Generally Accepted Accounting Standards (GAAS) specify specific minimum limited scope financial audit criteria that companies must meet to qualify for GAAS ratings. By outlining those standards, GAAS helps companies determine whether they can meet the qualifications for a limited scope of a financial audit.
The “Audit Committee” handles developing GAAS policies and standards. The policies are the basis for an audit’s goals and aims, which define the scope of the audit, the method of conducting the audit, and the type of acceptable audit results. Also, accepted auditing standards define specific types of audits, including fee-based, proforma, and post-award.
Generally Accepted Accounting Standards (GAAS) are standards of upmost importance. They are “gold” standards because there are many levels of audits. Some of the levels of audits are listed in GAAS. The only levels that are specific to the insurance company audits are the following:
Generally Accepted Accounting Standards (GAAS) for Trustees: To take part in an in-house employees-only audit, a company must first be approved for an in-house employees-only agreement. In some cases, as part of the approval process, the company’s CFO must make a written certification to the Board of Directors that the company’s policy is consistent with GAAS.
Generally Accepted Accounting Standards (GAAS) for Custodians: A company must also meet in-house audit criteria for the fiduciary standard if its CFO certifies that the CFO’s officers or other employees own stock in the company, or that they will act as an officer of the company in the future.
Generally Accepted Accounting Standards (GAAS) for Insurance Company Trustees: To qualify for GAAS ratings, a company must also meet all the in-house audit criteria of this standard, plus three additional standards: Generally Accepted Accounting Standards (GAAS) for Insurance Companies: A company must be able to demonstrate that the highest quality practice of insurance business ethics that is available to it is evidenced in the policies and procedures adopted by the company. Also, the company must prove that the business practice of insuring, as opposed to collecting has been the practice of the company for at least the last two years.
Generally Accepted Accounting Standards (GAAS) for Insurance Companies: In addition to reviewing the policies and procedures of insurance companies, GAAS also evaluates the risk that is associated with the products and services offered by the company.
It is easy to explain a full scope audit, but what is the process for doing so? Generally speaking, the phrase “full-scope audit” means that every aspect of an organization’s business operations, including accounting, financial reporting, and human resources, are subject to the full scrutiny of a third-party auditor. In most cases, the audit must be at least a three-month-long affair.
Let us start with some general discussion about retirement plans. Under GAAS, a large, multi-employer or employee-funded 401(k) plan falls into a category known as “Preferred,” as it is “supported” by “plan members.”
Also known as a “guaranteed benefit plan,” a 401(k) plan is a set of guidelines designed to simplify the complexities of retirement planning and investment. Retirement planning involves evaluating several different sides of your life, such as income, assets, finances, etc. By putting all this information under one roof, it becomes easier to make better decisions about your retirement. The three primary areas of operation are the 401(k) plan itself, the account itself, and the investments.
With that said, there are several reasons why retirement plans might be under the GAAS framework. For example, if the company has elected to offer a defined benefit pension plan (the same kind of program offered by many companies with the U.S. Department of Defense), then it would be subject to GAAS standards. And, if the company offers a defined contribution plan (like a 401(k) plan), then that plan also would be subject to GAAS standards.
In terms of employee retirement plans, “preferred” does not necessarily mean a higher degree of oversight or scrutiny. It just means that if an employee participates in the plan, and if it is reasonably regarded as being safe by an outside entity, the company would not be subject to additional tax scrutiny.
In addition to the general GAAS regulations concerning retirement plans, the company must follow the regulations about the financial reporting of the plan. Individually, the company must review and report the following: the details of the funds invested in the account, annual expense reports (including surplus), a balance sheet, a profit and loss statement, and an auditor’s report. These statements must be made open to anyone who requests them.