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Unformatted text preview: CHAPTER 2 Professional Standards Review Questions 2-1 Generally accepted accounting principles are accounting principles which have substantial authoritative support, such as approval by the Governmental Accounting Standards Board, the Financial Accounting Standards Advisory Board, or the Financial Accounting Standards Board, or its predecessor, the Accounting Principles Board. Generally accepted auditing standards (GAAS) refer to the 10 broad standards set forth by the AICPA. These 10 standards include three general standards, three standards of field work, and four standards of reporting. Examples of generally accepted accounting principles are the cost principle, realization principle, matching principle, and the going-concern assumption. There are a number of others, but no official list exists. An example of a generally accepted auditing standard (within the general standards subgroup) would be any of the following. (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, an 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. 2-2 The usual avenues for an individual to meet the requirement of "adequate technical training and proficiency as an auditor" are obtaining a college or university education with major work in accounting and auditing, experience in public accounting (auditing experience with the GAO or in internal auditing is a possible alternative), and participation in continuing education programs. 2-3 The generally accepted auditing standards (GAAS) consist of 10 broad general standards developed by the AICPA and officially adopted by the AICPA membership. The Statements on Auditing Standards (SASs) are a series of interpretations of the GAAS and are issued by the Auditing Standards Board (ASB). The SASs are more detailed and specific than the 10 generally accepted auditing standards. Additional SASs are issued whenever the ASB deems an auditing problem to be of sufficient importance to justify a pronouncement. 2-4 The first Statement on Auditing Standards issued was a codification of 54 statements previously issued over many years by the Committee on Auditing Procedure, a predecessor of the ASB. Thus, SAS 1 deals with a great variety of topics and exceeds 200 pages in length. The rest of the SASs typically deal with a single auditing topic. 2-5 The auditors' responsibilities concerning the detection of illegal client acts depends on the relationship of the law or regulation to the financial statements. Certain laws and regulations, such as income tax laws, have a direct effect on the amounts included in the financial statements. The auditors have a responsibility to design their audit to provide reasonable assurance of detecting material violations of these laws and regulations....
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This note was uploaded on 03/08/2010 for the course ACCOUNTING acc304 taught by Professor Askari during the Spring '10 term at BA Mannheim.
- Spring '10