An Overview of the Standard-Setting Industry And Its History
Introduction
Accounting Standards have been in existence since the beginning of the recorded history. Some of these standards were set up by rulers or reigning kings. However, as the world developed, States started coming up with bodies aimed at controlling the quality and standards of products and services in the accounting sector. In the ancient world, the man used to come up with standards with a desire of harmonizing his activities with important changes in the environment. Some standards were also set in response to a rise in needs in the society. The standard setting body in America was established in 1918 by a group of five engineering societies with the help of three government agencies (Previts & Merino, 1998). The body is still a private entity, a non-profit organization which is supported by both the public and private sector.
Since the inception of the standard-setting industry, the body still maintains its primary role of enhancing the global competitiveness of business and the quality produced and carrying out consensus standards. The body also promotes the integrity of products and conformity assessments of products. This industry represents the interests of all agencies whether private or governmental (Previts & Merino, 1998). However, the standard-setting industry has some branches where each branch deals with setting standards pertaining different type of services. These bodies include the Securities Exchange Commission, the American Institute of Certified Accountants and the Financial Accounting Standard Board.
Roles of the Security Exchange Commission (SEC)
The goals of any investor investing in the stock exchange market are to make profits. To ensure that their goals are achieved led to the formation of the Security Exchange Commission (SEC). The commission mission was aimed at protecting investors, maintaining an orderly, fairly and efficient transaction in the security and stock exchange market and also facilitating capital formation. Although the primary role of the SEC is to oversee and regulate the United Securities market, it also works closely with other bodies such as private organizations, state security regulators, and self-regulatory bodies with the aim of attaining its goals easily and ensure that there is cohesion with other bodies (Braiotta, 1994). The commission also elects a group of leaders who have the following responsibilities (Saudagaran, 2001).
• To interpret and to enforce the security laws
• To issue new rules
• To amend the laws that were existing earlier
• To oversee the inspection of security firms and brokers.
• To manage the private regulatory firm in the fields of securities.
• To audit and to account the securities.
• To coordinate the United States securities regulation with other foreign authorities
The Security Exchange Commission has four divisions with each division having its role. These divisions include the Corporation Finance Division which assists the body in executing its role in overseeing commercial disclosure of vital information to the potential investors. The category of Economic and Risk Analysis helps the Commission in accomplishing its mission of protecting investors, maintaining fair and orderly markets and also capital formation. The category on Investment Management helps the Security Exchange Commission in executing its roles of protecting investors and forming capital (Saudagaran, 2001).
Roles of the Financial Accounting Standards Board (FASB)
The Financial Accounting Standards Board (FASB) was established in 1973 with the aim of developing a set of financial standards referred to as the accepted principal in the private sector. FASB holds a vital position in reporting the financial proceedings. Its primary role is to help the public companies and firms to come up with accounting methods which are used in preparing the final financial statements (Saudagaran, 2001). The body has the authority to set the standards required, but it does not have the rights to enforce the standards. Simply the goal of FASB is to offer advice to stakeholders so as they can be able to make conversant decisions pertaining where to invest through carrying out an analysis on the financial statements. These standards are designed to promote accurate fiscal reports. Honest financial reports will, therefore, enable latent investors to make correct evaluations of business’ finances.
Roles of the American Institute of Public Accountant (AICPA)
The American Institute of Public Accountant (AICPA) is a trade association which seeks to represent professional accountants. AICPA also provides some benefits to its members such as continuing education, selling them various products and services at a discount and also access to various types of services such as insurance. AICPA also influences the regulation of the accounting industry. It also drafts the control statements which are to be used in regulating firms. The AICPA also administers the uniform CPA examination to the students in the country (Braiotta, 1994). The body is also involved in revoking of licenses which violate the rules and regulations set by the body. However, the primary mission of the organization is to provide members with resources and information which enable them to provide their employers and clients with the best services.
Conclusion
The standard-setting industry was incepted in the United States with the aim of giving investors a sense of their money. Some bodies were set up to ensure that the accounting industry is closely monitored. These agencies include the American Institute of Public Accountant (AICPA), Financial Accounting Standards Board (FASB) and the American Institute of Certified Accountants and the Financial Accounting Standard Board.
References
Braiotta, L. (1994). The audit committee handbook. Chichester, United Kingdom: Wiley, John & Sons.
Previts, G. J. J., & Merino, B. D. (1998). A history of accountancy in the United States: The cultural significance of accounting. Columbus, OH: Ohio State University Press.
Saudagaran, S. M. (2001). International accounting: a user perspective. Cincinnati, OH: South-Western College Pub.
