Politicalization of Accounting Standards
A. These groups are put in place to help regulate the economy and to help form accounting principles that should be followed to promote and ensure accuracy and efficiency in companies across America. There was much policitalization which led to the abolishment of the APB and the formation of FASB. This was due to reasons such as the investment of tax credit in 1961 which made the APB responsible for deciding how it was to be reported. Due to the disagreement which what the APB chose to follow, the SEC took it into their own hands to let the companies decide for themselves what method they wanted to follow for reporting tax credit. Since the APB disregarded such principles the companies were reluctant to participate. Due to the problems the APB caused in 1972 FASB was formed. Members were not all from the AICPA, as they were in the APB, but instead the members of FASB were from various organizations. FASB includes members which as full time employees whose overall objective is to improve financial reporting, improve understanding, promote compatibility, and keep standards current.
B. The government and other governing bodies such as FASB should be in compliance with each other to ensure efficiency and compatibility. The government must be aware of the standards of accounting and other governing bodies of accounting must be aware of the government’s regulations to help insure that the standards help the general economy.
C. The government should not be allowed to disregard the standards set forth by bodies such as FASB. They should not have the author to decide which accounting standards should be issued because it disregards those made by intelligent bodies specifically in accounting and furthermore promotes inconsistency of accounting practices.
Case 1-6 Accounting in Crisis
A. In 2001, the Enron scandal unfolded. In summary the company used unethical practices which in turn led to