Question

This is for someone who has auditing experience or knowledge:

Ch2 Q 2

2.    Discuss what GAAS cover and what quality control standards cover (what does the auditor do)?

Answer 1

2) Step 1 : Coverage of GAAS

Generally Accepted Auditing Standards (GAAS) are a set of systematic guidelines used by auditors when conducting audits on companies finances, ensuring the accuracy, consistency and verifiability of auditor's actions and reports. The Auditing Standards Board (ASB) of the American Institute of Certified Public Accountants (AICPA) created GAAS.

Generally Accepted Auditing Standards (GAAS) comprises a list of 10 standards, divided into the following three sections:

A. General Standards

1. The auditor must have adequate technical training and proficiency to perform the audit.
2. The auditor must maintain independence in mental attitude in all matters relating to the audit.
3. The auditor must experience professional care in the performance of the audit and the preparation of the report.

B. Standards of Field Work

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 internal control, to assess the risk of material misstatement of the financial statement, 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.

C. Standards of Reporting

1. The auditor must state in the auditor's report whether the financial statements are presented in accordance with generally accepted accounting principles.
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 adequte, 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 can not be expressed, in the auditor's report.

Step 1 : Coverage of Quality Control Standards

The AICPA has a detailed set of quality control requirements in place for public accounting firms that do not perform audits for SEC issuers. GAAS quality control standards are composed of three interrelated sets of standards. A public accounting firm's overall auditing and attestation practice is governed by AICPA statements on Quality control standards (SQCS) No. 8. This standard mandates the public accounting firms must have a firm wide system of quality control that sets overall firm standards for the conduct of all accounting and auditing engagements.