GAAS and Principles

Question 1

What is GAAS?

Answer 1

The body of authoritative professional standards issued in the form of Statements on Auditing Standards

Question 2

What is the purpose of the 7 GAAS principles?

Answer 2

To provide a framework for understanding and explaining an audit

Question 3

What are the primary themes of the 7 principles?

Answer 3

1 Purpose/premise
2 Responsibilities
3 Performance
4 Reporting 
(as a memory aid, remember: PR-PR)

Question 4

What’s the purpose of the Purpose (Premise) theme for the 7 principles?

Answer 4

The purpose of an audit is to provide financial statement users with an opinion by the auditor on whether the financial statements are presented fairly, in all material respects, in accordance with the applicable financial reporting framework

Question 5

What’s the purpose of the Premise (Purpose) theme for the 7 principles?

Answer 5

The premise is that management and, where appropriate, those charged with governance, have responsibility for the preparation and fair presentation of the financial statements and will Provide the auditor with all information

Question 6

What’s the purpose of the Responsibilities theme for the 7 principles?

Answer 6

Auditors are responsible for having appropriate competence and capabilities to perform the audit
(takes the place of what previously had been called general standards describing characteristics the auditor brings to the engagement)

Question 7

What’s the purpose of the Performance theme for the 7 principles?

Answer 7

To express an opinion, the auditor obtains reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error
(takes the place of what previously had been called fieldwork standards governing the auditor’s evidence-gathering activities)

Question 8

What’s the purpose of the Performance theme in regards to reasonable assurance?

Answer 8

1 Plans the work and properly supervises any assistants
2 Determines and applies appropriate materiality level or levels throughout the audit
3 Identifies and assesses risks of material misstatement, whether due to fraud or error, based on an understanding of the entity and its environment, including the entity’s internal control
4 Obtains sufficient appropriate audit evidence about whether material misstatements exist, through designing and implementing appropriate responses to the assessed risks

Question 9

What’s the purpose of the Performance theme in regards to the inability to obtain absolute assurance that the financial statements are free from material misstatements because of inherent limitations which arise from?

Answer 9

1 The nature of financial reporting
2 The nature of audit procedures
3 The need for the audit to be conducted within a reasonable period of time and so as to achieve a balance between benefit and cost

Question 10

What’s the purpose of the Reporting theme for the 7 principles?

Answer 10

A written report, is an opinion in accordance with the auditor’s findings, or states that an opinion cannot be expressed. The opinion states whether the financial statements are presented fairly, in all material respects, in accordance with the applicable financial reporting framework.

Question 11

What are the 10 former principles of GAAS?

Answer 11

T- Training
I - Independence 
D - Due professional care
P - Planning and Supervising
I - Internal control (gain understanding)
E - Evidence (obtain and evaluate)
G - GAAP (must state in report)
C - Consistency
D - Disclosure
O - Opinion