Intermediate Accounting Paper

Intermediate Accounting Paper

The Financial Accounting Standards Board (FASB) is a private, not-for-profit organization whose primary purpose is to develop generally accepted accounting principles (GAAP) within the United States in the public's interest. The Securities and Exchange Commission (SEC) designated the FASB as the organization responsible for setting accounting standards for public companies in the U.S. It was created in 1973, replacing the Accounting Principles Board and the Committee on Accounting Procedure of the American Institute of Certified Public Accountants. The Financial Accounting Standards Board's mission is "to establish and improve standards of financial accounting and reporting for the guidance and education of the public, including issuers, auditors, and users of financial information."

The Financial Accounting Standards Board is not a governmental body. The SEC has statutory authority to establish financial accounting and reporting standards for publicly held companies under the Securities Exchange Act of 1934. Throughout its history, however, the Commission’s policy has been to rely on the private sector for this function to the extent that the private sector demonstrates ability to fulfill the responsibility in the public interest.

The FASB is part of a structure that is independent of all other business and professional organizations. Before the present structure was created, financial accounting and reporting standards were established first by the Committee on Accounting Procedure of the American Institute of Certified Public Accountants and then by the Accounting Principles Board, also a part of the AICPA. Pronouncements of those predecessor bodies remain in force unless amended or superseded by the FASB.

With over 330,525 CPA members (in August 2006), the American Institute of Certified Public Accountants (AICPA) is the largest professional organization of Certified Public Accountants (CPAs) in the United States of America. Approximately 40% of its members are engaged in the practice of public accounting, in areas such as auditing, accounting, taxation, general business consulting, business valuation, personal financial planning and business technology. The majority (60%) of its members are CPAs who work in industry, government and education. However, because of the Institute's major role in self-regulation of most practicing CPAs, a large part of the Institute's resources are devoted to this function and to related programs to help CPAs maintain professional competence. The two most visible CPA practice functions are tax practice and the independent audits and similar services related to financial statements of all types of entities. Only CPAs and a now dwindling number of "grandfathered-in" non-CPA accountants are permitted to perform this audit function.

The Institute's overriding role is to promote and enhance the profession of accounting. To accomplish this, it has a variety of functions, which include: providing group member benefits; preparing the Uniform CPA Examination; developing CPA professional standards; providing technical support to CPA members in many areas of practice; operating the profession's public relations programs; providing support to the academic community and representing the profession before Congress and federal agencies.

The AICPA develops the Uniform CPA Exam, one of the most respected entry-level professional licensing exams in the U.S. The test has recently been changed from a biannual two-day examination to a test that can be taken on a computer in a testing center. While each state has variations in the educational, experience and other requirements necessary to earn a CPA license, all states use the AICPA's exam to meet the entry-level testing requirement.

The AICPA also developed the International Qualification Examination (IQEX)

The AICPA sets generally accepted professional and technical standards for CPAs in many areas. Until the 1970s, the AICPA held a virtually monopoly in this field. In the 1970s, however, it transferred its responsibility for setting generally accepted accounting principles (GAAP) to the newly formed Financial Accounting Standards Board (FASB.) Following this, it retained its standards setting function in areas such as financial statement auditing, professional ethics, attest services, CPA firm quality control, CPA tax practice and financial planning practice. Before passage of the Sarbanes-Oxley law, AICPA standards in these areas were considered "generally accepted" for all CPA practitioners.