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Understanding Accounting and Financial Regulatory Organizations in the U.S.

Written by AnonymousJune 17, 2011
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Over the years, regulatory organizations have been formed to ensure that accounting institutions are held to the same high standards as other professional organizations. These regulatory groups consist of either government or nongovernment agencies whose primary function is to define and enforce guidelines that are then applied to various facets of the accounting profession.

  • The Securities and Exchange Commission: One of these regulatory groups is the Securities and Exchange Commission (SEC), which is in charge of governing the form and content of financial statements, and, in addition, making sure that the standards expected in the private sector are upheld.

One way they enforce these standards is through drafting analytical overviews of the information found in financial statements. Likewise, the annual reports filed with the SEC, which are also sent to stockholders, contain audited financial statements and valuable additional data, much of which is not found in stockholder reports. 

  • The American Institute of Certified Public Accountants: The American Institute of Certified Public Accountants (AICPA) is the national professional organization of Certified Public Accountants (CPAs). The AICPA’s efforts have been central to the development of GAAP in the United States. Over the years it has formed, with various levels of success, a number of special committees whose purposes were to determine, among other things, proper accounting principles.

After the Depression, the AICPA formed the Committee on Accounting Procedure (CAP), the institute’s first attempt to address modern accounting issues. From 1939 to 1959, CAP issued 51 Accounting Research Bulletins dealing with a variety of accounting problems. Despite all of CAP’s successes, it didn’t generate the necessary structured set of accounting principles. Thus, the AICPA formed the Accounting Principles Board (APB) in 1959.

The APB was formed to develop a well-defined conceptual framework that would set forth a written set of accounting principles, determine appropriate accounting practices, and address inconsistencies in current accounting practice. From inception to its dissolution in 1973, the board issued 31 APB opinions. However, while these opinions succeeded in solidifying accounting practice to some degree, the APB ultimately failed due to charges of a lack of productivity, a failure to act quickly in correcting abuses, a strong level of dissention from CPA firms, and occasional government intervention.

Thus, in 1973, the Financial Accounting Standards Board was formed.

  • The Financial Accounting Standards Board: Following the disbanding of the Accounting Principles Board, the Financial Accounting Standards Board was established to pick up where the APB left off. This highly authoritative and influential Board is comprised of seven full-time members who determine accounting standards for companies issuing audited financial statements.
  • Governmental Accounting Standards Board: The Governmental Accounting Standards Board is a private organization that functions as the foremost source of accounting principles used by the government at the state and local level.
  • Federal Accounting Standards Advisory Board: The Federal Accounting Standards Board (FASAB) is an advisory committee that dictates accounting financial reporting principles at the federal level.