Week 8 Paper
Week 8 Paper
The generally accepted accounting principals are the accounting principles, standards and procedures employed by companies in recording their financial statements. This principal ensures that investors keep a consistent level of financial statements when evaluating the company to invest. The GAAP involves revenue identification, balance sheet entry classification and outstanding share identification. All companies are required to follow the GAAP in recording their financial statements. A Fidelity Investment Company is a great mutual fund investment company. It makes great investments in the companies listed in the stock markets. The Fidelity Investment Analysts therefore prefer financial statements that have been prepared in accordance with the GAAP and audited by an independent CPA (Needles, Powers & Crosson, 2011).
These financial statements are useful to them due to some specific reasons. The management prepares the financial statement. They may falsify it to benefit them. Due to this, all public companies and companies that apply for sizable loans are required to have their financial statements audited by the independent certified public accountant. This financial statement will be useful to the Fidelity Investment Analyst since he will be able to rely on it due to it accuracy. The CPA is not the company’s employee and due to this, they do not compromise with anyone in the company. Their opinion is usually honest and they practice high integrity. The Fidelity investment analysts can therefore be sure that such financial statements are correct. The financial statements prepared in accordance with the GAAP ensure that the rules are followed. The company will therefore be free from punishment from the influencing bodies. These accounts are therefore safe for use by the Fidelity Investment Analysts (Needles, Powers & Crosson, 2011).
. The CPA is authorized to safeguard the public by offering professional service. Most organizations influence the GAAP either directly or indirectly. The Public Company Accounting Oversight Board (PCAOB) is a government body formed by the Sarbanes-Oxley Act. This organization controls the accounting field and therefore greatly determines the standards that should be followed by the auditors. In case these standards are not followed, this organization has the authority to discipline the responsible companies. The Financial Accounting Standards Board (FASB) is the main body responsible for making rules to be employed in accounting practice (Epstein, Nach & Bragg, 2009).
The Security and Exchange Commission authorize this body to issue the Statements of Accounting Standards. The American Institute of Certified Public Accountants (AICPA) is a professional association of the certified public accountant. It influences the accounting field through the acts of its senior technical committee. The Security and Exchange Commission (SEC) is the federal government agency with the authority to implement accounting practices. These practices are implemented on the companies that offer their securities to the public. It therefore has great influence on the accounting practice. The Government Accounting Standards Board (GASB) is an organization that was started in 1984. This body provides accounting standards to the state and the local governments.
The financial markets continue to grow every year. Therefore, this calls for global cooperation’s to aid in the improvement of accounting principles. The International Accounting Standards Board (IASB) is a body that approves the international accounting standards. The US tax law administers the evaluation and compilation of revenue. This revenue aids in operating the federal government. This law influences the GAAP since the income tax is the main source of government revenue. This law denotes the taxable income rules. The Internal Revenue Service (IRS) is the body that administers the tax law rules. At times, these laws clash with the accounting GAAP. They however remain a good influence on the accounting practice (Epstein, Nach & Bragg, 2009).
Epstein, B. J., Nach, R., & Bragg, S. M. (2009). Wiley GAAP 2010: Interpretation and application of generally accepted accounting principles. Hoboken, N.J: Wiley.
Needles, B. E., Powers, M., & Crosson, S. V. (2011). Principles of accounting (11th Ed.). Mason, OH: South-Western Cengage Learning.