GAAS and Principles

Question 1

AICPA replaced the 10 GAAS with 7 “principles” in four categories, what are the four categories?

Answer 1

1) Purpose/Premise
2) Responsibilities
3) Performance
4) Reporting

Question 2

For purpose and premise, what are the two principles?

Answer 2

Purpose: The purpose of an audit is to provide F/S to users with an opinion by the auditor on whether the F/S are presented fairly, in all material respects, in accordance with the applicable financial reporting framework.

Premise: An audit in accordance with GAAS, that management and, where appropriate, those charged with governance, have the responsibility that

• for the preparation and fair presentation of F/S
• To provide the auditor with all information relevant to preparation and fair presentation of the F/S

Question 3

What is the one principle under responsibilities?

Answer 3

Auditors are responsible to have appropriate competence and capabilities to perform the audit; maintaining professional skepticism and exercising professional judgement

Question 4

What is the three principle for performance?

Answer 4

1) To express an opinion, the auditor obtains reasonable assurance about whether the F/S as a whole are free from material misstatement, whether due to fraud or error

2) To obtain reasonable assurance, which is a high, but not absolute, level of assurance, the auditor
- Plans the work and property supervises any assistants
- determines and applies appropriate materiality levels
- identifies any risks of material misstatements
- obtains sufficient appropriate audit evidence about whether there are material misstatements.

3) The auditor is unable to obtain absolute assurance that the F/S that the F/S are free from material misstatement because of inherit limitations, which arise from
- The nature of financial reporting
- the nature of audit procedures
- the need for the audit to be conducted within a reasonable period of time and so to achieve cost benefit

Question 5

What is the one principle for reporting?

Answer 5

Based on the evaluation of the audit evidence obtained, the auditor expresses, in the form of a written report, an opinion in accordance with the auditors findings, or states than an opinion cannot be expressed.

The opinion states whether the financial statements are presented fairly, in all material aspects, in accordance with the applicable financial reporting framework.

Question 6

What does GAAS now mean?

Answer 6

It is a body of literature, “statements on auditing standards” SASS