Generally Accepted Accounting Standards Paper
Prithvi Shenoy
ACC491
October 14, 2013
Michael Milkonian

Abstract
The importance of Auditing has gained considerable attention ever since its introduction in the mid-1800s. According to FASB, Statement of Financial Accounting Concepts No. 2, relevance and reliability are central to making accounting information useful for decision makers. To achieve this, auditors are required to obtain “reasonable assurance that those financial statement are presented fairly in all material respects” (Boynton & Johnson, 2006). This paper aims to explain the nature and types of auditing which is governed by the Generally Accepted Auditing Standards (GAAS). The paper then discusses the effects of Sarbanes-Oxley (SOX) Act 2002 and the Public Company Accounting Oversight Board (PCAOB) on publicly traded companies (issuers). Finally, the changes in the auditing environment with respect to the additional responsibilities placed on auditors and PCAOB as a result of the enforcement of SOX Act 2002 is discussed in the paper.

Generally Accepted Accounting Standards Paper

The elements of GAAS
In response to the McKesson & Robbins’ accounting scandal in 1938, the AICPA introduced the 10 Generally Accepted Auditing Standards (GAAS) in 1939 to provide “guidance on the conduct of an audit” as well as an “overview of the timing of the different phases of an audit engagement” (Louwers and Ramsay et al., 2007). The 10 basic standards can be categorized into 3 broad groups: general standards, fieldwork standards, and reporting standards (Refer Figure 1). Together they allow auditors to follow a framework for carrying out high quality financial statement audits. Additionally, compliance with GAAS is mandatory for publicly traded companies.

The general standards are in place to a) set mandatory requirements of a professional