Accounting and Auditing Research and Databases: Practitioner's Desk Reference

Auditing Standard-Setting Environment

Auditing is indispensable in a society where credit is extended widely and business failures regularly occur, and where investors wish to study the financial statements of many enterprises. The purpose of the audit report is to add credibility to the financial information. The general environment for auditing is very dynamic and constantly evolving as various factors affect the audit process.

The independent auditor's role serves as a secondary communication function; the audit opinion is expressed on the financial information reported by management. The auditor's primary concern is whether the client's financial statements are presented in accordance with generally accepted accounting principles (GAAP). The auditor must conduct the audit in a manner that conforms to auditing standards and must take actions that are guided by professional ethical standards. In addition, in nonaudit engagements the accountant must use relevant attestation standards and statements for compilation and review services, as well as standards for accountants’ services on prospective financial information (that is, forecasts and projections).

Attestation Services and Standards

Society increasingly seeks attestation services (a subset of assurance services) from the accounting profession. In the past, attestation services were normally limited to audit opinions on historical financial statements based on audits that followed generally accepted auditing standards (GAAS). ...