Essential Accounting and Auditing Standards

Accounting Standards

The rapid development of information technology has changed the way that investors and early adopters access a company's financial information, while enhancing its analysis and comparison. Accounting normalization is constituted by the set of rules and principles adjusted to a specific accounting model to allow for both spatial and temporal comparability. The business world needs this harmonization to avoid misinterpretations of accounting information.

Normalization can be driven by public bodies or private organizations. Professional organizations have a significant influence on the issuance of accounting standards in the Western world. In Spain, accounting rules are established by the ICAC, an agency under the Ministry of Finance, although we must also take into account the influence of professional organizations such as the AECA.

Auditing Standards

The auditor applies rules and procedures leading to the formation of an opinion on the financial statements, which allows for the issuance of a professional opinion. The Institute of Chartered Accountants issued a new version of their accepted auditing standards. For the institute, there are two types of standards: ethics and professionalism.

Ethical standards are reflected in the general ground rules, as well as in the professional code of ethics of the institute. These rules are the quality requirements required by the institute of its members regarding the work performed and the reports issued accordingly.

General Ground Rules and Professional Ethics

These rules concern the qualifications of the auditor, the quality of their work in the profession, and professional ethics issues:

• Rule 1: The audit must be conducted by a person with the technical and professional capacity of an auditor, holding the authorization required by legislation.
• Rule 2: During their performance, the auditor will maintain a position of absolute independence, integrity, and objectivity.
• Rule 3: The auditor must exercise due professional care in the execution of their work and in the issuance of information.
• Rule 4: The auditor is responsible for compliance with established auditing standards and for ensuring compliance by the professional audit team.
• Rule 5: The auditor must maintain the confidentiality of information obtained in the course of their actions.
• Rule 6: Professional fees must be a fair price for the work performed for the client.
• Rule 7: The auditor may not carry out advertising that is aimed at attracting customers.