Ethical and Legal Obligations in Accounting

Only available on StudyMode
  • Download(s) : 259
  • Published : April 1, 2006
Open Document
Text Preview
According to Marshall (2004), "accounting is the process of identifying, measuring, and communicating economic information about an organization for the purpose of making decisions and informed judgements" (p. 3). Specifically, financial accounting "refers to the process that results in the preparation and reporting of financial statements for an entity" (Marshall, McManus, & Viele, p. 5). While many entities prepare their own financial statements, firms can also contract with a public accounting firm or a Certified Public Accountant (CPA) to perform services such as reviewing or compiling statements. (A CPA is a professional designation granted by individual states.) Entities that are publicly traded or complex in nature contract for auditing services. The provider of the auditing service will test the compliance of the entity's financial reporting against generally accepted accounting principles as issued by the Federal Accounting Standards Board (FASB). The provider will also ensure that the company, if publicly traded, complies with requirements of the Securities and Exchange Commission (SEC) and the regulations of the Public Company Accounting Oversight Board (PCOAB). This paper briefly explains the principles of financial accounting and how the deviation from ethical and legal obligations led to greater government oversight and the need for ethics training of future accounting professionals. Principles of Financial Accounting

Since 1973, FASB has been the private sector organization designated to establish standards of financial accounting and reporting. Lending authority to its designation is the recognition of the SEC and the American Institute of Certified Public Accounts (AICPA) as the principle issuing entity for financial accounting principles in the United States. The SEC has statutory authority over setting standards in the public sector; however, according to the FASB website, the SEC relies on the private sector for this function "to the...
tracking img