Accounting Regulatory Bodies

Accounting Regulatory Bodies

The success of an organization relies heavily on accounting. Investors are extremely important to publicly traded companies, and they rely on accurate accounting documents when choosing whether or not they want to invest in a company. Several accounting regulatory bodies exist, and each of them plays an important role in accounting and the effects that accounting has on an organization. The primary goal of these regulatory bodies is to establish a set of rules and regulations and help improve the financial accounting standards of organizations. A few of such bodies are the Securities and Exchange Commission, the Financial Accounting Standards Board, the Government Accounting Standards Board, and the International Accounting Standards Board.

Securities and Exchange Commission

The Securities and Exchange Commission (SEC) is a government agency that has been given several responsibilities and a great deal of power. Its mission is to “protect investors, maintain fair, orderly, and efficient markets, and facilitate formation” (About the SEC, 2008). The SEC is responsible for enforcing several federal security laws, including the Securities Act of 1933, the Securities Exchange Act of 1934, and the Sarbanes-Oxley Act of 2002 (About the SEC, 2008). The Sarbanes-Oxley Act was passed in response to several corporate scandals such as Enron and WorldCom, after investors lost billions of dollars, and after the public’s confidence in the security of the nation’s markets declined (Wikipedia, 2008). Businesses comply with the SEC by following the rules and regulations that have been set in place. Failure to follow these regulations will result in disciplinary action.

Financial Accounting Standards Board

The Financial Accounting Standards Board (FASB) is the “private sector body given the primary responsibility to work out the concepts and detailed rules that become generally accepted accounting principles (GAAP)” (Phillips, Libby, & Libby, p. 697). Development and improvement of GAAP is an important job. GAAP sets which all publicly traded companies must follow when providing financial statements on its behalf. Failure to comply with the rules and regulations of the FASB also results in disciplinary actions, as well. The FASB’s mission is to “establish and improve the standards of financial accounting and reporting for the guidance and education of the public, including issuers, auditors, and users of financial information” (Facts About FASB, n.d.).

Governmental Accounting Standards Board

The Governmental Standards Board (GASB) is “the independent organization that establishes and improves standards of accounting and financial reporting for U.S. state and local governments” (Facts About GASB, 2008). Financial Accounting Foundation selects the members of the GASB, and supervises it as well. The GASB has issued over 50 statements for state and local governments in the United States (Wikipedia, 2008). Organizations that are subject to comply with the GASB are state and local governments. By obeying the statements