Gaas_Paper

Generally Accepted Auditing Standards According to Investopedia, Generally Accepted Auditing Standards (GAAS) is a set of systematic guidelines used by auditors when conducting audits on companies' finances, ensuring the accuracy, consistency and verifiability of auditors' actions and reports (Investopedia, 2012). GAAS are used for auditing private companies like Mars. Mars is the brand name that produce M&M, Pedigree (dog food), and Uncle Ben’s as well as some other brands. Mars Company has to follow a set of generally accepted accounting standards in order to meet guidelines. The GAAS applies to financial, operational, and compliance audits. This paper will explain GAAS, in addition to the affect Sarbanes-Oxley Act (SOX) and Public Company Accounting Oversight Board (PCAOB) have on publicly traded companies. Elements of Generally Accepted Auditing Standards In discussing the functions of GAAS, we must look at the three main key points: General Standards, Standards of Fieldwork and Standard of Reporting. The general standard represents the quality of work and the auditor’s experience. The standards consist of three conditions: “1) The audit is to be performed by a person or persons having adequate technical training and proficiency as an auditor. 2) In all matters relating to the assignment, independence in mental attitude is to be maintained by the auditor or auditors. 3) Due professional care is to be exercised in the performance of the audit and the preparation of the report” (Boynton, 2006). In the standards of field work auditors conduct must be approach and professional at all times. These conditions must show the adequate planning and assistants; in addition a high understanding of entity and control of environmental financial statements. In connection with these two standards should also include a majority of competent audit evidence to be obtained from audit procedures to perform an opinion about financial statements. The last set of standards is Standard of Report. This standard is the end results of audit. It include whether the statements are in accordance to generally accepted accounting guide lines. The set will also include whether there is consistence in pervious period to current period. The disclosure statement must be regarded as correct unless otherwise disclaimed. The last part of Standards of Reporting is to record the opinion of the auditor in connection with the financial statements or an assertion if an opinion is not able to be considered. Mars Applying Financial, Operational and Compliance Audits For the purpose of expressing an opinion about the financial statement audit; auditing in finance involve attaining and reviewing verification about a business’s financial position. This opinion helps the company to know if the are meeting guidelines of GAAP. External audit firms are usually the ones to be hired to conduct the audit for companies. Once the audit is complete the financial statements report is give to creditors, stockholders, agencies, and the public. Investors rely on the financial report from external auditors to attain reliable data that is needed for supporting lending. Mars’ pedigree foundation is a good example of GAAS guidelines. The Pedigree Foundation of Mars Corporation has their 2010 Report of Independent Auditors audited by Price Waterhouse Coopers LLP. The final report established that the financial position and cash flow was presently fair in all material respects. It further stated that the financial position and nest assets change for the year ending was conformity with accounting principles generally accepted in United States. The financial statements were the responsibility of the Foundation’s management and the auditors formed an opinion based on the audit. The auditors further state that they are required to plan and perform the audit in a way that assures that the financial statements are free from material misstatement. So as a result the audit finds was in accordance allowing Price Waterhouse to make an informed opinion (Mars Incorporated, 2012). The purpose of the operational audit is to attain and review any evidence about effectiveness and competence of the operating performance within certain objectives. This audit is also known as management audit or performance audit. All the activities of a firm’s enterprise are center on a branch, department or division. In addition the second part could function as a program like distributing food stamps. Compliance audit evaluates whether the evidence is operational or financial performance in connection with certain rules, conditions, or regulations. The information needed in relation to criterion will vary in sources. Also in relation to the compliance audit it is required to use SOX Act for the purpose of both management contention and financial statements. Creditors may want compliance audits to be base on criteria (Boynton, 2006, pg. 8). The Effect of SOX Act and PCAOB The SOX Act to publicly traded companies only will affect audits in several ways. Companies that are being audit can not receive any consulting work. The act also does not allow for auditors to advise consumers about internal audits. In addition auditors must provide PCAOB with list of consumers they serviced and the fees related to that service. Auditors can not audit the same company after five years. The act also requires that a risk assessment be done for internal control. The examination of how financial transactions are complied and recorded must be identified by auditors. Further SOX requires that thorough examination of internal audits be done (Slovin, 2012). The PCAOB is created by SOX Act to ensure that auditors meet the need of investors. The requirements of PCAOB are to ensure public registering of accounting firms in relation to financial statements. To ensure control standards of reviews for auditors publicly held companies and inspect registered companies. PCAOB is also to set independent and auditing standards for audits of publicly held companies. In addition the board is also to perform duties for promoting highly professional standards as it relate to public audits and ensuring compliance of SOX Act. Summary The discussion explains that GAAS is a systematic guideline of rules that auditors must use to ensure accuracy of financial statements. This paper also discussed that Mars Corporation is one the privately held companies that use GAAS. The paper further discussed that the generally accepted auditing standards consisted of three standards: General standards, Standards of Fieldwork and Standards of Reporting. Then the paper explained how these standards applied to financial, operational, and compliance audits. Finally we discussed the effect of Sox Act and PCAOB. References Boynton, W. C. (2006). Modern auditing: Assurance services and he integrity of financial reporting (8th ed.). Hoboken, NJ: John Wiley & Sons. Investopedia. (2012). Generally Accepted Auditing Standards. Retrieved from http://www.investopedia.com/terms/g/gaas.asp Mars Incorporated. (2012). Press Center Media. Retrieved from http://www.mars.com/global/assets/documents_Annual-Report.html Slovin, J. (2012). Sarbanes Oxley Audit Requirements. Retrieved from http://www.ehow.com/list_75343336_sarbanes-oxley-audit-requirements.html