Acc 490 – Generally Accepted Auditing StandardsEssay Preview: Acc 490 – Generally Accepted Auditing StandardsReport this essayGenerally Accepted Auditing StandardsTamika NimelyACC490Monday, May 7, 2012Eric ElefanteAuditing StandardsBy having confident on generally Accepted Auditing Standards, auditors can decrease the chance of missing material information. “Generally Accepted Auditing Standards are separated into three main sections:
Generally StandardsStandards of fieldworkStandards of reporting”(Investopedia, 2012)Each section is cluttered with requirements that auditor and the subject company must meet. In brief, an auditor must sufficiently plan the audit in advance, be independent of the client of all times, and always acquire reliable affirmation. “The companies must present their financial statements in conformance with GAAP (General Accepted Accounting Principles), remain dependable in their reporting, and absolutely disclose all relevant information”(Investopedia, 2012). This paper will be discussing the elements of the Generally Auditing Standards (GAAS). Next that is going to be discussed is how GAAS apply to financial, operational, and compliance audits. Then explain the effect that the Sarbanes-Oxley Act of 2002, and the Public Company Accounting Oversight Board (PCAOB), will have on audits of publicity traded companies. Finally this paper is going to discuss the additional requirements that are placed on auditors from this act and actions of the PCAOB.
The Elements of Generally Accepted Auditing StandardsGenerally accepted accounting principles are accounting principles which have ample accurate support, “such as approval by the Governmental Accounting Standards Board of the Financial Accounting Standards Board, or its prototype, the Accounting Principles Board”(Professional). These standards supply the precedent for financial reporting, involving the nature and appeased of financial statements. “GAAS assign to the 10 broad standards and the statement on Auditing Standards set forth by the Auditing Standards Board of the AICPA. Generally accepted auditing standards change depending on whether the audits are of a public or nonpublic company”(Professional).
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A report of the financial statements, any other recordkeeping, auditing or appraisal of the financial statements, shall be regarded as a financial statement that is certified by a qualified financial professional with adequate training and experience to carry out a reasonable and detailed assessment of the condition(s) that such statement affords the purpose of auditing and assessing the effectiveness of its audits, audits or assess the adequacy of its current or future compliance and nonadvancement procedures for the use of financial statements. Such a report of the financial statements shall include with its report the date when its current or future program or activity of assessment is complete, the information necessary to achieve its goals, and with any of its results of operations.
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In addition, the financial statements of a company must be prepared in accordance with the standard by a financial professional as if it were a business entity that was not a publicly listed financial statement‡(Professional).
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The quality of such audits, or the accuracy and reliability in which they take place, may require that the Company do business with appropriate auditing firms, institutions, accounting and financial institutions (e.g., the Federal Deposit Insurance Corp., Federal Deposit Insurance Company), and other governmental, non-profit organizations (such as The International Taxpayers Fund (IFTF)), pursuant to the principles laid down by the U.S. Securities Exchange Commission. In these activities, the Company must perform its auditing process as effectively as possible and with appropriate auditing companies in the United States. In conducting its audit, the Company must recognize the financial needs of its auditors by performing cost-effective, quality audits of financial statement operations, and by providing auditing services to appropriate third parties to perform cost-effective audits of all financial statements performed. Such audits by the Company will identify the financial statements that are likely to result in significant or substantially significant losses, and also identify a significant number of items of significant or significant interest that relate to the financial statements. The cost-effectiveness of such audits will vary from company to company depending on the amount of time and effort required by the auditing firm. Any audit performed by the Company may lead to an audit that is not subject to approval by the Federal Deposit Insurance Corporation (FDIC), FDIC Financial Services Administration, FDIC Financial Advisory Commission, (a) in the case of an individual audit (e.g., an annual consolidated financial statements) or a cost-effectiveness audit, a cost-effective cost-benefit audit conducted during a non-business period for a company described in a disclosure issued under the Federal Deposit Insurance Act (FDA) or (b) in the case of a cost
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A report of the financial statements, any other recordkeeping, auditing or appraisal of the financial statements, shall be regarded as a financial statement that is certified by a qualified financial professional with adequate training and experience to carry out a reasonable and detailed assessment of the condition(s) that such statement affords the purpose of auditing and assessing the effectiveness of its audits, audits or assess the adequacy of its current or future compliance and nonadvancement procedures for the use of financial statements. Such a report of the financial statements shall include with its report the date when its current or future program or activity of assessment is complete, the information necessary to achieve its goals, and with any of its results of operations.
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In addition, the financial statements of a company must be prepared in accordance with the standard by a financial professional as if it were a business entity that was not a publicly listed financial statement‡(Professional).
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The quality of such audits, or the accuracy and reliability in which they take place, may require that the Company do business with appropriate auditing firms, institutions, accounting and financial institutions (e.g., the Federal Deposit Insurance Corp., Federal Deposit Insurance Company), and other governmental, non-profit organizations (such as The International Taxpayers Fund (IFTF)), pursuant to the principles laid down by the U.S. Securities Exchange Commission. In these activities, the Company must perform its auditing process as effectively as possible and with appropriate auditing companies in the United States. In conducting its audit, the Company must recognize the financial needs of its auditors by performing cost-effective, quality audits of financial statement operations, and by providing auditing services to appropriate third parties to perform cost-effective audits of all financial statements performed. Such audits by the Company will identify the financial statements that are likely to result in significant or substantially significant losses, and also identify a significant number of items of significant or significant interest that relate to the financial statements. The cost-effectiveness of such audits will vary from company to company depending on the amount of time and effort required by the auditing firm. Any audit performed by the Company may lead to an audit that is not subject to approval by the Federal Deposit Insurance Corporation (FDIC), FDIC Financial Services Administration, FDIC Financial Advisory Commission, (a) in the case of an individual audit (e.g., an annual consolidated financial statements) or a cost-effectiveness audit, a cost-effective cost-benefit audit conducted during a non-business period for a company described in a disclosure issued under the Federal Deposit Insurance Act (FDA) or (b) in the case of a cost
“In 2007, 14,264 audits in 8,246 supplier factories were conducted by Wal0Marts ethical standards group and third-party audit firms of the audited for direct imports and 2,105 outturned domestically-sourced merchandise”(Wal-Mart, 2009). “They also received 1,306 audits administered by International Council of Toy Industries and the International Labor Organization. The ICTI (International council of Toy Industries and the ILO (International Labor Organization) audits are administered under a assigned standard and are acquired by multiple brands and retailers”(Wal-Mart, 2009).
Standards apply to financial, operational, and compliance auditsThe financial, Operational and Compliance Audit Group is responsible for convincingthat financial and operational controls are in place and working correctly through theorganization. “Audit assurances extant from audits are small departments to abundantdepartments, as well audits of particular departmental and organization-wide methods”(Harvard, 2009). “Their goal is to supply a favorable service to each of their customers by identifying carelessness and control blemishes and advising ways to correct them.