Three organizations have been involved in the development of financial accounting standards in the US - the SEC, FASB, and the AICPA. The SEC has been responsible for developing and standardizing financial information presented to stockholders. The AICPA is responsible for setting professional requirements for CPAs. FASB has the responsibility for establishing and improving standards of financial accounting and reporting. Two sets of rules are currently accepted for international use - US GAAP and the International Financial Reporting Standards. The International Accounting Standards Board and FASB are working on convergence efforts to minimize the gap between the two and increase compatibility.

The PCAOB was established by the Sarbanes-Oxley Act and has the responsibility for establishing auditing standards for US public companies while the Auditing Standards Board of the AICPA established auditing standards for US private companies. Prior to the creation of the PCAOB, the ASB had responsibility for establishing auditing standards for both public and private companies. Generally accepted auditing standards include three general standards related to competence, independence, and due professional care; three standards of field work including planning and supervision as well as understanding the entity and its environment; and four standards of reporting, disclosure and the expression of an opinion as to the fairness of the presentation of the financial statements.

Class, which topic was your favorite this term? Why?