Most people find financial statements identical to a foreign language that they can’t understand. Therefore, to ensure that financial statements are easier to understand, there is a set of rules and practices known as the generally accepted accounting principles (“GAAP”). Development of these rules provides a basic guideline accounting because I think it’s fair to say that it can get obtuse at times. There are a lot of variations to the meaning so here is the best answer. It’s the generally accepted accounting rules and procedures that are necessary to define accounting practice. Basically it’s a set of theories that accountants come to accept, and controversies are lively with some methods between accountants.
Accounting is a discipline that is always growing and changing so that better measures of performance can be reported. As always, it’s a good idea to keep up to date with all of the trends that are going on. A company’s management prepares the financial statements of a company. They create a financial statement designed to present their results in the best light possible. Obviously, material alterations can give a company a financial boost. So, that’s why companies selling their stock to the public need to get their financial statements audited by a public certified accountant.
A certified public accountant (CPA) is licensed through the state for the same exact reason lawyers and doctors are, so they can protect the public by providing the highest quality of professional service possible. CPAs are used because they have no connection with the company and are independent. They have no financial ties with the company. Whenever large companies influence the process disastrous and illegal transactions are created to cheat investors. An independent accountant commonly performs an audit, which is evaluating a companies financial statements, product, accounting systems, and records. The main purpose of an audit is to make sure that the financial statements have been properly prepared according to the accepted accounting rules. Accounting is not a precise science it has room for interpretation according to the GAAP. However, that doesn’t mean that the accountants report should contain substantial errors in the financial report.
The financial report must be reliable. Creditors and shareholders’ rely on accurate reports in order to analyze their investment or risk. An accountant can make a decision only when the financial statements conform to the guidelines of GAAP. Creditors, banks, and investors rely on auditors when they are deciding to invest in a company or give loans, because of their credibility. The independent audit is an extremely crucial factor in the growth of financial markets internationally. Also, many organizations can directly or indirectly influence a GAAP. The Financial Accounting Standards Board (FASB) is the most critical body for the development and issuing of rules on accounting practice. This independent body issues the Statements of Financial Accounting Standards. Next, the Malaysia Institute of Accountants (MIA) is the official professional association for certified accountants in Malaysia.
The Securities and Exchange Commission is the agency of the federal government that legally has the power to set and execute accounting practices for companies that sell security to the public, and it has a large impact on accounting practice. Next, the governmental accounting standard (GASB) is critical for accounting because its main job is to issue the standards for accounting to the local and state governments. However, a lot of these organizations are focused on the rules in regulations in the Malaysia. There are a lot of businesses and accountants internationally so that’s why the International Accounting Standard Board (IASB) was formed. It was approved by more then 25 international agencies. The income tax rules are applied by the Internal Revenue Service (IRS). Many times these rules actually cause a conflict with the accepted rules of accounting. A lot of businesses use accounting practices because it’s a requirement by tax law. Also, companies can use the rules of tax law to their advantage financially. Accounting also has laws of conduct for professionalism, and one extremely important one is ethics.
It touches bases on questions that help determine if something is either right or wrong, and is based on moral decisions. Most people are faced with several ethical issues each day and, and some ethical activities could be on the range of illegal. For example, if a business decides to use false or misleading advertising, or to bribe customers into giving them testimonials for a specific product, then they could be acting in an unethical manner. The ethics of a company could also be a result of the employees so that’s why it’s always a good idea to run a background check of who you are hiring, whether it’s online or offline. Professional ethics is the guidelines that apply to the conduct of individuals of a certain profession. Similar to the ethical actions of a company, the ethical actions of an individual is a decision. Accountants have to take the responsibility not only for their customers and employers, but also to the general public to act in the greatest ethical way possible.
Accountants are very good at following professional ethics. It is important for individuals who decide to become an accountant to have the highest levels of professionalism possible. To enforce its prestigious membership’s conduct, the MIA has adopted some codes of professional conduct that certified public accountants have to follow. These simple rules enable people, such as creditors and investors, to rely on and trust accountants. When working with people the accountant must act with integrity, which means that they are honest, and the individuals benefit from their visit with the accountant. The accountant must display objectivity meaning that they are intellectually honest, and they must remain independent which means that they must avoid any relationship with the business or individual because it will violate the accountant’s principles.