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1 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Auditing & Assurance Services: A Systematic Approach, 11e (Messier) Chapter 2 The Financial Statement Auditing Environment 1) A series of business and related auditing failures led to the passage of the Sarbanes-Oxley Act (2002). 2) The primary audit context with which an auditor is concerned is the auditee's industry or business. 3) The audit committee generally includes senior executives of the organization. 4) A financial statement audit is generally organized based on the five basic business processes or cycles. 5) One of the five basic business processes is the warehousing cycle. 6) The ASB's auditing standards contain a preface that includes Principles Underlying an Audit Conducted in Accordance with GAAS. 7) PCAOB auditing standards must be followed on all financial statement audits performed in the U.S. 8) A financial statement audit must be conducted based on GAAP. 9) Generally, the financial statements of U.S. companies must be prepared based on GAAP. 10) PCAOB auditing standards must be followed on all audits of public companies' financial statements. 11) The Audit Committee consists of: A) members of management. B) a subcommittee of the AICPA who establish the SAS. C) members of the Board of Directors. D) appointed government overseers. 12) What organization is responsible for setting auditing standards for audits of publicly-traded companies in the U.S.? A) AICPA. B) FASB. C) GASB. D) PCAOB.
Updated November 11, 2020 What Are Generally Accepted Auditing Standards (GAAS)?Generally accepted auditing standards (GAAS) are a set of systematic guidelines used by auditors when conducting audits on companies' financial records. GAAS helps to ensure the accuracy, consistency, and verifiability of auditors' actions and reports. The Auditing Standards Board (ASB) of the American Institute of Certified Public Accountants (AICPA) created GAAS. Understanding the Generally Accepted Auditing StandardsGAAS are the auditing standards that help measure the quality of audits. Auditors review and report on the financial records of companies according to the generally accepted auditing standards. Auditors are tasked with determining whether the financial statements of public companies follow generally accepted accounting principles (GAAP). GAAP is a set of accounting standards that companies must follow when reporting their financial statements. Auditors review a company's financial numbers and accounting practices to ensure they're consistent and comply with GAAP. The Securities and Exchange Commission (SEC) requires that the financial statements of public companies are examined by external, independent auditors. While GAAP outlines the accounting standards that companies must follow, GAAS provides the auditing standards that auditors must follow. Key Takeaways
Click Play to Learn What Generally Accepted Auditing Standards AreRequirements for GAASGenerally accepted auditing standards (GAAS) comprises a list of 10 standards, divided into the following three sections: General Standards
Standards of Field Work
Standards of Reporting
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Which of the following is a principle underlying an audit conducted in accordance with GAAS?Which of the following is a principle underlying an audit conducted in accordance with generally accepted auditing standards? An auditor's opinion enhances the degree of confidence that intended users can place in the financial statements.
What are the three auditing standards that constitute GAAS?The 10 standards in the GAAS are grouped into three categories: general standards, standards of field work, and standards of reporting.
What are the principles underlying the audit activity?The basic principles of auditing are confidentiality, integrity, objectivity, independence, skills and competence, work performed by others, documentation, planning, audit evidence, accounting system and internal control, and audit reporting.
Which of the following best describes the general character of the three principles that are listed?Which of the following best describes the general character of the three principals that are listed in the Performance section of the Principles Underlying an Audit Conducted in Accordance with GAAS? The fundamental responsibilities and characteristics of an auditor.
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Which principle of the principles underlying an audit conducted in accordance with GAAS describes?
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