1) Generally Accepted Auditing Standards (GAAS) are the conventional standards which auditors both internal and external should follow in their auditing process. GAAS provides the standards for systematic process aimed at evaluating and obtaining the evidence pertaining the events and actions of a certain economic functionality. Consequently, the results can be communicated to various persons of interest. GAAS aims at ensuring that auditing is logical and purposeful for adequate grounds of decision making. It provides the nature of structure, plan and process recommended for the auditing process (Justin, 2007).
It sets the standards for conducting and reporting performance and financial audits for government and public companies. 2) The application of GAAS to the financial, operational and compliance audits is through setting out the guidelines and standards which should be in performing these management activities. GAAS is the statutory package of guidelines that ensure that the financial accounting and the auditing process is done in the most professional manner that would offer the most optimal management decisions.
Conventionally, GAAS is the package of instructions, conventions, rules, standards and guidelines that secure professionalism in compliance audits, operations and financial transactions (Melvin, Allan, 2001) 3) Both Public Company Accounting Oversight Board and the Sarbanes-Oxley Act ensure that the financial accounting system within public companies is within professional standards that protect the sovereignty of the shareholders. PCAOB was created by Sarbanes-Oxley Act.
The role of the two control institutions is in protecting the interest vested in investors of public companies through ensuring fair, informative and also independent systems of audit reports. PCAOB is mandated in issuing, monitoring, assessing and promoting public friendly systems of auditing that provide adequate financial controls (Philip, 2006) 4) The Sarbanes-Oxley Act of 2002 establishes a broad scope of auditing legislation in form of rules and guidelines for the auditors. It pronounces the scope of criminal penalties that could be levied on those acting against professional accounting system (Robarta, 2005.
) It implements auditing laws and requirements to ensure full protection into the interests of the investors. PCAOB was developed from Sarbanes-Oxley Act. Through the Act, it has established the power that gives an independent oversight system for the public firms that provide auditing services (Scott, 2005). The Act has a full pledge of creating a central board for auditing oversight that is mandated in defining parameters for various compliance audits, registering auditors, quality control, policing conduct, inspections as well as enforcing the compliance of the wide range of mandates of the Sarbanes-Oxley Act
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