The Importance of GAAP in Ensuring Transparent Financial

School: Southern New Hampshire University - Course: ACC 300 - Subject: Accounting

Great post! Yes, I agree with "A company that follows the GAAP closely will provide standard practices to ensure a financial statement that can be trusted." The generally accepted accounting principles (GAAP) provide a method for measuring a company's stakeholders or other parties involved in order to assess both its historical performance and its potential going forward. The generally accepted accounting principles (GAAP) help to guarantee that there is more transparency with regard to the primary metrics that are being used by the management of the organization to carry out their operations. This GAAP statement is used by investors, analysts, and other interested parties to ascertain the budgets and operational objectives for the purpose of projecting the company's future performance. In 2002, legislation known as the Sarbanes-Oxley Act was passed into law in order to protect investors from being defrauded by fraudulent acts carried out by corporations when such corporations disclosed their financial information to investors. The legislation followed the tight guidelines to mandate the modifications made to the accounting operations, and it was passed in 2010. The investors' trust in being able to depend on financial statements has suffered as a direct result of the many accounting scandals that have occurred in the past. Some examples of these accounting scandals are Waldron, Enron, and Tyco. The most important provisions of the Sarbanes-Oxley Act are sections 302, 401, 404, 409, and 802. These sections address the most significant changes brought about by the legislation. Due to the fact that it is designed to shield investors from deceptive accounting statements, the legislation is unquestionably in the investors' best interests. The preceding paragraph outlines the stringent regulations that must be followed in order to prevent any kind of inconsistency in the organization's internal control, which is accomplished by the company via the employment of internal auditors. In point of fact, any fraudulent acts that have been carried out deliberately or unwittingly by any authorized person may result in a penalty or up to 20 years of imprisonment, depending on the severity of the offense. What is the most significant instance of financial fraud in the annals of American history?