A company's financial statements present its current financial condition and future prospects to investors. To be useful, a company's financial statements need to be accurate, understandable and easily compared with the statements of other companies. To make sure companies file their accounting statements correctly, the United States developed four main accounting regulatory bodies. These four regulatory bodies each have a different purpose to protect the standards of accounting.
Securities and Exchange Commission
The U.S. Securities and Exchange Commission regulates the financial statements of companies to protect investors. The goal of the Securities and Exchange Commission is to ensure that investors have access to all information relevant to an investment decision. This is done by requiring all public companies to release accurate and timely financial information. The Securities and Exchange Commission functions as an accounting regulatory body by ensuring this financial information is accurate. Civil actions are brought against companies that commit accounting fraud.
American Institute of Certified Public Accountants
The American Institute of Certified Public Accountants is in charge of representing the field of accountants. The AICPA develops the CPA exam, sets standards for the audits of private companies and provides continuing education for its members. The AICPA also maintains the standards of the accounting field by ensuring members follow strict ethical and technical standards. Infractions of these standards are investigated by the organization. The purpose of the AICPA as a regulatory body is to monitor the professional conduct of practicing accountants.
Financial Accounting Standards Board
The Financial Accounting Standards Board is in charge of the accounting standards of nongovernmental organizations. The FASB establishes guidelines for companies to follow to ensure proper financial reporting. By following these national standards, companies publish more accurate and uniform financial statements. This makes it easier for investors to review and compare the status of different companies. The FASB's role as an accounting regulatory body is to monitor and improve accounting standards to regulate the publishing of financial statements.
Governmental Accounting Standards Board
The Governmental Accounting Standards Board is in charge of accounting standards for government organizations. The GASB sets the guidelines for the financial reporting of state and local governments. Similar to the FASB, the GASB works to ensure that government financial reports are easy to understand and compare across the United States. The role of the GASB as a regulatory body is to set and improve the accounting standards of government organizations.
- U.S. Securities and Exchange Commission: The Investor's Advocate: How the SEC Protects Investors, Maintains Market Integrity, and Facilitates Capital Formation
- AICPA: AICPA Mission and History
- Financial Accounting Standards Board: Facts about FASB
- GASB: Mission, Vision, and Core Values
- Financial Accounting Foundation. "GAAP and Public Companies." Accessed April 19, 2020.
- Internal Revenue Service. "Publication 538: Accounting Periods and Methods." Accessed April 19, 2020.
- American Instituted of Certified Public Accountants. "About the AICPA." Accessed April 19, 2020.
- American Instituted of Certified Public Accountants. "Objectives of Financial Statements." Accessed April 19, 2020.
- American Instituted of Certified Public Accountants. "Objectives of Financial Statements," Page 13. Accessed April 19, 2020.
- Financial Accounting Standards Board. "About the FASB." Accessed April 19, 2020.
- U.S. Securities and Exchange Commission. "Testimony Concerning the Roles of the SEC and the FASB in Establishing GAAP." Accessed April 19, 2020.
- U.S. Securities and Exchange Commission. "Securities Exchange Act of 1934." Accessed April 19, 2020.
David Rodeck has been writing professionally since 2011. He specializes in insurance, investment management and retirement planning for various websites. He graduated with a Bachelor of Science in economics from McGill University.