Accounting

Integrity

Means being honest and forthright in dealings and communications with others

Bookkeeping

Procedures are used to accumulate the financial results of many of an entity's activities, and these procedures are part of the financial accounting process.

Objectivity

means impartiality and freedom from conflict of interest

Independence

related to objectivity and is especially important to the auditor, who must be independent both in appearance and in fact.

Financial Accounting

Generally refers to the process that results in the preparation and reporting of financial statements for an entity. Financial Accounting is generally oriented toward the external user. The financial statements are directed to individuals who are not in a position to be aware of the day-to-day financial and operating activities of the entity. Also primarily concerned with the historical results of an entity's performance.

Financial Accounting Standard Setting at the Present Time

In 1973, as a result of congressional and other criticism of the accounting standard setting process being performed by an arm of the AICPA, the Financial Accounting Foundations was crated as a more independent entity.

Internal Auditing

Organizations with many plant locations or activities involving many financial transactions employ professional accountants to do internal auditing. The internal auditor performs functions much like those of the external auditor/public accountant, but perhaps on a smaller scale.

Ethics and the Accounting Profession

The AICPA and the IMA have both published ethics codes. The Code of Professional Conduct was adopted by the membership of the AICPA. The bylaws state that members must conform to the rules or face consequences. The IMA Statement of Ethical Professional Practice calls on management accountants to maintain the highest standards of ethical conduct as they fulfill their obligations to the organizations they serve, their profession, the public, and themselves. Both codes identify integrity and objectivity as two key elements of ethical behavior for a professional accountant. Also independence, competence, and acceptance of an obligation to serve the best interests of the employer, the client, and the public.

Auditing — Public Accounting

The process of having financial statements reviewed or examined by an independent third party. Independent auditor's report consist of about four brief paragraph.

Controller

Used to designate the chief accounting officer of a corporation. Usually responsible for both the financial and managerial accounting functions of an organization

How Has Accounting Developed

Accounting has developed over time in response to the needs of users of financial statements for financial information to support decisions and informed judgments

Accounting

Is the process of identifying, measuring, and communicating economic information about an organization for the purpose of making decisions and informed judgments.

The Accounting Profession in the United States

Accounting professionals in this country organized themselves in the early 1900s and worked hard to establish certification laws, standardized audit procedures, and other attributes of a profession. However, not until 1932-1934 did the American Institute of Accountants, and the New York Stock Exchange agree on five broad principles of accounting.

Governmental and Not-for-Profit Accounting

Same accounting practices are used for governmental and not-for-profit organizations

Managerial Accounting / Cost Accounting

Concerned with the use of economic and financial information to plan and control many activities of the entity and to support the management decision-making process. Cost Accounting is a subset of managerial accounting that relates to the determination and accumulation of product, process, or service costs.

Early History

Dating back to the clay tablets used by Mesopotamians in about 3000 B.C. to record tax receipts, accounting has responded to the information needs of users. In 1494, Luca Pacioli, a Franciscan monk and mathematics profesor, published the first known text to describe a comprehensive double-entry bookkeeping systems. Modern bookkeeping has evolved from his system.

Uses of Accounting Information

Users of accounting information include the management of the entity or organization; the owners of the organization; potential investors in and creditors of the organizations; employee; and various federal, state, and local governmental agencies that are concerned with regulatory and tax matters.

International Accounting Standards

Accounting standards in individual countries have evolved in response to the unique user needs and cultural attributes of each country. Thus, despite the development of a global marketplace, accounting standards in one country may differ significantly from those in another country. In 1973, the International Accounting Standards Committee was formed by accountancy bodies in Australia, Canada, France, Germany, Japan, Mexico, the Netherlandsm the United Kingdom and Ireland, and the United States to create and promote worldwide acceptance and observation of accounting and financial reporting standards. The goal of the IASB is to develop a single set of high quality, understandable, enforceable, and globally accepted financial reporting standards based upon clearly articulated principles.

Standards are Evolving

Financial accounting and reporting practices are not based on a set of inflexible rules to be mastered and blindly followed. The reality is that financial reporting practices have evolved over time in response to the changing needs of society and are still evolving.

Standards for Other Types of Accounting

Managerial Accounting / Cost Accounting: Because managerial/cost accounting is oriented primarily to internal use, it is presumed that internal users will know about the accounting practices being followed by their firms. One significant exception is accounting for the cost of work done under government contracts. Auditing: auditing standards are established by the Auditing Standards Board, a technical committee of the AICPA, unless superseded or amended by the PCAOB. The SEC has had input into this process, and over the years a number of auditing standards and procedures have been issued Governmental and Not-for-Profit Accounting: In 1984, the Governmental Accounting Standards Board was established to develop guidelines for financial accounting and reporting by state and local governmental units. Income Tax Accounting: The United States Internal Revenue Code and related regulations and the various state and local tax laws specify the rules to be followed in determining an entity's income tax liability.

Financial Accounting Standards Board

The foundation established the Financial Accounting Standards Board as the authoritative standard setting body within the accounting profession. Embarked on a project called the Conceptual Framework of Financial Accounting and reporting and issued eight Statements of Financial Accounting Concepts

Income Tax Accounting

The growing complexity of federal, state, municipal, and foreign income tax laws has led to a demand for professional accountants who are specialists in various aspects of taxation.