Good Guys v/ Dirt Guys
America has recently been subjected to the dirty side of their economy. Record gains in almost all industries and stocks have feel out from beneath investors leading to distrust and a fair amount of head-shaking in the market. Companies that were trusted like Enron, Worldcom, Goldman Sachs, and others seemed to betray their investors at every turn, while the people responsible walked free with millions of dollars. What was happening here, according to some sources, was that these “dirty guys” were just smarter than the “good guys.” However, the American people replied all the same demanding tougher standards and it seems like they got them. This paper will serve as a guide to Generally Accepted Auditing Standards (GAAS), guide the reader through their use in financial, operational and compliance audits, and explain the effects of the Sarbanes-Oxley Act of 2002 (SOX) and the ramifications thereof on the auditing world. The Generally Accepted Auditing Standards are a list of standards that serve to give any audit credibility. While some of these seem like common sense, keep in mind that the aforementioned “dirty guys” were able to exploit vagaries in the system and keep auditors guessing for years. The GAAS is divided into three trees of standards. The first of which are general standards. The three general standards are roughly: 1) The auditor must be qualified to do the audit in question 2) The auditor must maintain a professional distance from the audited. 3) They must be professional in the auditing and reporting process maintaining their diligence throughout. After that we have standards of field work:
1) The auditor must have a plan and supervise their assistants 2) The auditor must be able to scrutinize the information given to them 3) All opinions must be backed by evidence
Finally there are standards of reporting:
1) The auditor will report compliance with Generally...