chapter 2 book notes - GAAP GAAP-A collection of standards...

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GAAP GAAP -A collection of standards and guidelines set by Financial Accounting Standards Board (FASB) with input from the SEC, and AICPA, and investors and politicians These guidelines are: -Statements of Financial Accounting Standards -APB Opinions -Accounting Research Bulletins -AICPA prounouncements -at the bottom: Industry practices SEC -independent, quasi-judicial gov’t agency -administer securities regulations -can modify and set GAAP, major player in global accounting but pressured to accept International Accounting Standards -rarely challenges FASB Managers of companies -primary responsibility is fair and accurate reports -major lobbyist on GAAP Auditing -SEC requires Audit report -opinion can be clean, qualified, or disclaimer Corporate Governance -financial statements need approval by board of directors -appointed audit committee oversees accounting, internal control, internal/external audit -companies often perform internal audits to prevent fraud Internal users -managers -internal auditors -budget officers External users -lenders
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-shareholders -gov’t Alternative information sources instead of Financial statements -industry and economy news -voluntary disclosure -motivation: legal liability...lower probability of being sued if you disclose important news
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