Accounting Standards and Auditing Standards
CGAP
Publication Date: 1998
Published by: Consultative Group to Assist the Poor (CGAP)
Document Type: Other (PDF)
Introducing accounting and auditing standards and their importance
This paper explains the need for understanding and adhering to accounting and auditing standards. This introductory paper defines:
- Accounting standards are guidelines that specify the accounting treatment for financial transactions and ensure the comparability, consistency, and completeness of financial records.
- Auditing standards guide the auditor through each step of the audit process.
As with accounting standards, each country may have its own auditing standards established by a national professional association of accountants or by a government body.
The paper asserts that it is important to recognize differences between accounting/auditing standards and methods followed in each country or by specific institutions when comparing financial information from different institutions or countries. Similarly it is important that microfinance institutions (MFIs) and auditors adhere to a recognized, comprehensive set of accounting/ auditing standards.
Three major issues should be considered in understanding accounting standards and methods:
- Overall standards,
- Accounting methods,
- Industry practices.
Accounting standards provide guidance on:
- Accounting treatment to be used for different financial transactions and accounts.
- Minimum disclosure requirements.
Auditing standards provide guidance on:
- Procedures to be followed,
- Responsibilities of the auditor,
- Reporting.
The paper concludes by describing select accounting standards used internationally.
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