Accounting: Standard-setting Organizations
The primary standard-setting organization in accounting is the Federal Accounting Standards Board, also known as FASB. Although it works alongside government agencies, FASB is not publicly financed. Perhaps the most important responsibility of FASB is the creation of Generally Accepted Accounting Principles (GAAP), the primary set of accounting standards in the United States. Public companies are required to follow these standards. In the course of its work, FASB cooperates with several different organizations:
- Securities and Exchange Commission (SEC): the agency of the federal government that oversees the US financial markets and standard-setting organizations like FASB. The SEC cooperates with FASB to create accounting standards.
- International Accounting Standards Board (IASB): helps create International Financial Reporting Standards, which are more general than GAAP and require more interpretation by professionals
- Public Company Accounting Oversight Board (PCAOB): responsible for monitoring the independent auditors of public companies
- American Institute of Certified Public Accountants (AICPA): establishes professional standards for Certified Public Accountants
- Institute of Management Accountants (IMA): establishes standards for Certified Management Accountants, who typically work for a single company
The Generally Accepted Accounting Practices created by FASB and the SEC are the most important guide to professional conduct. According to GAAP, accounting information is considered useful when it is relevant and provides a faithful representation. Accounting information is considered relevant if it enables users to make decisions. Accounting information provides a faithful representation when it is complete, unbiased, and error-free