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Professional Standards
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McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved.
Generally Accepted Auditing Standards--General Standards
Adequate technical training and proficiency
Independence in mental attitude is to be maintained
Due professional care is to be exercised
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Generally Accepted Auditing Standards--Standards of Field Work
Work is to be adequately planned and properly supervised
Sufficient understanding of internal control is to be obtained
Sufficient competent evidential matter is to be obtained to afford a reasonable basis for the opinion
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Generally Accepted Auditing Standards--Standards of Reporting
State whether the financial statements are presented in accordance with GAAP
Identify circumstances in which such principles have not been consistently applied
Informative disclosures are adequate unless otherwise stated in the report
Report should clearly state the degree of responsibility being assumed by the auditors by expressing an opinion or stating that one cannot be expressed, and the reason therefor
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Auditor Responsibility for the Detection of Errors and Fraud
Obtain information to assess the inherent risks and fraud risks Information about the company and its environment Discussion among audit team members Inquiries of management and others Planning analytical procedures, including those involving revenue
Assess the risk of errors and fraud that may cause the financial statements to contain a material misstatement.
Based on that assessment, plan and perform the audit to obtain reasonable assurance that material misstatements, whether caused by errors or fraud, will be detected (including those procedures required by SAS No. 99.
Exercise due care in planning, performing and evaluating the results of audit procedures, and the proper degree of professional skepticism to achieve reasonable assurance that material misstatements due to error or fraud will be detected.
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Auditor Responsibility for the Detection of Illegal Acts
Those that could have a direct and material effect on financial statement amounts--same as for errors and fraud. An audit obtains reasonable assurance of detecting these types of illegal acts.
Those with an indirect effect on financial statement amounts: Be aware of possible occurrence. If information comes to the auditor’s attention, apply
audit procedures directed at determining whether an illegal act has occurred. An audit does not provide assurance that indirect-effect illegal acts will be detected.
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The Standard Auditors’ Report
Title Addressee Content
Introductory Paragraph Scope Paragraph Opinion Paragraph
Signature Date
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McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved.
The Standard Auditors’ Report--Introductory Paragraph
We have audited the accompanying balance sheet of XYZ Company as of December 31, 20XX, and the related statements of income, retained earnings, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
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The Standard Auditors’ Report--Scope Paragraph
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
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McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved.
The Standard Auditors’ Report--Opinion Paragraph
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of XYZ Company as of December 31, 20XX, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
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The GAAP Hierarchy
Authoritative Body Pronouncements Pronouncements of Bodies Composed of Expert
Accountants, That Are Exposed for Public Comment
Pronouncements of Bodies of Expert Accountants That Are Not Exposed for Public Comment
Widely Recognized Practices and Pronouncements
Other Accounting Literature
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The Attestation Standards
Attestation Standards
Financial Forecasts and
Projections
Pro Forma Financial
Information
InternalControl
Compliance With Laws,
Regulations, and Contracts
Management’sDiscussion and
Analysis
ApplyingAgreed-UponProcedures
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Elements of Quality Control
Independence, Integrity, and Objectivity Personnel Management Acceptance and Continuance of Clients
and Engagements Engagement Performance Monitoring
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Regulation of the Public Accounting Profession—Public Companies
Public Company Accounting Oversight Board & the SEC Registration of public accounting firms that audit
public companies Establish or adopt auditing, quality control, ethics,
independence and other standards for auditors of public companies
Conduct inspections of registered public accounting firms
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Regulation of the Public Accounting Profession—Nonpublic Companies
American Institute of Certified Public Accountants Peer review/inspection program Ethics investigations
State Boards of Accountancy Registration of all CPAs and CPA firms Ethics investigations
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International Audit Report
Title Addressee Content
Introductory Paragraph Scope Paragraph--International Auditing Standards Opinion Paragraph
Signature--Firm, Partner or Both Date
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International Audit Report-Introductory Paragraph
We have audited the accompanying balance sheet of ABC Company as of December 31, 20X1, and the related statements of income, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
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International Audit Report-Scope Paragraph
We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
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International Audit Report-Opinion Paragraph
In our opinion, the financial statements present fairly, in all material respects, the financial position of ABC Company as of December 31, 19X1, and the results of its operations and its cash flows for the year then ended in accordance with International Accounting Standards.
