An Overview of Generally Accepted Auditing Standards

April 10, 1996 Generally Accepted Auditing Standards are those guidelines which auditors must adhere to while conducting an audit of a company’s or government entity’s financial statements. It must also be stated in the audit report that the audit was conducted following Generally Accepted Auditing Standards. This has been required since 1941 after the investigation of a large drug company, McKesson & Robbins, Inc., which had had funds embezzled by its president and his three brothers. Neither the internal controls or the independent auditors detected the embezzlement.

Generally Accepted Auditing Standards are divided into three main areas: 1) General Standards, 2) Standards of Fieldwork, and 3) Standards of Reporting.

Each area contains three or four specific standards. General Standards There are three general standards. They deal with technical training and proficiency, independence, and due professional care. To have technical training and proficiency means you have the proper educational background. This is demonstrated by passing a comprehensive examination. Independence is the most important attribute of an auditor.

An auditor must remain independent of the client at all times and avoid all situations that may jeopardize his independence. Due professional care means working carefully and being willing to take responsibility for the accuracy of your work. Standards of Field Work There are three standards of field work. They address proper planning and supervision, examination and evaluation of internal controls, and collecting sufficient and competent evidence. An auditor must adequately plan his audit in advance and be familiar with the business and industry of his client. He should test the internal control system of the client, especially those controls on which he plans to rely during the audit.

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He should obtain the most reliable evidence available and select the best procedures to obtain that evidence.

Standards of Reporting There are four standards of reporting. They are concerned with whether the financial statements are presented in accordance with Generally Accepted Accounting Principals (GAAP), consistency, informative disclosures, and an expression of opinion on the financial statements that have been audited. The audit report must explicitly state whether the financial statements have been prepared in conformity with GAAP and whether or not these principles have been applied consistently from one year to the next. Unless stated otherwise, it should be assumed that the informative disclosures stated in the financial statements are adequate. Any deficiencies in this area should be specifically stated in the audit report. Footnotes must contain all the relevant information needed to be able to properly interpret the financial statements. Finally, the auditor must express an opinion on the financial statements. The auditor should issue either an unqualified, qualified, adverse, or disclaimer of opinion. The basic format for each of these opinions is pretty much pre-established. In a qualified or adverse opinion, an additional paragraph should be added for each problem found within the financial statements. A disclaimer of opinion should be issued any time an auditors independence is violated or if he is unable to complete the entire audit for some reason. Conclusion Each of the standards carry equal weight and should be followed while conducting any audit whether it is a private business or a governmental entity. Depending on the specific audit, there may be other standards which also apply. 

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An Overview of Generally Accepted Auditing Standards. (2022, May 10). Retrieved from

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