Explaining GAAS vs GAAP
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What Is GAAP?
What Is GAAS?
How Does GAAS Work?
What Are GAAS Standards?
The auditor must be trained and qualified to do the audit. The auditor should be objective and not allow their personal opinion to sway their findings. The auditor must be professional during the audit and during the writing of the report.
Standards of Field Work
The auditor should plan the work that must be done and properly supervise any assistants during the audit. The auditor must thoroughly understand the business or entity that is being audited so as to understand the risk of fraud or error during the reporting of financial statements; furthermore, the auditor should also plan future audits, if needed, based on their findings. The auditor must acquire sufficient evidence during the audit process so that they can form an opinion on their findings (whether everything is copacetic, there has been error, or there has been deliberate fraud).
Standards of Reporting
The auditor must determine and state in their report whether the financial statements they reviewed were written following GAAP regulations. The auditor must state when, and under what circumstances, GAAP principles and regulations were not followed. The auditor must state whenever financial disclosures are not adequate. The auditor must state their opinion regarding any financial disclosures they review. If they are unable to reach an opinion, then they must state their reasons. Lastly, when an auditor’s name is linked to an audit, they must state what degree of responsibility they are taking to the veracity of their findings.
Comparing GAAP to GAAS
Both are designed to make sure a company’s financial statements are complete, consistent, and comparable. While they are used by different professions, the mindset behind them is the same. Both consist of 10 rules or principles. The guidelines are different, but the behavior that is expected of either accountants or auditors is summed up in 10 key concepts. Both were created to instill trust and confidence in a company’s financial records. Thanks to GAAP and GAAS, investors, lenders, and other third parties know they can trust the financial information released by GAAP-compliant companies.
They are used by different professions. GAAP is used by accountants; GAAS is used by auditors. They have different functions. The primary function of GAAP is to assist firms in making their financial statements. The main job of GAAS is to help auditors properly audit companies. They are used at different stages. GAAP is used first, when companies are preparing financial statements. GAAS is later, after those documents have been prepared.
Pros and Cons of GAAS
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