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Case Study Assignment

Vernon Daniels Jr., Shannon Glascock, Maria Cristina Guzman, Shenille McCoy
ACC/497
August 25, 2014
Charles Christian, Jr














Running head: CASE STUDY ASSIGNMENT 2
Case 1-3 Politicalization of Accounting Standards in Ch. 1
The following organizations, Committee on Accounting Procedure (CAP), Accounting
Principles Board (APB), and the Financial Accounting Standards Board (FASB) are becoming
more and more politicization for two reasons. First reason is the organizations are increasing the
auditing of accounting firms, second the organizations are continuing to set more and more
accounting standards. With fraud cases within organization it decreases the reliability and
honesty within company. For individuals it increases the need for more regulations for assurance
and trust within the company. The CAP was the first organization to create accounting standards,
which was replaced by the APB. The APB was created in 1959 and issued rules and regulations.
The SEC has statutory authority to establish financial accounting and reporting standards for
publicly held companies under the Securities Exchange Act of 1934. (FASB, n.d.) The APB was
related to the Securities Exchange Commission operating with the U.S. government then
replaced in 1973 by the FASB. The mission of the FASB is to establish and improve standards
of accounting and reporting that foster financial reporting by nongovernmental entities that
provides decision-useful information to investors and other users of financial reports. (FASB,
n.d.) The FASB is independent for all businesses and professional organizations.
After huge fraud crimes within various organizations like Enron, the government created
rules and regulations. The rules and regulations hold owners, board of directors, and any
individual holding high power within a company accountable of the companies accounting
procedures and reporting. Other reasons are to create bigger restrictions for companies to
prevent fraud and dishonesty and to protect individuals who were not involved within a corporate
scandal. Protection is a must for individuals in these types of situations because he or she can
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lose their jobs, homes, savings, and retirements due to someone elses dishonesty, fraudulent
activity, greed, or lack of knowledge on accounting standards and procedures.
When the CMA was adapted, it made accounting standards to help keep fraud to a
minimum. This is because when people comply with all the rules and regulations or guidelines
then it will keep people honest and fraud will not happen. This also helps small business owners
who like bigger companies do not have accounting professionals within the company or at a
every day interaction. Smaller companies must keep their own financial records accountable,
accurate, and honest which becomes more times consuming and more involvement from all
company officials but helps with staying in tune with the companies accounting procedures and
reporting.
Case 1-4 Generally Accepted Accounting Principles in Ch. 1
Accounting principles, as referenced in an auditors report is inclusive of accounting
principles as the term states, but it is also inclusive of the application and the process involved
when applying those principles. The term accounting principles is inclusive of the utilization
of rules and guides in the action of the principle. It also applies to main or essential personality
of those principles.
Accounting principles do not signify that the principles are guidelines that cannot be
deviated from. On the contrary the applicability of the principles varies by situation or
circumstance. Accounting principles cannot be mistaken as accounting theory; principles vs.
theory are two very different terms. According to "Accounting Theory" (2014), it is defined as
the assumptions, methodologies and frameworks used in the study and application of financial
principles. The study of accounting theory involves a review of both the historical foundations of
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accounting practices, as well as the way in which accounting practices are verified and added to
the regulatory framework that governs financial statements and financial reporting.
In line with what was stated above, the accounting principles used by any
one organization or company are not inevitably generally accepted. To be considered generally
accepted these principles must meet the accounting principles suggested by the accounting
standards setting body in the country where the client, organization, or company operates. In the
United States, this body is the Financial Accounting Standards Board (FASB). The generally
accepted accounting principles publicized by this body are enclosed in the Statement of Financial
Accounting Standards (SFAS).
To discuss the president's beliefs that accounting practice will always exist among
independent entities despite continual improvements in comparability, he of she needs to look at
the standardization of accounting practices that are initiated by the International Financial
Reporting Standards (IFRS) and the GAAP (generally accepted accounting principles). There
have been recent efforts to converge standards initiated by the IASB and the FASB. The
convergence will affect share-based payments, business combinations, and pensions. It will also
undoubtedly decrease the occurrence of differences between IFRS and GAAP in the coming
years. Although convergences of accounting standards are the right path to take there are still
hurdles to be cleared. Therefore it is seen that for the foreseeable future, the president will be
right in his beliefs.
Case 2-2 The Theoretical Foundation of Accounting Principles in Ch. 2
In accounting a Conceptual Framework is important because rule-making should be built
in relation to a well rooted body of concepts. It can also provide information useful in assessing
future cash flows. Several benefits of a firm created conceptual framework are as follows: It is
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much easier to issue a logical set of standards and rules, and some practical problems should
solve faster and help to increase financial statement users to better understanding and have more
confidence in financial reporting.
There are three levels to the Conceptual Framework, which is developed in a sequence of
concept statements. The first question would be why; the purpose of financial accounting
reporting. Next, are the qualitative traits and some elements which are the bridge between all
three levels, and can also contribute to the quality or value of the information making it
usefulness for decision making. Lastly, it is the how, which it involves implementation,
measurement and some disclosure concepts.
In conclusion, the evolution of the current FASB certainly represents increasing
politicization of accounting standards setting. Many of the efforts extended by the AICPA can be
directly attributed to the desire to satisfy the interests of many groups within our society. The
FASB simply represents another step in this evolutionary process somewhat created by
understandability, relevance and reliability.









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References
Cathey. J., Clark. M., Schroeder. R. (2011). Financial Accounting Theory and Analysis (10
th
ed.).
Retrieved from
https://ecampus.phoenix.edu/content/eBookLibrary2/content/eReader.aspx.

Accounting Theory. (2014). Retrieved from
http://www.investopedia.com/terms/a/accounting-theory.asp
(n.d.). Retrieved from FASB: https://asc.fasb.org/home