Cultural differences and evolution of different accounting principles in different parts of the world have meant that in this age of globalization, it is difficult to make a fair assessment of a company’s performance that is situated in a different country from yours. To bridge the gap between accounting principles of various countries so as to make a fair assessment of the performance of a company operating in many countries, it is necessary to have some sort of standardization. This is what GAAP, also known as Generally Accepted Accounting Principles, is trying to do. GAAS (or Generally Accepted Auditing Standards), on the other hand is a framework for auditing bodies when they are called upon to conduct audits of company’s finances. There are many differences in GAAP and GAAS that will be discussed in this article.
What is GAAP?
GAAP (Generally Accepted Accounting Principles) is a set of rules meant for companies to help and assist in preparing financial statements that are followed in all parts of the world. These are accounting principles, standards and procedures that are adhered by companies while preparing financial statements. 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.
What is GAAS?
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. GAAS help in ensuring highest quality of auditing in a manner that it is possible to compare audits of various companies easily. GAAS require auditors to have a certain level of proficiency and also requires them to maintain a high level of independence. GAAS ensure professionalism from auditors which helps them prepare audits in the most transparent and unbiased manner.
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In brief: Difference Between GAAP and GAAS • GAAP are generally accepted accounting principles that are a set of guidelines for the companies to help them in preparing financial statements according to a standard. • GAAS are auditing standard that are meant for auditors to help ensure in transparent and unbiased auditing.
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