What GAAP Governs

As stated above, there are many agencies involved in using and applying GAAP. With all the guidelines, principles, and regulations that accountants must follow, what does the GAAP govern over? Here is a list of areas that are important to accountants and how GAAP gets involved:

·        Ethics – The one area that is really getting a lot of focus recently has been accounting scandals. These scandals involve major companies. Ethics affect accountants in every thing they do. This is because investors and creditors need reliable information and depend on the accounting department to deliver accurate financial statements. Because of this scrutiny, pressure is put on accountants to make the numbers look really good. In most cases accountants do their job with integrity, honesty, professionally, and ethically. It’s when they don’t follow these standards is when they make headlines.  

·        Standards – Under the guise of the AICPA, CPAs and other accountants follow procedures that dictate what they do. Accountants, especially CPAs even take an oath.  

·        GAAP – GAAP is considered in the accounting field as the Bible or law. It basically rests on the framework that the primary objective of accountants is to put together financial reports that will be useful to investors to make investment decisions and banks to make lending decisions.

 

In order for information to be useful to others, it must be useful, relevant, reliable, and comparable. There can be no inconsistencies in any of the records. If there happens to be too many, an audit or examination of the records has to be done.