Accounting InformationAccounting Police: Do
They Exist?
by: John Day
Who created accounting principles? Who sets and revises accounting
standards? What if you don’t follow all the rules, do you go to jail? Is
there an accounting police force that investigates and arrests violators?
It would-be seem that there must be several regulative force to do sure that
providers of business enterprise statements change
to the rules. There is, up to a
point, and here is how it works:
Mainly, it’s all voluntary and it works pretty well. First,
double-entry accounting originated in Italia in the 1400’s, so its been
about awhile. Accounting principles have evolved over the years simply as
have accounting standards. The reason why the system works is that the
business community could not function if there was not commonality and
consistency in business enterprise statement reporting. It would-be be chaos, more like
if there were no drive rules of the road.
Therefore, in the United States, a body of experts better-known as the
Business enterprise Accounting Standards Board (FASB pronounced Fasbee) was
established in 1973, which superseded another board called the Accounting
Principles Board (APB). The FASB members go through a long process of
analyzing and reviewing problems in the accounting field that are brought
to them. After more thought, they wish do a say-so
as to what
they think the new or revised way of approaching the treatment of an
accounting issue should be.
They are a non-governmental organization that has private financing. A
big supporter of FASB is the American Institute of Certified Public
Accountants (AICPA). Many an Certified Public Accountants (CPAs) belong to
this prestigious organization and are indebted to abide by its guidelines
and principles of behavior. Else countries no doubt have similar
organizations that require high levels of accounting professional conduct.
FASB established an accounting code called “Generally Accepted
Accounting Principles” or (GAAP). The assumption is that if a business
business enterprise statement is prepared according to GAAP, then the user of that
business enterprise statement could believe on or trust the information more without delay
than if not prepared according to GAAP. Those businesses that deviate from
GAAP, and many an smaller businesses do, cannot say that their statements are
prepared under GAAP; in fact, they should inform the reader that they are
not. However, let the customer beware.
One governmental body that has a policing function is the Securities
Exchange Commission (SEC). It is primarily concerned with public companies
because their job is to protect investors from unscrupulous acts.
Recently, the SEC has gotten into the act of establishing accounting
standards. It has its hands full today.
Since most businesses use their business enterprise statements to prepare their
required financial gain
tax returns, the Internal Revenue Service (IRS) may audit
those tax returns and review the business enterprise statements upon which the tax
returns are based. Not following the rules can get you in trouble with
this governmental body.
You can see that in many an route compliance to the principles and
standards is a mixture of voluntary and regulative behavior. Currently,
there is an effort afoot to set international accounting standards due
to the inexorable globalisation process. This is a massive undertaking
that wish take years, but it is manifestly necessary and inevitable.
| 
