Generally Accepted Auditing Standards Paper

Generally Accepted Auditing Standards Paper

Auditing plays a vital role in business, government, and our economy. The current paper shall discuss the nature and functions of auditing and relate them to the audit functions in ABC, Inc., The paper shall also address the elements of the Generally Accepted Auditing Standards (GAAS) and how these standards apply to financial, operational, and compliance audits, explain the effect that the Sarbanes-Oxley Act of 2002, and the Public Company Accounting Oversight Board (PCAOB) will have on audits of publicly traded companies, and discuss the additional requirements that are placed on auditors from this Act as well as the actions of the PCAOB.

The American Accounting Association (AAA) provides the most general definition of auditing as follows: 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 the assertions and established criteria and communicating the results to interested users. This definition contains several ideas important in a wide variety of audit practices. Auditing is a systematic process. It is purposeful and logical and is based on the discipline of a structured approach to decision making. It is not haphazard, unplanned, or unstructured. The process involves obtaining and evaluating evidence. Evidence consists of all influences that ultimately guide auditors' decisions and relates to assertions about economic actions and events (Louwers, Ramsay, Sinason, Strawse, 2007).

Ireland San Fillipo, LLP are the external independent auditors for ABC, Inc., a software company. Having external and independent auditing agency helps ensure unbiased opinions for ABC, Inc. The audit functions are conducted on an annual basis after their year-end close in March. The Senior Accountant and the VP of Finance gather all the information pertaining to the audit and submits to the external auditors. The auditors also gather information about the company's processes, economic transactions and procedures in an unbiased manner. The information is then evaluated to ensure that it follows Generally Accepted Accounting Principles (GAAP) or any other standards that may apply. The auditors then compile a report of their findings to be submitted to the appropriate parties. These processes are critical to the accurate verification and assurance provided by the auditing professional. The validity of ABC, Inc.'s financial statements and the accuracy of their internal controls shall be very important in decision making processes; therefore, the need for reliable auditing and assurance in these areas is required.

The elements of the GAAS are the General Standards, Standards of Fieldwork and Standards of Reporting. The General Standards require that the auditor be proficient and trained adequately, maintain independence, and exercise due professional care throughout the