The United States has a system of government-backed entities that ensure effective, proper and acceptable professional practice of US-certified public accountants. These accountants practice not just in the United States but also overseas. These entities are the American Institute of CPAs (AICPA), the Financial Accounting Standards Board (FASB) and the Public Company Accounting Oversight Board (PCAOB). The system addresses various issues in accounting, such as standardization. However, globalization creates challenges that have prompted efforts to improve standards. The aim is to support accounting practice at the global level. The system must continually change to address issues brought about by trends like globalization.
This article explains the interrelationships among the FASB, the AICPA, and the PCAOB, and how they relate to current changes and challenges in the accounting environment brought about by trends like globalization.
FASB, AICPA & PCAOB: Roles & Impact on Business, Accounting Profession & Economy
The FASB develops standards used for effective, proper and acceptable accounting in companies. These standards are applied by way of the action of the AICPA and its members. However, to further ensure compliance to these standards, the government-backed PCAOB oversees the performance of CPAs. In this regard, the three entities (AICPA, FASB and PCAOB) function as an integrated system. They influence the professional practice of CPAs and the financial reporting of companies. Since the FASB’s standards are applied through the AICPA, the FASB provides basis for the rules that the AICPA implements. The AICPA’s manner of implementing these standards also influences the professional practice of CPAs in the United States.
The economy is subject to the influences of the FASB, the AICPA and the PCAOB. The development and implementation of stricter policies and standards through the FASB and the AICPA could lead to more financial reporting challenges for business organizations and CPAs. New standards usually require change and the use of resources on the part of CPAs and organizations. This condition leads to difficulties in businesses, especially small ones. These difficulties and required changes affect business decisions and performance, thereby also influencing the U.S. economy.
Trends & Current Issues in Accounting Standards
Globalization is a major trend affecting the AICPA, the FASB and the PCAOB. Globalization leads to more connections among organizations from different countries. The FASB, the AICPA and the PCAOB must consider developing new policies and standards to support the integration of different standards from other countries. Constituents must also face the issue of the increasing significance of information technology on accounting practice. These concerns on international integration and information technology require continuous change in standards from the FASB and as applied via the AICPA. This system of the AICPA, the FASB and the PCAOB affects professional accounting practice and the development of business.
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- Public Company Accounting Oversight Board (2015). About the PCAOB.
- U.S. Securities and Exchange Commission (2015). Public Company Accounting Oversight Board (PCAOB).