Government Regulations: Accounting Essay

1582 words - 6 pages

Charlie Munger once stated, “You have to know accounting. It’s the language of practical business life.” This statement emphasizes that accounting has become the center of the business world. With the world now being focused around businesses and the idea of how to make the next dollar it’s obvious that the accounting field is rapidly becoming the most influential field in the world today. With these occurrences comes regulation, and when I say regulation I mean stiff government regulations on how financial reporting is done. There are many theories as to why there is an increase in accounting regulations. One is the emphasis on the accuracy of accounting period, another being the development of ethical codes being promoted in college courses, and another being increasing competition among businesses and the strive to be the top firm. Regardless, the Federal Government requires intense regulations that require financial reporting to be clear, concise, and accurate.
To help ensure accuracy and legitimacy among financial reports the Federal Accounting Standards Advisory Board (FASAB) was developed in 1990 by the Secretary of Treasury, Director of Office Management and Budget, and the Comptroller General. The board consists of nine members including one representative of the Congressional Budget Office, one representative of the defense and international agencies, one representative of civilian agencies, and three representatives from private sectors. FASAB was created to help form accounting principles and regulations that would help the federal government ensure that all financial reports were handled properly and met the requirements the board has set forth. This board established boundaries and rules for every cost under the sky from assets and liabilities to marginal revenue. No cost of any sort was to be overlooked. These regulations and principles would set forth a precedent that would require businesses to present their financial processes in an accurate manner.
FASAB created four objectives to ensure the quality of financial reporting with them being: budgetary integrity, operating performance, stewardship, and systems and controls. Budgetary Integrity would help provide information to determine how budgetary resources had been acquired and if that transaction was properly done through legal processes. Budgetary integrity also presents the status of its resources and if these statuses were consistent with information on assets and liabilities. Operating performance helps users of financial reporting evaluate the reporting entity’s service efforts, costs, and accomplishments. It also evaluates the manner in which their particular efforts and accomplishments had been financed as well as the entity’s handling of its assets and liabilities. The third objective, stewardship, evaluates how the nation is affected by the governments operations and investments while also assessing how the government’s financial condition has changed and how it...

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