Question

The Generally Accepted Auditing Standards (GAAS) provide the template for an AUDIT. Discuss the major components of each section of the standards and how they provide the auditor with the necessary steps to ensure there is minimal audit risk.

Answer 1

The generally accepted auditing standards (GAAS) were made by the Auditing Standards Board in USA. These standards are basically guidelines which should be auditors when auditing books of accounts, so s to ensure that the financial statements are free from any material defect, true & fair, can be verified with actual line items and is backed with sufficient & adequate documented evidence.

The 3 sections of GAAS are

1. General standards
2. Standards of fieldwork
3. Standards of reporting.

1. General standards: They specify the general skills and conduct of an auditor. The most important principle is that the Auditor must apply reasonable and due care, in a professional manner when auditing the books of accounts and preparing the audit report. He should be independent in his approach. He must have adequate technical training & proficiency to perform the audit.
2. Standards of fieldwork: These guide how should proceed when auditing the financial records. It specifies that sufficient, appropriate audit evidence must be gathered to judge whether the financial statements as presented by the management are true & fair. The business scenario, corporate functioning, internal controls, must be verified to minimise the risk of material misstatements occurring in the financial statements. All the Audit work should be properly planned and all assistants must be properly supervised.
3. Standards of reporting: These guide about how audit report should be prepared. It specifies that should state whether or not the books are prepared using Generally accepted accounting principles (GAAP) and any deviations from the same are adequately reported. Further it should be acccompanied by all necessary disclosures that explain the figures in the balance sheet. Lastly all audit reports must contain auditor’s opinion whether.

By adhering to the guidelines, an auditor will be able to minimize the audit risk of material misstatements occurring in the books of accounts. It captures all aspects of the audit function, which is necessary to ensure that all the due diligence have been correctly carried out and all necessary best practices are implemented.