Politicalization of Accounting Standards Essay Sample
A. These groups are put in topographic point to assist modulate the economic system and to assist organize accounting rules that should be followed to advance and guarantee truth and efficiency in companies across America. There was much policitalization which led to the abolition of the APB and the formation of FASB. This was due to grounds such as the investing of revenue enhancement recognition in 1961 which made the APB responsible for make up one’s minding how it was to be reported. Due to the dissension which what the APB chose to follow. the SEC took it into their ain custodies to allow the companies decide for themselves what method they wanted to follow for describing revenue enhancement recognition. Since the APB disregarded such rules the companies were loath to take part. Due to the jobs the APB caused in 1972 FASB was formed. Members were non wholly from the AICPA. as they were in the APB. but alternatively the members of FASB were from assorted organisations. FASB includes members which as full clip employees whose overall aim is to better fiscal coverage. better apprehension. promote compatibility. and maintain criterions current.
B. The authorities and other regulating organic structures such as FASB should be in conformity with each other to guarantee efficiency and compatibility. The authorities must be cognizant of the criterions of accounting and other regulating organic structures of accounting must be cognizant of the government’s ordinances to assist see that the criterions help the general economic system.
C. The authorities should non be allowed to ignore the criterions set Forth by organic structures such as FASB. They should non hold the writer to make up one’s mind which accounting criterions should be issued because it disregards those made by intelligent organic structures specifically in accounting and furthermore promotes incompatibility of accounting patterns.
Case 1-6 Accounting in Crisis
A. In 2001. the Enron dirt unfolded. In drumhead the company used unethical patterns which in bend led to incorrect fiscal statements. Enron wanted their statements to look good so they failed to describe any liabilities which they had. Enron used particular purpose entities ( VIEs ) to conceal its debt.
B. 1. ) Arthur Andersen. once one of the Big Five audit houses. has gone out of concern. 2. ) In July 2002. President George W. Bush signed into jurisprudence the Sarbanes-Oxley Bill. which imposes a figure of corporate administration regulations publically traded companies. 2. ) The public company accounting oversight board was established ( as a consequence of SOX ) 3. ) Legal restraints placed on corporate executives by necessitating truth of fiscal statements. 4. ) SOX established regulative board that has the power to penalize and punish.
