality control in terms of the way the auditing is taking place and the audit report is prepared. He or she must also check if the financial statements are written as per the GAAP rules or not.

I hope this brief information on the generally accepted auditing standards helped you in gaining an insight into the standards that the auditing process demands while accounting and auditing the books of accounts in an organization. Good luck!