Untalan, Shaira Coleen DC.

BSA 3A

Pre-Test L2
The Professional Standards (GAAS)
1. What are the general standards, standards of fieldwork and standards of reporting in
GAAS?

Generally accepted auditing standards (GAAS) are a set of systematic guidelines used by
auditors when conducting audits on companies' financial records. GAAS helps to ensure
the accuracy, consistency, and verifiability of auditors' actions and reports. GAAS are the
auditing standards that help measure the quality of audits. Auditors review and report on
the financial records of companies according to the generally accepted auditing standards.

2. How will you differentiate these three standards?

General Standards
 The auditor must have adequate technical training and proficiency to perform the
audit.
 The auditor must maintain independence in mental attitude in all matters relating
to the audit.
 The auditor must exercise due professional care in the performance of the audit
and the preparation of the auditor's report.
Standards of Field Work
 The auditor must adequately plan the work and must properly supervise any
assistants.
 The auditor must obtain a sufficient understanding of the entity and its
environment, including its internal control, to assess the risk of material
misstatement of the financial statements whether due to error or fraud, and to
design the nature, timing, and extent of further audit procedures.
 The auditor must obtain sufficient appropriate audit evidence by performing audit
procedures to afford a reasonable basis for an opinion regarding the financial
statements under audit.
Standards of Reporting
 The auditor must state in the auditor's report whether the financial statements are
presented in accordance with generally accepted accounting principles.
 The auditor must identify in the auditor's report those circumstances in which
such principles have not been consistently observed in the current period in
relation to the preceding period.
 If the auditor determines that informative disclosures in the financial statements
are not reasonably adequate, the auditor must so state in the auditor's report.
  The auditor's report must either express an opinion regarding the financial
statements, taken as a whole, or state that an opinion cannot be expressed. When
the auditor cannot express an overall opinion, the auditor should state the reasons
in the auditor's report. In all cases where an auditor's name is associated with
financial statements, the auditor should clearly indicate the character of the
auditor's work, if any, and the degree of responsibility the auditor is taking, in the
auditor's report.

3. What are the elements of quality control?

• Leadership responsibilities for quality within the firm (the "tone at the top")
• Relevant ethical requirements
• Acceptance and continuance of client relationships and specific engagements
• Human resources
• Engagement performance
• Monitoring
4. What is the extent of the system of quality control system? Is it the same for all auditing
firms?
A CPA firm shall have a system of quality control for its accounting and auditing practice
and describes elements of quality control and other matters essential to the effective
design, implementation, and maintenance of the system. A firm has a responsibility to
ensure that its personnel comply with the professional standards applicable to its
accounting and auditing practice. A system of quality control is broadly defined as a
process to provide the firm with reasonable assurance that its personnel comply with
applicable professional standards and the firm's standards of quality. The policies and
procedures designed to implement the system in one segment of a firm's practice may be
the same as, different from, or interrelated with the policies and procedures designed for
another segment, but the purpose of the system is the same for all segments of a firm's
practice. A firm's system of quality control encompasses the firm's organizational
structure and the policies adopted and procedures established to provide the firm with
reasonable assurance of complying with professional standards. The nature, extent, and
formality of a firm's quality control policies and procedures should be appropriately
comprehensive and suitably designed in relation to the firm's size, the number of its
offices, the degree of authority allowed its personnel and its offices, the knowledge and
experience of its personnel, the nature and complexity of the firm's practice, and
appropriate cost-benefit considerations.

5. What is the effect of the CPA firm not complying with the professional standards?
A system of quality control consists of policies designed to achieve the objectives of the
system and the procedures necessary to implement and monitor compliance with those
policies. A CPA firm not complying with the professional standards could not achieve all
of this. They might encounter unethical behavior of the employees like fraud and
inefficiency in the firm. Reasonable assurance cannot be obtain within a firm without a
system of quality control.