Understand U.S. Accounting and Auditing Standards Now
What accounting and auditing standards do accountants follow in the United States? And who issues them?
Understanding these standards will better enable you to craft services specific to your client’s needs. For example, what if a client says, “I need you to audit my inventory, but nothing else,” how would you respond? Or another client says, “I need you to create a balance sheet and and income statement to provide to my board,” what service could you offer?
The following information will enable you to better respond to client requests for services. Think of these as arrows in your quiver. We’ll start with a list of commonly used A&A standards.
List of Commonly Used Accounting and Auditing Standards
These are the standards I use most often:
- Generally Accepted Auditing Standards (GAAS) – AICPA
- Government Auditing Standards (GAS) – Government Accounting Office (also called Yellow Book standards)
- Uniform Guidance – Office of Management and Budget (OMB)
- Attestation Standards – AICPA
- Statements on Standards for Accounting and Review Services (SSARS) – AICPA
- Generally Accepted Accounting Principles (GAAP) – Financial Accounting Standards Board (FASB) – for all nongovernmental entities
- Generally Accepted Accounting Principles (GAAP) – Governmental Accounting Standards Board (GASB ) – for all governmental entities
- Consulting Standards – AICPA
- Quality Management Standards – AICPA
Brief Explanation of Each Accounting and Auditing Standard
Generally Accepted Auditing Standards (GAAS) – These are the audit standards used to audit any type of entity in the United States, including commercial entities, not-for-profits, and governmental entities. GAAS tells auditors how to audit, how to document those audits, and the types of opinions to issue. Audits provide a high level of assurance.
Government Auditing Standards (GAS) – These standards tell you how to audit and document these engagements when your engagement is subject to the Yellow Book standards. These standards are used most often in governmental and nonprofit entity audits—when laws, regulations, or grants require compliance.
A Yellow Book report is issued in addition to the GAAS opinion. These standards build upon GAAS but impose additional independence (e.g., Yellow Book CPE) and reporting requirements. (See the AICPA Government Auditing Standards and Single Audits guide for sample Yellow Book reports.)
Uniform Guidance – These regulations tell you how to perform a Single Audit (see subpart F). The Single Audit standards are in play when your entity expends $750,000 or more in a fiscal year (the threshold changes soon to $1,000,000).
A Single Audit report is issued in addition to the GAAS opinion and Yellow Book report. A Single Audit report opines on the entity’s compliance with major program compliance requirements (e.g., allowability) and provides internal control findings, if any, related to compliance requirements. (See the AICPA Government Auditing Standards and Single Audits guide for sample Single Audit reports.)
Attestation Standards – These standards encompass (1) examinations, (2) reviews, and (3) agreed upon procedures (AUPs). An examination report, a review report, or agreed upon procedures report is issued at the conclusion of these engagements. (Reviews under these standards differ from reviews under the SSARS.) These services provide assurance to third parties.
AUPs focus on specific assurances (e.g., agreement of all property additions greater than $50,000 to supporting invoices). Unlike audits, AUPs do not result in an opinion but rather a report of factual findings.
Statements on Standards for Accounting and Review Services – These standards include (1) preparation of financial statements, (2) compilations, and (3) reviews.
Preparation engagements do not involve the issuance of a report.
Compilation and review engagements do involve the issuance of a report, a compilation report for compilation engagements, and a review report for review engagements.
The cost of these services is usually less than that of an audit; the lower cost is usually why these types of services are requested.
Preparations and compilations are nonassurance services, while review engagements provide limited assurance that no material modifications are needed for the financial statements to be in accordance with the applicable reporting framework.
Generally Accepted Accounting Principles (FASB) – These standards provide guidance for the creation of financial statements (including notes) for nongovernmental entities.
Generally Accepted Accounting Principles (GASB) – These standards provide guidance for the creation of financial statements (including notes) for governmental entities.
Consulting Standards – These are the ruling standards for consulting services issued by the AICPA. Consulting services are not attest services. Such services are provided mainly to assist clients without offering assurance to third parties. These standards provide a great deal of flexibility.
Quality Management Standards – These standards provide a framework whereby CPA firms can create systems to create and monitor the quality of their accounting and auditing services.
CPA firms must implement the new risk-based quality management (QM) standards by December 15, 2025, replacing the prior quality control standards.
Other Accounting and Auditing Standards
While there are other accounting and auditing standards, these are among the most commonly used by U.S. CPAs.
This article will come in handy when clients call you about providing services, especially if the request is somewhat unusual.
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