The Financial Reporting Environment
How Financial Reporting Is Regulated
Financial reporting follows established accounting standards that promote consistency, comparability, and reliability. In the United States, publicly traded companies prepare financial statements primarily in accordance with U.S. Generally Accepted Accounting Principles (GAAP).
- SEC oversees financial reporting for public companies.
- FASB establishes U.S. GAAP.
- AICPA provides guidance for the accounting profession.
- PCAOB oversees audits of public companies.
Note
The CPA FAR exam primarily tests U.S. GAAP, although certain topics compare GAAP with IFRS.
Summary
Accounting standards ensure that financial statements are prepared consistently across organizations.