Ethical and Legal Obligations

Essay by jefnerUniversity, Master's January 2007

download word file, 4 pages 2.3

The FASB (Financial Accounting Standards Board), the SEC (Security and Exchanges Commission), and PCAOB (Public Company Accounting Oversight Board) all work together to decide and determine which standards and concepts are necessary to resolve accounting problems and create a framework for companies to operate within. This allows investors, the government, and other organizations to have a standardized method of financial reporting that allows comparisons between different companies. This also allows transparency in publicly traded companies to ensure accurate record keeping and reporting and protects the investor from fraudulent accounting practices. The FASB and the PCAOB are the policy makers although the PCAOB only creates policy under the Sarbanes Oaxley act that created it and this act only applies to public companies and not privately held organizations. These organizations work together to develop the standards and policies that the SEC then enforces. Although the SEC is the primary regulator of the United States securities markets, the SEC works closely with many other institutions, including Congress, other federal departments and agencies, and the global stock exchanges.

Accounting provides us with some basic outputs that allow for monitoring, comparing, and evaluating company performance. The GAAP (Generally Accepted Accounting Principles) allow accounting personnel to handle a majority of situations and problems that can occur in running a business. Guidelines are available for the creation of financial statements, methods of depreciation, creation of journal entries and transaction entries, creation of income statements, balance sheets, etc. However, GAAP guidelines are not part of law, although there are a number of other accounting guidelines that are monitored by the SEC, and there is the Sarbanes Oaxley Act that is a law for publicly traded organizations which is the jurisdiction of the PCAOB. The PCAOB operates under the "Section 103 of the Sarbanes-Oxley Act...