Regulatory Bodies

Essay by rick2476 January 2010

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In today's large corporate world businesses are being regulated by regulatory bodies due to unethical activities found in the past with large corporations and their financial officers. Agencies such as, the U.S. Securities and Exchange Commission, Public Company Accounting Oversight Board (PCAOB), the Financial Standards Accounting Board (FASB), the International Accounting Standards Board (IASB), and the General Accepted Accounting Principles (GAAP). Their main objectives are to set financial standards, guidelines, ethics, quality control and rules enforced by the Securities Exchange Commission.

The primary accounting standard setting board in the United States is the Financial Standards Accounting Board, who is responsible for setting guidelines and financial reporting. FASB is the designated body in the private sector responsible for establishing and improving standards of financial accounting and reporting in the United States for non-governmental public and private enterprises, including small businesses (Financial Accounting Standards Board, 2008).

According to FASB, accounting information needs to be relevant, reliable, comparable, and consistent in order to make the best business decision for the economic development of the company.

This information must be relevant in order to make review past and future financial decisions in the organization. Relevance also helps predict future company events and feedback to prior financial stability of the corporation. FASB has a full disclosure principle which states, that all companies disclose all circumstances and events that would make a difference to financial statement users (Phillips, Libby, Libby, 2007).

Another regulatory agency is the Public Company Accounting Oversight Board (PCAOB), who was created as a result of the Sarbanes-Oxley Act of 2002. The duties of the PCAOB are, under this section, to register public accounting firms that prepare audit reports for public companies (issuers); to establish rules for auditing, quality control, ethics, independence, and other standards relating to the preparation of audit reports;...