Generally Accepted Auditing Standards

There have been many scandals in the past years that have lead up to the need for public organizations to be audited. The Sabarnes-Oxley Act of 2002 was enacted to keep the public safe from these scandals and to ensure the public has a positive opinion of accounting professionals. Auditors are to follow a set of systematic guidelines when conducting audits on companies' finances, ensuring the accuracy, consistency and verifiability of their actions and reports. These guidelines are set up by the Generally Accepted Auditing Standards (GAAS).

Auditing is "a systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between those assertions and established criteria and communicating the results to interested users." (Boynton & Johnson, 2006) Generally accepted auditing standards are the guidelines that auditors follow when performing their audit. Generally accepted auditing standards have three elements: General standards, Standards of field work, and Standards of reporting. General standards require the audit to be preformed by a person having adequate technical training and proficiency as an auditor, the auditor is to be independent from the organization, and professional care is to be exercised in the performance of the audit and the preparation of the report. Standards of field work require work is to be adequately planned and assistants are to be properly supervised, an understanding of the entity and its environment, including internal controls, should be obtained to assess the risk of material misstatement of the financial statements whether due to error or fraud, and sufficient competent audit evidence should be obtained in the audit process to afford a reasonable basis for an opinion regarding the financial statements under audit. Standards of reporting require that the reports shall state whether the financial statements are presented in accordance with generally accepted accounting principles, the report shall identify circumstances in which principles have not been consistently observed in the current period in relation to previous periods, disclosures in the financial statements are to be regarded as reasonably adequate unless otherwise stated in the report, and the report shall contain either and expression of opinion regarding the financial statements or that an expression cannot be expressed. If an opinion cannot be expressed then a reason should be stated. Financial statement audits are a presentation of and organizations financial position and are to be preformed by independent certified public accounts. Operational audits evaluate a company's efficiency and effectiveness in regard to operational activities in relation to specified objectives. Standards of field work are important in the operational audit for the auditor to recommend improvements. Compliance audits