Question

Auditors must be concerned with both generally accepted auditing standards and generally accepted accounting principles in performing an audit.

1. Compare generally accepted auditing standards with generally accepted accounting principles.
2. Summarize two of the three generally accepted auditing standards known as the general standards.

.

Note: The answer must be 400 to 500 words please

Answer 1

a.

- Definition : GAAS are a set of guidelines for auditors to use when conducting audits on the financial records of a company. GAAP are a set of accounting principles, procedures and standards issued by the independent agency Financial Accounting Standards Board (FASB).

- Purpose : GAAP are used by all the company's accountants to maintain the accounting system and to report a company's everyday financial dealing accurately and correctly so as to minimise the occurence of fraud. GAAS are the standards that the prepared financial statements are checked against for accuracy, completeness and compliance with the existing rules and regulations.

- Timing and users : GAAP are used before GAAS in the role of business and financial reporting. A company's accountants will use GAAP all through its business operations (on a daily basis) and GAAS comes into play usually in the quarter/year-end audits when an external auditor will review the financial reporting.

(Koening, 2017)

b. Two of the three GAAS general standards : these address the basic qualifications that an auditor must posses and the minimum standards for conducting an audit.

1. Auditors must have adequate training and proficiency to be qualified.

2. Auditors must exercise professionalism in the performance of the audit and the preparation of the report

All auditors need to be proficient in the type of audits they perform to ensure that the audit is efficiently undertaken. This includes training in all principles, procedures, processes, standards and expectations of an audit including the preparation of the report. IT auditing might have additional contexts and controls and auditors in this domain will require specialised expertise or knowledge to qualify to perform an audit. Additionally, all codes of conduct, ethical considerations such as integrity, competence, objectivity and compliance should be endorsed. Auditors must be entirely professional in their conduct such as disclosing any conflict of interest or financial interest in companies they are proposed to, to not do so is unlawful. At all times, auditors should adhere to the appropriate guidelines and standards of GAAS to ensure any fraud is identified. (Gantz, 2014)

Auditors will review financial records (sample of) and review key areas where problems might commonly occur. Post review, auditors will create a report that will state whether a business's financial statements are credible and dependable. This report is crucial as it is reviewed in key decision-making concerning the company. Some companies may alter data or include misleading information in their financial statements as a way to make the business seem more profitable than it is or as a way to hide its true financial position. This along with accidental inaccuracies are what the auditors need to ferret out to present a final and accurate view of the company's accounting. (Purpura, 2008)

References :

Gantz, Stephen (2014) IT Audit Fundamentals. The Basics of IT Audit.

Koening, Edriaan (2017) Difference Between GAAS and GAAP. Biz Fluent

Purpura, Philip P. (2008) Accounting, Accountability, and Auditing. Security and Loss Prevention (5th Ed).