Brief Description of Gaas Holmes' Actions Resulting in Failure To Comply With Gaas
Brief Description of Gaas Holmes' Actions Resulting in Failure To Comply With Gaas
Brief Description of Gaas Holmes' Actions Resulting in Failure To Comply With Gaas
GENERAL STANDARDS
1 The auditor must have
adequate technical training
and proficiency to perform the
audit.
STANDARDS OF REPORTING
1 The auditor must state in the
auditors report whether the
financial statements are
presented in accordance with
generally accepted accounting
principles (GAAP).
6.22
A. Auditing standards indicate that reasonable assurance is a high level of
assurance. Accordingly, financial statement users should have a high degree
of confidence in the financial statements. However, reasonable assurance is
not an absolute level of assurance, and there is at least some risk that the
audited financial statements may include material misstatements.
B. The responsibility of the independent auditor is to express an opinion on the
financial statements he or she has audited. Inasmuch as the financial
statements are the representation of management, responsibility rests with
management for the proper recording of transactions in books of account, for
the safeguarding of assets, and for the substantial accuracy and adequacy of
the financial statements.
In developing the basis for his or her opinion, the auditor is responsible for
conducting an audit that conforms to auditing standards. These standards
constitute the measure of the adequacy of the audit. Those standards require
the auditor to obtain sufficient appropriate evidence about material
management assertions in the financial statements.
The informed judgment of a qualified professional accountant is required of an
independent auditor. The auditor must exercise this judgment in selecting the
procedures he or she uses in the audit and in arriving at an opinion
In presenting himself or herself to the public as an independent auditor, the
auditor is responsible for having the abilities expected of a qualified person in
that profession. Such qualifications do not include those of an appraiser,
valuer, expert in materials, expert in styles, insurer, or lawyer. The auditor is
entitled to rely upon the judgment of experts in these other areas of
knowledge and skill.
C. Auditors are responsible for obtaining reasonable assurance that material
misstatements included in the financial statements are detected, whether
those misstatements are due to error or fraud. Professional standards
acknowledge that it is often more difficult to detect fraud than errors because
management or employees perpetrating the fraud attempt to conceal the
fraud. That difficulty, however, does not change the auditors responsibility
to properly plan and perform the audit. Auditors are required to specifically
assess the risk of material misstatement due to fraud and should consider
that assessment in designing the audit procedures to be performed.
There has been increased emphasis on auditors responsibility to evaluate
factors that may indicate an increased likelihood that fraud may be occurring.
For example, assume that management is dominated by a president who
makes most of the major operating and business decisions himself. He
has a reputation in the business community for making optimistic
projections about future earnings and then putting considerable pressure on
operating and accounting staff to make sure those projections are met. He
has also been associated with other companies in the past that have gone