Question

Accountants follow generally accepted auditing accounting standards and generally accepted accounting principles (GAAP). Distinguish between the GAAS and GAAP.

• What professional organization establishes the GAAS and what is its purpose?
• What professional organization establishes the GAAP?
• Can GAAS exist without GAAP and/or vice versa and why is this so?
• Do GAAS and GAAP have different agendas and why is each needed?

Answer 1

GAAS

1)GAAS (Generally Accepted Auditing Standards) is a set of rules and guidelines for the auditors that are meant to help them in the audit of companies in such a way that these audits are more reliable or accurate, are consistent, and are verifiable

GAAP

1) GAAP (Generally Accepted Accounting Principles) is a set of rules meant for companies to help and assist in preparing financial statements.

2)These accounting principles, standards and procedures are fallowed  by companies while preparing financial statements.

DIFFERENCES BETWEEN GAAS AND GAAP

GAAP are generally accepted accounting principles that are a set of guidelines for the companies to help them in preparing financial statements according to a standard.

• GAAS are auditing standard that are meant for auditors to help ensure in transparent and unbiased auditing.

Famous GAAPs from around the world are IFRS (International Financial Reporting Standards) and US GAAP used in, you guessed it, in the US. IFRS are prevalent in majority of the world. Currently a conformance project is underway to ensure similar accounting treatments between US GAAP and IFRS.

Famous examples of GAAS are the AICPA (US) issued GAAS and IASB issued IAS (International Auditing Standards).

a)What professional organization establishes the GAAS and what is its purpose?

ANS) Generally accepted auditing standards are general guidelines to help auditors meet their professional responsibilities in the audit of historical financial statements. They are considered to be the minimum standards of performance for auditors to follow and are established by the Auditing Standards Board of the American Institute of Certified Public Accountants for private companies and by the Public Company Accounting Oversight Board for public companies.

b)What professional organization establishes the GAAP?

ANS)Generally accepted accounting principles are the guidelines which an entity’s management normally follows when preparing historical financial statements. GAAP is established by the Financial Accounting Standards Board.

c)Can GAAS exist without GAAP and/or vice versa and why is this so?

ANS) GAAS and GAAP both are plays a importent role while preparation and analysis of financial statements whithuot existence of GAAS or whithout existence of GAAP financial statements may not shows reliable information.

c)Do GAAS and GAAP have different agendas and why is each needed?

ANS) The main agenda of GAAS (Generally Accepted Auditing Standards) is to provide guidelines to auditors for  prepare audits in the most transparent and unbiased manner.

The agenda of GAAP(Generally Accepted Accounting Principles) is to how to audit a set of financial statements, The auditor’s report on the same financial statements would set out which GAAS has been used to carry out the audit.