Ethical and Legal Financial Reporting
Ethical and Legal Obligations in Accounting
Background Accounting is the “process of identifying, measuring, and communicating economic information about an organization for the purpose of making decisions and informed judgments.” (Marshall et al, 2003) The use of this information has widespread application to company managers, investors, creditors, employees and government agencies. For sound decisions to be made based on this information, the profession of accounting has created several agencies to establish, monitor and maintain ethical codes of standards. Because of the widespread applicability of the information contained in the accounting process, honest reporting is critical. History has proven repeatedly that the temptation exists to manipulate figures for personal gains and corporate malfeasance. This paper will identify agencies that regulate accounting practices and briefly discuss the basic concepts and principles of accounting. Regulatory Agencies The Public Company Accounting Oversight Board is a five-member, SEC-appointed board, created as a result of the Sarbanes Oxley Act. This group serves as the audit process’ regulatory agency. As stated on its website, its primary mission is to oversee the auditors of public companies in order to protect the interests of investors and further the public interest in preparation of informative, fair, and independent audit reports. (2009) Like the SEC, the PCAOB is further divided into sub divisions including enforcement and investigations, registration and inspections, international affairs, chief auditor, research and analysis, internal oversight and performance assurance, administration and communications. The rules that these agencies have created and enforce govern the securities and accounting practices within the United States. Their primary goals are to ensure the investors, employees, government and the public have access to free and fair information so that decisions can be made with
Background Accounting is the “process of identifying, measuring, and communicating economic information about an organization for the purpose of making decisions and informed judgments.” (Marshall et al, 2003) The use of this information has widespread application to company managers, investors, creditors, employees and government agencies. For sound decisions to be made based on this information, the profession of accounting has created several agencies to establish, monitor and maintain ethical codes of standards. Because of the widespread applicability of the information contained in the accounting process, honest reporting is critical. History has proven repeatedly that the temptation exists to manipulate figures for personal gains and corporate malfeasance. This paper will identify agencies that regulate accounting practices and briefly discuss the basic concepts and principles of accounting. Regulatory Agencies The Public Company Accounting Oversight Board is a five-member, SEC-appointed board, created as a result of the Sarbanes Oxley Act. This group serves as the audit process’ regulatory agency. As stated on its website, its primary mission is to oversee the auditors of public companies in order to protect the interests of investors and further the public interest in preparation of informative, fair, and independent audit reports. (2009) Like the SEC, the PCAOB is further divided into sub divisions including enforcement and investigations, registration and inspections, international affairs, chief auditor, research and analysis, internal oversight and performance assurance, administration and communications. The rules that these agencies have created and enforce govern the securities and accounting practices within the United States. Their primary goals are to ensure the investors, employees, government and the public have access to free and fair information so that decisions can be made with
References: Invesstordictionary.com (2009) Retrieved July 17, 2009 from http://www.investordictionary.com/definition/securities+exchange+commission+(sec).aspx.aspx) Marshall, D. et al. (2004). Accounting: What the Numbers Mean (6th ed.). New York: McGraw-Hill. About the PCAOB (2009) Public Company Accounting Oversight Board. Retrieved July 18, 2009 from http://www.pcaobus.org/About_the_PCAOB/index.aspx