Understanding Accounting Principles and Regulations in the US

Generally Accepted Accounting Principles (US GAAP)-GAAP are the accounting standards or rules companies use. This is set by the Financial Accounting Standards Board. This is mainly used in the United States and others use the International Financial Reporting Standards. GAAP is important because it makes companies produce accurate financial statements (Fernando, 2022). Financial Accounting Standards Board (FASB)-The FASB is responsible for writing the accounting standards which is the GAAP. The board consist of 7 members who serves for 5 years. The FASB is important because it sets the accounting standards and continues to improve these standards. FASB is allowed to make these standards from the SEC and AICPA (FASB, n.d.) Securities and Exchange Commission (SEC)-SEC was created in 1934 under the Securities and Exchange Act. It is important because the SEC has the authority to set the standards to every major US business. They push for complete public information. They have the authority to file civil lawsuits against people who break the law and works with the Justice Department on criminal cases (Chen, 2022). Public Company Accounting Oversight Board (PCAOB)-This was created to overlook accountants that provide audit reports for public companies. The PCAOB was made by Sarbanes-Oxley Act of 2002. The SEC oversees the PCAOB. All rules and standards established by them must be approved by the SEC (PCAOB, n.d.). Certified Public Accountant (CPA)-CPA is a licensed accountant. This enforces a professional standard in the accountant industry. This is important because it ensures that qualified personnel are CPA's and distinguished from the rest of the other accountants. Companies look highly to CPA's because of the knowledge and credentials they have (Hayes, 2022). The 10-K and The Annual Report-This is an annual report by a public company that is forced by the SEC. This is an in depth report which differs from the regular annual report. There is data that is required in the 10-K. Some include the history, organizational structure, financial statements, and executive compensation (Kenton, 2022). This allows investors to be aware of the company's financial condition so they can make their best decision.