National And International Accounting, Auditing, and Reporting Entities, Concepts and Practical

Applications

- GAAP
o GAAP, or Generally Accepted Accounting Principles, are imposed on companies so that investors
have a minimum level of consistency in the financial statements they use when analyzing
companies for investment purposes. GAAP cover such things as revenue recognition, balance
sheet item classification and outstanding share measurements. Companies are expected to
follow GAAP rules when reporting their financial data via financial statements.
- GAAS
o GAAS, or Generally Accepted Auditing Standards, are a set of systematic guidelines used by
auditors when conducting audits on companies' finances, ensuring the accuracy, consistency and
verifiability of auditors' actions and reports.
o By relying on GAAS, auditors can minimize the probability of missing material information. GAAS
are divided into these main sections:
1) General standards
2) Standards of fieldwork
3) Standards of reporting
o Each section is littered with requirements that the auditor and the subject company must meet.
In short, an auditor must adequately plan the audit in advance, be independent of the client at all
times, and always obtain reliable evidence. The companies must present their financial
statements in accordance with GAAP, remain consistent in their reporting, and explicitly disclose
all pertinent information.
- FASB
o FASB is a seven-member independent board consisting of accounting professionals who establish
and communicate standards of financial accounting and reporting in the United States. FASB
standards, known as generally accepted accounting principles (GAAP), govern the preparation of
corporate financial reports and are recognized as authoritative by the Securities and Exchange
Commission.
- Accounting Standards Codification
o The FASB Accounting Standards Codification (ASC), the single source for authoritative
nongovernmental U.S. GAAP beginning July 1, 2009, provides a new logical, topical format and
the Codification Research System supplies an online tool not previously available for performing
research.
- IASB
o The IASC reorganized itself in 2001 and created a new standard-setting body called the
International Accounting Standards Board (IASB).
o The IASB's main objective is to develop a single set of high-quality, understandable, and
enforceable global accounting standards to help participants in the world's capital markets and
other users make economic decisions.
o The International Accounting Standards Board (IASB) is dedicated to developing a single set of
global accounting standards.
o International Accounting Standards Board (IASB): 14 members (12 full-time; 2 part-time).
o The IASC issued 41 International Accounting Standards (IASs), and the IASB endorsed these
standards when it was formed in 2001.
o Since then, the IASB has revised many IASs and has issued new standards of its own, called
International Financial Reporting Standards (IFRSs).
o The FASB and IASB have been working for many years to converge to one global set of
accounting standards.
- IFRS
o A set of international accounting standards stating how particular types of transactions and other
events should be reported in financial statements. IFRS are issued by the International
Accounting Standards Board
o The goal with IFRS is to make international comparisons as easy as possible. This is difficult
because, to a large extent, each country has its own set of rules. For example, U.S. GAAP are
different from Canadian GAAP. Synchronizing accounting standards across the globe is an
ongoing process in the international accounting community
- Convergence
o The phrase international convergence of accounting standards refers to both a goal and the path
taken to reach it.
o The FASB believes that the ultimate goal of convergence is a single set of high-quality,
international accounting standards that companies worldwide would use for both domestic and
cross-border financial reporting
o Today, the path toward that goal is the collaborative efforts of the FASB and the International
Accounting Standards Board to both improve U.S. generally accepted accounting principles (U. S.
GAAP) and International Financial Reporting Standards (IFRS) and eliminate the differences
between them.
o The FASB believes that there is demand for international convergence, driven by investors desire
for high-quality, internationally comparable financial information that is useful for decision-
making in our increasingly global capital markets.
o The FASB and the IASB have been working together toward convergence since 2002.
- Sarbanes-Oxley Act of 2002
o Act created by congress to restore public confidence and trust in the financial reporting of
companies. Only applies to publicly held companies. Emphasizes the importance of internal
control. Also requires companies and their independant accountants to report the effectiveness
of the company's internal controls.
- PCAOB
o The Public Company Accounting Oversight Board (also known as the PCAOB) is a private-sector,
nonprofit corporation created by the Sarbanes-Oxley Act of 2002 to oversee accounting
professionals who provide independent audit reports for publicly traded companies.
o When Congress created the PCAOB, it gave the SEC the authority to oversee the PCAOB's
operations, to appoint or remove members, to approve the PCAOB's budget and rules, and to
entertain appeals of PCAOB inspection reports and disciplinary actions
- Auditing Standards Board
o The American Institute of Certified Public Accountants' (AICPA) senior technical committee for
auditing, attestation and quality control. The Auditing Standards Board produce statements,
standards and guidance to certified public accountants (CPAs) for non-public company audits.
The Auditing Standards Board exists to service "the public interest by improving existing and
enabling new audit and attestation services."
- SEC
o Securities and Exchange Commission; a government commission created by Congress to regulate
the securities markets and protect investors. In addition to regulation and protection, it also
monitors the corporate takeovers in the U.S. The SEC is composed of five commissioners
appointed by the U.S. President and approved by the Senate. The statutes administered by the
SEC are designed to promote full public disclosure and to protect the investing public against
fraudulent and manipulative practices in the securities markets. Generally, most issues of
securities offered in interstate commerce, through the mail or on the internet must be registered
with the SEC.
- XBRL
o An open technology standard for reporting and analyzing business and financial information
o XBRL (Extensible Business Reporting Language), is a freely available XML-based specification that
uses accepted financial reporting standards and practices to exchange financial statements
across all software and technologies, including the Internet. It is an XML-based framework that
provides the financial community a standards-based method to prepare, publish in a variety of
formats, reliably extract and automatically exchange financial statements of publicly held
companies. XBRL is not about establishing new accounting standards but enhancing the usability
of the ones that we have through the digital language of business, XML.
- Form 10-K
o A comprehensive summary report of a company's performance that must be submitted annually
to the Securities and Exchange Commission. Typically, the 10-K contains much more detail than
the annual report. It includes information such as company history, organizational structure,
equity, holdings, earnings per share, subsidiaries, etc.
o The 10-K must be filed within 60 days (it used to be 90 days) after the end of the fiscal year.
- IRS
o The Internal Revenue Service; A United States government agency that is responsible for the
collection and enforcement of taxes. The IRS was established in 1862 by President Lincoln and
operates under the authority of the United States Department of the Treasury. It is primarily
engaged in the collection of individual income taxes and employment taxes, but also handles
corporate, gift, excise and estate taxes.
- AICPA
o American Institute of Certified Public Accountants; The non-profit professional organization of
certified public accountants in the United States. The American Institute of Certified Public
Accountants was founded in 1887, under the name American Association of Public Accountants,
in order to ensure that accountancy gained respect as a profession and that it was practiced by
ethical, competent professionals. The AICPA exists to provide more than 370,000 members with
the resources, information and leadership to provide CPA services in the highest professional
manner