Introduction
Inevitably, the existence of sustainability and efficacy depends upon numerous things in particular, and it is essential to stay in the same jurisdiction for a long span of time. There are certain aspects that deem significant from the viewpoint of companies and industries. Hundreds of thousands of companies are currently working in the world, and it is essential for these companies to comply with a legal requirement and operational laws in particular; otherwise it would become extremely difficult for them to stay in the business for a long span of time.
There are certain regulations that are important for an organization to opt in particular and with the help of effective strategies; organizations can have the power and stance of regulations. Among numerous regulations on the different departments of an organization, certain regulations are there which specifically associated with the accounting and finance department as well.
Theoretically, regulations are corporate rules and standards which are essential for an organization to comply with otherwise it will become extremely difficult for an organization to sustain and stay in the business for a long span of time. There are hundreds of regulatory bodies which are essential for an organization to pursue (Anderson, 2014). The main theme of this assignment is to analyze the effectiveness of six different regulatory bodies along with focus on their core operations along with the challenges they faced while setting up the accounting standards. All of the regulating bodies which have been selected for the same assignment are essential for setting the objectives in particular. The assignment has been divided into different sections, like introduction, analytical framework and conclusion. Let’s now move towards the analytical framework.
Analytical Framework
There are some standard setting entities which have been taken into account for the same analysis and some of the regulating bodies are as follows which will be used throughout this analysis
- American Institute of Certified Public Accountants (AICPA)
- Health Financial Management Association (HFMA)
- Sarbanes- Oxley Act
- Dodd-Frank Act
- International Financial Reporting Standards (IFRS)
- Securities & Exchange Commission (SEC)
Standard Setting Analysis of AICPA
The United Stated bases, professional non-profit organization, AICPA or The American Institute of Certified Public Accountants was established in the year 1887, with the purpose to certify that the field of accountancy must achieve the reverence and value as a profession and also that the accountancy must be practiced by all moral and ethical values by the knowledgeable and capable professionals.
In general, the mission of the American Institute of Certified Public Accountants to carter and present its 370,000 members with the reliable information, resources, abilities and the leadership which enables the individuals to groom themselves and then to make this profession more valued and respected by others. It guides their member to offer their valuable services in very professional and productive manner which benefits the public, clients, employers and the overall society. AICPA is the controller and rule maker in the CPA profession, and it plays as a crucial role in front of government or legislative bodies and the groups working for public interest (Berger, 2012).
The essences of Certified Public Accountants are extremely vital and essential for the sake of the organization, and they are the one that deem extremely important and effective for the sake of an organization. American Institute of Certified Public Accountants (AICPA) is one of those regulating bodies that make certain standards and regulations for the Certified Public Accountants that how they will conduct, plan and report the audit and attestation engagements of the companies in terms of different aspects. AICPA is one of those regulating bodies which are in the favor of regular convergence between the International Financial Reporting Standards (IFRS) and US GAAP. AICPA is in the favor of converting the accounting standards to IFRS in terms of achieving the milestone in particular. The main challenge which AICPA accounts for due to the standard setting is the fair value and measurement, and the companies have to take this particular thing into consideration in particular for their effectiveness and long run economic valuation.
Standard Setting Analysis of Health Financial Management Association (HFMA)
HFMA, Health Financial Management Association is a registered charity and nonprofit UK based organization. It was founded in September 1946 in order to promote and set the valuable standards in financial management in healthcare field. It has attracted around 40 thousand members that include financial managers, executives, CFO, accountants and controllers. The association's ideology revolves around encourage and endorse the practices and best innovation in financial leadership and management across the health community in order to get wider health care agenda.
In HFMA, health care finance professional seeks the opportunity to demonstrate:
- Benefits, role and support of HFMA to the members and to the public. The association is committed to endorsing the members through changes.
- The influence over the policies and technical work's development in financial areas.
- Building of the International profile and to shape the agenda of wider health care in the social society
Support to the new learning, leading techniques and growing needs of financial professionals and the nation.
Costing is one of the most important aspects from the viewpoint of the organization and the standards that have been set out by the companies in all over the world in terms of managing their costs and budgeting in particular (Godfrey & Chalmers, 2007). The Health Financial Management Association is effective and well organized organizations that are in the favor of managing the cost of the companies especially for the Health Insurance organization. The body makes the standards according to its applicability, implementation and utilization in particular. Most of the decisions based on the finance and costing of the company and standard would have been set on the basis of their decision making stance in particular. From the analysis, it is found that most of the standards which set by the HFMA set on the basis of its prior costing in particular that led to increasing the revenues of the companies from different angles.
Standard Setting Analysis of Sarbanes- Oxley Act
The Sarbanes-Oxley Act or SOX is a resolution that was passed by United States in the year 2002 with the intention to safeguard and protect the investors from the likelihood and risk of deceptive and fake activities of accounting by different companies and corporations.
The Sarbanes-Oxley Act assists in the full fair disclosure of financial activities and dealings of the organization to restrict and prevent the public, clients, investors and other people related to the firm, from the fraud of accounting (Holt, Tweedie, Richard, Mirza & Orrell, 2013). It came into being in the result of the past scandals of fraud in the financial situation of companies. This enforcement act has outlined two particular keys of provision:
- An authorization that needs upper or senior management to verify the accuracy of the financial statements which are reported.
- An obligation that management, administration and the auditors set up an interior controlling system and verified reporting methods of financial statements. Though it has higher cost implementation but still very helpful to control.
Accuracy of the financial information is an important stance from the viewpoint of the organization. Shareholders always try to have effective and timely information in particular. It is important for an organization to communicate with their shareholders from every angle in order to sustain in the business for a long span of time as it is essential for their financial and strategic growth. Sarbanes Oxley Act is made specifically to have transparency in the accuracy of the information (Rodgers, 2007). The act is trying to provide timely and transparent information to the shareholders completely. It has been a consensus that there are lots of organizations which are providing unethical information to the internal and external shareholders through manipulation, and the act will be in active demand to cover up the issues considerably. The challenges for Sarbanes Oxley Act arise during the economic recessions.
Standard Setting Analysis of Dodd-Frank Act
The Dodd-Frank Act is the most recent act passed in 2010 by administration of Obama. Its major purpose was to attempt certain measures to prevent the unforeseen disturbance and financial crisis. This regulation act has lowered the risk in the system of finance. This act has formed many new agencies of government in order to evaluate, regulate and oversee the organization’s dealings and overall financial situation (Ingram & Albright, 2007). They seek to prevent the circumstances of bringing economic collapse. The other agency is established to provide funds and investments to those companies that are on the urge of liquidation. These agencies assist the company by providing enough money to regain their value in the market and to save them from liquidation.
Not only this, Dodd-Frank Act has provided various ways to open doors towards the stability of financial market and the whole economy. It guides the systemic risk to the insurance firms; it helps the consumer bureau for preventing from the voracious lending of mortgage, reducing incentives and improving clarity of paperwork on the mortgage. It also restricts the banks by implementing The Volcker Rule, from investments and trading regulations derivatives. Overall, this entire act is really helpful to strengthen the financial and economic market.
Investment is an important stance from the viewpoint of the organization as well as for an individual as well that requires extensive research and analysis. In terms of currency trading, there are certain aspect and acts that deem important and significant in particular and among those acts, the name of the Dodd Frank Act is one of them (Needles & Powers, 2011). It is applicable during the trading session in Wall-Street and other brokerage firms of the United States (US) and other adjacent parts. With these standards, individuals can have a firm confidence over the investment and asset management companies because their entire invested amount of money would be saved from government regulations and bodies.
Standard Setting Analysis of International Financial Reporting Standards
IFRS, international financial reporting standards was formally known as International Accounting Standards (IAS). IAS came into being in 1973 and played a role till 2000 then after that it was replaced by IFRS. Board of IAS issues IFRS rules (Norton, Diamond & Pagach, 2006). IFRS is basically a set of different rules and procedures representing the ways of reporting the transactions and events in financial statements. Here are some of its objectives:
- It promotes fair transactions and representation in the financial statements.
- It endorses reporting annually.
International Financial Reporting is an important body for regulating the accounting and financial need and organizations are using the standards of IFRS to increase their effectiveness in particular. The need of IFRS associated with the setting of standards related to the valuation of assets and liabilities of the company. IFRS is a body of standard setting, and they set standards that what should be included in the income statement, balance sheet and cash flow of the company. There are certain items that are essential to fix it in the income statement and in the balance sheet, as well. IFRS are having a tough time in managing their effectiveness, and it is effective for the company to use these regulations during the economic downturn.
Standard Setting Analysis of Securities & Exchange Commission (SEC)
The protection of investors was needed so this SEC, Securities & Exchange Commission came into being in the year 1932 by Congress. Initially, millions of shareholders took participation in it and got benefited by it. The sole purpose of the commission was to give security and safety to the public against in manipulative practices and the deceptive people in the market of securities and exchange (Oppermann, 2009). It created a platform at which people can raise their issues regarding securities market.
The government here plays a vital role in enforcing such regulations and laws of securities in order to get the stability over the investing market. The SEC has the main purpose to control and enforce the law. The SEC is further divided into different departments according to their functions for instance, it is their duty to overlook the precision of corporation's disclosure of financial situations, management of investment, supervision of investing companies and advisors and all other financial policies and their implementation in financial markets.
Security and Exchange Commission (SEC) is the regulating body which is essential for a country to maintain and to manage their companies in particular, and it is equally applied over the market of the United States (US), as well (Padmavathi, 2005). The standard sets by the SEC are to maintain the effectiveness of the companies from different angles and all of these standards are essential for a company to comply with accordingly and effective at the same time.
Conclusion
Financial markets are extremely important for an organization from different standpoints, and it is also essential to stick with the regulations to increase the financial belongings. The main theme of this assignment is to analyze the effectiveness of six different regulatory bodies along with focus on their core operations along with the challenges they faced while setting up the accounting standards. From this entire analysis, it is found that the standards are essential for organizations and organizations are obliged to comply with different operating standards and it is a key for their sustainability in the market. There are six different regulating bodies which have been analyzed in this analysis.
References
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Holt, G., Tweedie, D., Richard, P., Mirza, A., & Orrell, M. (2013). International financial reporting standards (ifrs) workbook and guide (1st ed.). Hoboken, N.J.: Wiley.
Ingram, R., & Albright, T. (2007). Financial accounting (1st ed.). Mason, OH: Thomson/South-Western.
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