General_Accepted_Accounting_Standards

Business has made the economy prosper and in order for a business to continue, internal control is required in order for a business to properly and legally function in the business world. Auditing is an integral part of the internal control of each business, organization, and companies. The topic of this paper is to describe the nature and functions of auditing. Further information will include the General Accepted Auditing Standards (GAAS) and how GAAS affects Sarbanes Oxley Act of 2002 with applying the operational, functional, and the internal compliance of companies. The Sarbanes Oxley Act (SOX) place auditors with additional requirements including the Public Company Accounting Oversight Board (PCAOB). Auditing is the examination of statement of accounts and of other documents connected with accounts by persons who have no part in the preparation. Systems of financial inspection have been used especially in connection with public accounts. Audit has certain categories of questions that shows actual assets and liabilities that are property recorded, evaluated, incurred, and valued. Accuracy and the validity of the transaction and accounts are vital in auditing. Auditing is also vital in ensuring that the standards applied and used in the accounting procedures of the company is with compliance with Generally Accepted Accounting Principles (GAAP). Audits are vital for the owners, investors, executives , creditors, and trustees because accurate reporting is vital in making financial and executive decisions for an organization or company. In some companies, an annual audit is required before investing. (Auditing, 2008) CORT Business Services have internal control starting from the daily functions of accounting. Procedures ensure that each transaction are being reviewed and accounted by a manager or supervisor at the end of the month. Accounting department reviews and dissects the financials for any errors. After the review, executives review the financials once again. Once everything is in order, the financials are then submitted to the CFO in the corporate office. The corporate office evaluates and examines the accounts and the supporting documents. Any error or discrepancies found are being thoroughly reviewed before again. After the final review is done with, the documents are presented. CORT also has an internal auditor that travels twice a year to do an internal audit for each region that has an accounting department. The internal auditors reviews and test each department for accuracy, discrepancy, outstanding items, and any internal control issues. The elements of GAAS are the General Standards, Standards of Fieldwork, and Standards of Reporting. The first element, General standards require that the auditor be proficient, trained, maintain independence, and exercise due professional care throughout the audit. The second element, Standards of Fieldwork require that the auditor prepare a thorough audit plan with supervision for assistants. The auditor must be educated in the nature of the client’s business and its operations and internal control. The third element, Standards of Reporting require that an auditor include a report with a statement that the organization or entity are in compliance with GAAP procedures as well as any discrepancies stating inadequate reporting of disclosures, inconsistent data and principles, and other information that are being withheld. Compliance audits require that auditors are knowledgeable of an entity’s policies, procedures, in order to evaluate if the entity is complying with their own policies. Audit requirements and what auditors look for are consistency between reports and the performed results. The PCAOB auditing standards is created by the Sarbanes Oxley Act of 2002 in order to protect the interest of investors, owners, and the public. Preparation of audit for public companies to ensure the accuracy and validity of an independent audit report is the goal of the standards applied. This is why exclusive rights are given to the PCAOB for public company audits. SOX Act and the Board require that the CFO and CEO of an entity certify all financial statements, the entity provide a more comprehensive and informative reporting on the internal controls. CFO and CEO will also certify and approve all non-auditing activities as well as creating a report to the public. Auditing committees must have at least one financial expert and more than one member that are educated in financial accounting and internal control. A period of five years or cooling-off period is required for an auditing firm to audit a company.   Reference auditing. (2008). In The Columbia Encyclopedia. Retrieved from http://www.credoreference.com.ezproxy.apollolibrary.com/entry/columency/auditing Brenda A. Porter, (2009) "The audit trinity: the key to securing corporate accountability", Managerial Auditing Journal, Vol. 24 Iss: 2, pp.156 – 182 Keizer, H. (Dec 2009). Utilizing internal audit: a CFO's guide. Financial Executive, 25, 10. p.46(4). Retrieved August 31, 2010, from Academic OneFile via Gale: http://find.galegroup.com.ezproxy.apollolibrary.com/gtx/start.do'prodId=AONE&userGroupName=apollo