Accounting Regulatory Bodies
Accounting Regulatory Bodies
Accounting Regulatory Bodies
The purpose of accounting is to provide information needed to make economic decisions. Financial accounting is the tasks of preparing financial reports that provide information about an organizations performance and external audiences. External users consist of investors, creditors, and regulators. The same financial reports are also used by internal users, such as managers. In the United States, financial accounting is performed while adhering to General Accepted Accounting Principles (GAAP) guidelines. Regulatory bodies set these accounting standards and formulate the principles outlined in the GAAP. Four of these accounting regulatory bodies are: the Securities and Exchange Commission (SEC), Financial Accounting Standards Board (FASB), Federal Accounting Standards Advisory Board (FASAB), and Governmental Accounting Standards Board (GASB). Accounting measures a companys success at meeting its goals and it helps users understand how efficiently economic resources are being used.
Securities and Exchange Commission
The Securities and Exchange Commission (SEC) is a government agency responsible for enforcing the federal securities laws and regulating the stock market (Wikipedia [1], 2008). The SEC enforces the Sarbanes-Oxley Act of 2002, which are a set of regulations passed by Congress in 2002 to try to reduce unethical corporate behavior (Kimmel, Weygandt, Kieso, 2007). The SEC enforces the statutory requirement that public companies submit quarterly and annual reports, as well as other periodic reports (Wikipedia [1], 2008). Companies are required, not only to provide annual financial reports, but also to provide a narrative account. This narrative account is called the “management discussion and analysis” and outlines the prior year of operations while explaining how the company “fared” in that period (Wikipedia [1], 2008). The quarterly and annual reports help investors to make sound decisions about investing in the capital markets of public companies. Thankful for the regulations of the SEC, mandatory disclosure of financial information gives users the information to help increase public scrutiny and reduce insider trading and fraud.
Financial Accounting Standards Board
The Financial Accounting Standards Board (FASB) is a private, non-profit organization which is responsible for developing the generally accepted accounting principles (GAAP). The FASB was appointed by the SEC as the organization responsible for setting accounting standards for public companies (Wikipedia [2], 2008). Companies are required to follow the principles set by the FASB. The FASB establishes these principles by issuing pronouncements publicly; these pronouncements are: statements of financial accounting standards, statements of financial accounting concepts, FASB interpretations, FASB technical bulletins, and EITF Abstracts (Wikipedia