Accounting Regulation With the recent accounting discrepancies that have taken place in some of America’s largest and well known corporations greater importance is being placed on the creation and monitoring of financial reports. Some of these organizations which regulate how financial reports and compiled are private, given a charter by a federal agency, others were born from the creation of new laws and regulations, some are state agencies, and many more are private organizations made up of academics and certified public accountants who altruistically want to improve ethics in one’s field of accountancy.
These organizations include the Financial Accounting Standards Board (FASB), the Public Company Accounting Oversight Board (PCAOB), the Securities and Exchange Commission (SEC), and the International Accounting Standards Board (IASB). Companies which operate within the United States must compile financial reports within the guidelines set forth by the (SEC) and the (FASB); the (FASB) ensures that all companies focus on the characteristics of relevance and reliability when generating financial reports while staying within the guidelines of the Generally Accepted Accounting Principles (GAAP).
When companies do not follow these guidelines they can be sanctioned by the (SEC) (Facts about FASB, 2009). The (PCAOB) was granted investigative and disciplinary power by the Sarbanes-Oxley Act of 2002; this act was established as a result of major American corporations falsifying financial data in an attempt to make one’s company appear more profitable than it was.
The (PCAOB’s) primary responsibility is to ensure that public accounting firms conduct regular audits of internal controls and to evaluate the consistency of published financial statements. The (IASB) is a global regulatory body which is an offshoot of the International Financial Reporting Standards (IFRS); the (IFRS) sets standards for financial reporting for small to medium businesses which make up approximately 95% of the companies worldwide (IFRS for SMEs, 2009).
The (IASB) has no enforceable power to discipline organizations who do not adhere to financial reporting guidelines, however, when violations are discovered the (IASB) reports all discrepancies to the (IFRS) which will make a determination as to the validity of the violation and take disciplinary action. While there are a number of federal and international accounting regulatory organizations, the foundation for good accounting ethics occurs at local or state levels. In he United States there are accountancy boards for every state which anyone wishing to become a certified public accountant (CPA) must register and pass a battery of exams in order to obtain a license to work as an accountant. The California Board of Accountancy (CBA) in addition to testing and licensing new accountants also provides people looking for an accountant a forum to check on the status of an accountant’s license, whether they are authorized to sign reports on attest engagements, ant to view any disciplinary action taken against a particular accountant (Web License Status Lookup Information, 2009).
The (CBA) is granted authority by the California Accountancy Act and works to protect the public interest by regulating the accountancy profession minimizing substandard practices, investigating complaints against accountants, and when necessary, taking legal action against those who do not follow proper (GAAP) guidelines.
With all problems come opportunities, and with the discrepancies in financial reporting in recent history, an opportunity has arisen to reform accounting policies and procedures. There is currently a shift in most western countries for a set of international accounting standards for companies all around the world to abide by and in this age of global commerce and multinational corporations will only improve the accuracy of financial reports.