- What should you tell your friend about the presence of accounting standards in the United States? Who has the authority for standard setting? Who has the responsibility? In the United States we have a set of standards known as generally accepted accounting principles (GAAP). GAAP are a dynamic set of both broad and specific guidelines that companies should follow when measuring and reporting the information in their financial statements and related notes. The Securities and Exchange Commission has the authority to set accounting standards for companies whose securities are publicly traded but always has delegated the responsibility to the accounting profession. At present, the Financial Accounting Standards Board is the private sector body responsible for standard setting.
- What is the economic and political environment in which standard setting occurs? The setting of accounting and reporting standards often has been characterized as a political process. Standards, particularly changes in standards, can have significant differential effects on companies, investors and creditors, and other interest groups. A change in an accounting standard or the introduction of a new standard can result in a substantial redistribution of wealth within our economy. The FASB must consider potential economic consequences of a change in an accounting standard or the introduction of a new standard.
- What is the relationship among management, auditors, investors, and creditors that tends to preclude the “What would you like it to be?” attitude? It is the responsibility of management to apply accounting standards when communicating with investors and creditors through financial statements. Auditors serve as independent intermediaries to help ensure that the management-prepared statements are presented fairly in accordance with GAAP. In providing this assurance, the auditor precludes the “What would you like it to be?” attitude.
- In general, what is the conceptual framework that underlies accounting principles? The conceptual framework is a coherent system of interrelated objectives and fundamentals that can lead to consistent standards and that prescribe the nature, function, and limits of financial accounting and reporting. The fundamentals are the underlying concepts of accounting, concepts that guide the selection of events to be accounted for, the measurement of those events, and the means of summarizing and communicating them to interested parties.
|  <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0072994029/0073130087_001_1957.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (K)</a>]]> |
