Acc 490 - Generally Accepted Auditing Standards

Generally Accepted Auditing Standards

ACC 490

October 23, 2011

Generally Accepted Auditing Standards

Auditing employs practical methods of research and testing using the auditor to obtain evidence necessary to substantiate the auditors' opinions and conclusions, its use is based on the auditors' criteria or trial, according to the circumstances. The objective of the audit is to support members of the firm in the course of their activities. Furthermore, audit provides analysis, appraisals, recommendations, advice, and information concerning the activities reviewed. Members of the organization that auditors support include firm's directors and the managers. Although transparency and ethics should be the ruling fact of auditing, that is not always the case.

Accounting scandals involving irregularities and fraudulent procedures which involved Enron auditor Arthur Andersen and that was declared the largest bankruptcy in history in November 2001, gave the precedent for necessary regulations from the government. In the following paper a description on the Generally Accepted Auditing Standards (GAAS) will be presented and the effects of the Sarbanes-Oxley Act of 2002 in auditing will be explained. Moreover, a study of the Public Company Accounting Oversight Board (PCAOB) will be described as it has a major influence on auditing.

Generally Accepted Auditing Standards (GAAS)

General standards, standards of fieldwork, and standards of reporting constitute the 10th most known auditing standards that dictate the GAAS. "These standards were originally approved by the members of the AICPA in the late 1940s" (Media.Wiley, 2010, p. 50). GAAS are compulsory indications that auditors have to comply in the performance of audit functions and presents the requirements and the auditor's professional character. According to the GAAS, the auditor should be free of constraints and influences, keep an open mind, and absolute independence of criteria in the preparation of the report of its examination. The objective and independent auditor's mental and quality is the most important requirement. The loss of such conditions completely eliminates the validity of his report and questioning decreases considerably the auditing credibility. Audit must ensure adequate control of quality of work, through constant monitoring of work, continuing preparation of the auditors, enabling, and giving them the tools to develop their work without pressure or limitations.

Furthermore, during the performance of work, auditors should discuss with the officials of the audited entity, the interim reports containing the findings being obtained in order to take appropriate corrective action.

Effects of the Sarbanes-Oxley Act of 2002 in Auditing

The not so recent events and corporate bankruptcy cases have changed the way in which companies acknowledges the impact that a good system of internal control, corporate governance, and ethics will provide to the organization. After known bankruptcies of Enron, WorldCom, and others not so well known, governments were forced to establish control measures on business and its executives by requiring greater responsibility for their acts. The first law was issued in this area was the Sarbanes Oxley Act, known as the SOX, which established requirements for businesses in the United States but that consequently has altered the activities of companies in different countries.

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