Generally Accepted Auditing Standards: Definition, GAAS vs. GAAP

Generally Accepted Auditing Standards (GAAS)

Investopedia / Paige McLaughlin

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 Standards

GAAS 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

  • Generally accepted auditing standards (GAAS) are a set of principles that auditors follow when reviewing a company's financial records.
  • GAAS helps to ensure the accuracy, consistency, and verifiability of an auditors' actions and reports.
  • The generally accepted auditing standards (GAAS) are contained within three sections that cover general standards, fieldwork, and reporting.

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Requirements for GAAS

Generally accepted auditing standards (GAAS) comprises a list of 10 standards, divided into the following three sections:

General Standards

  1. The auditor must have adequate technical training and proficiency to perform the audit.
  2. The auditor must maintain independence in mental attitude in all matters relating to the audit.
  3. The auditor must exercise due professional care in the performance of the audit and the preparation of the auditor's report.

Standards of Field Work

  1. The auditor must adequately plan the work and must properly supervise any assistants.
  2. The auditor must obtain a sufficient understanding of the entity and its environment, including its internal control, to assess the risk of material misstatement of the financial statements whether due to error or fraud, and to design the nature, timing, and extent of further audit procedures.
  3. The auditor must obtain sufficient appropriate audit evidence by performing audit procedures to afford a reasonable basis for an opinion regarding the financial statements under audit.

Standards of Reporting

  1. The auditor must state in the auditor's report whether the financial statements are presented in accordance with generally accepted accounting principles.
  2. The auditor must identify in the auditor's report those circumstances in which such principles have not been consistently observed in the current period in relation to the preceding period.
  3. If the auditor determines that informative disclosures in the financial statements are not reasonably adequate, the auditor must so state in the auditor's report.
  4. The auditor's report must either express an opinion regarding the financial statements, taken as a whole, or state that an opinion cannot be expressed. When the auditor cannot express an overall opinion, the auditor should state the reasons in the auditor's report. In all cases where an auditor's name is associated with financial statements, the auditor should clearly indicate the character of the auditor's work, if any, and the degree of responsibility the auditor is taking, in the auditor's report.
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  1. U.S. Securities and Exchange Commission. "All About Auditors: What Investors Need to Know." Accessed Nov. 10, 2020.

  2. American Institute of Certified Public Accountants. "Generally Accepted Auditing Standards," Pages 1599-1600. Accessed Nov. 10, 2020.