A business's accountant uses GAAP to prepare financial statements and carry out other accounting-related tasks. On the other hand, GAAS is used by the auditor. After the auditor reviews the financial statements, the auditor may ask for clarifications from the accountant. For example, the auditor may gather evidence that the recorded transactions actually took place. After the auditor gives his stamp of approval on the financial statements, they may become available to third parties, such as investors, shareholders and lenders.
Edriaan Koening began writing professionally in , while studying toward her Bachelor of Arts in media and communications at the University of Melbourne. She has since written for several magazines and websites. Share It. Securities and Exchange Commission. GAAP are not a single rule but provide many ways in which transactions can be recorded and reported by companies. GAAP are being sought to impose upon companies worldwide in an attempt to let investors have a minimum level of consistency and transparency in the financial statements of companies when they are trying to compare the performance of two companies located in different countries of the world.
GAAS Generally Accepted Auditing Standards is a set of guidelines for auditors that are meant to help them in the audit of companies in such a way that these audits are accurate, are consistent, and are verifiable. These guidelines ensure that auditors do not miss on any material information. Reporting in accordance with GAAP ensures consistency and comparability among like entities. The audit report of a department store should include the same types of information as the audit report of another department store; and the audit report of a city should include the same types of information as the audit report of another city.
Different standards setting bodies establish GAAP for different types of entities. The audit law Louisiana Revised Statute R. There is an exception in the law for local auditees that, under Louisiana law, cannot issue bonded debt R. Generally accepted auditing standards or GAAS are the minimum standards certified public accountants CPAs must follow when they perform audits. Auditing standards have evolved over the last four decades to ensure consistency and uniformity in the performance of audits.
Generally accepted government auditing standards or GAGAS are the additional standards, over and above GAAS, that CPAs must follow when auditing state and local governments, and non-governmental organizations that receive government funds.
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