TheGenerally Accepted Accounting Principles, or GAAP, arethe accounting principles, standards, and procedures employed by companies inrecording their financial statements (“Comprehensive guide…”,2018). This principle is used to make sure that investors keep a consistentlevel of financial statements when trying to figure out which company to invest.The GAAP includes revenue identification, balance sheet entry classification,and outstanding share identification (“Development of GAAP”3, 2018). When recordingtheir financial statements, U.S.
law requires that all companies release their financialstatements to the public and also to different companies that are publiclytraded on stock exchanges.TheFidelity Investments Company is a well-known mutual fund investment company. TheFidelity Investment Company makes great amounts of investments, that are worthbillions, in companies that have been listed in the stock markets (“Financial AccountingFoundation”, 2018). GAAP are very important for Fidelity’s investment analysts.The Fidelity investment analysts find financial statements that have been preparedin accordance with GAAP and audited by an independent Certified PublicAccountant (CPA) useful (“Comprehensive guide…”, 2018). It is useful to thembecause of its accuracy. These financial statements are prepared by the managementand checked by the CPA.
The CPA are honest and trustworthy. They have no reasonto lie since they will not gain anything from it. When the financial statementsare prepared in accordance with GAAP, it is guaranteed that all of the rulesare followed and that they are correct.Thereare several organizations that influence GAAP, which include the FinancialAccounting Standards Board (FASB), the American Institute of Certified PublicAccountants (AICPA), the Securities and Exchange Commission (SEC), the GovernmentAccounting Standards Board (GASB), the Public Company Accounting OversightBoard (PCAOB), the International Accounting Standards Board (IASB), and theInternal Revenue Service (IRS) (“Essentials of GAAP…”, 2017).The Financial Accounting Standards Board (FASB) is the main organizationthat is responsible for making rules that need to be followed to be employed inaccounting practice.
The American Institute of Certified Public Accountants(AICPA) is a professional association of the certified public accountant. Itinfluences the accounting field through the acts of its senior technicalcommittee. The Security and Exchange Commission (SEC) is the federal governmentagency with the authority to carry out accounting practices. These accounting practicesare carried out on the companies and businesses that provide their securitiesto the public. This is very important and has a great influence on theaccounting practice, because without it these practices would not be about tobe perpetrated. The Governmental Accounting Standards Board (GASB) is anorganization that provides accounting standards to the state, and also thelocal governments (Wilkinson, 2017).
The Public Company Accounting OversightBoard (PCAOB) is a government body that was created by the Sarbanes-Oxley Act. Thisorganization registers public accounting firms and determines the standardsthat should be followed by company auditors. It conducts inspections,investigations, and disciplinary proceedings of registered accounting firms ifstandards are not followed. The International Accounting Standards Board (IASB)is an organization that approves the international accounting standards. Lastly,the Internal Revenue Service (IRS) is the body that administers the tax lawrules, which is very helpful and important with the accounting practice (“Essentialsof GAAP…”, 2017).