Question
I know It is possible to deviate from GAAP and the accounting cycle and still prepare financial statements because “the standard categorizes the major sources of the GAAP are FASB Standards, Interpretations, and Staff Positions; APB Opinions; and AICPA Accounting Research Bulletins. Often, however, a specific accounting transaction occurs that these documents do not cover. In this case, companies must use other authoritative literature”
What about companies that are not governed by the SEC? What about private companies? Are they still governed by GAAP, and if so, to what extent? I need an expert opinion please. Thanks!
Explanation / Answer
Sarbanes-Oxely Act of 2002: During the financial scandals of the early 2000s , stock holders , creditors, and other investors lost bilions of dollars. As a result the US congress passed this act in 2002. The purpose of this act is to restore the public confidence and trust in the financial reporting of the companies. This act highlighted the importance of assesing the financial controls and reporting of all companies. As a result, companies of all sizes have been influenced by sarbanes oxely. Sarbanes-Oxely emphasizes the importance of effective internal control. Internal control is defined as the procedures and processes used by a company to; 1. safegaurd its assets. 2. Process information accurately. 3. Ensure compliance with laws and regulations. This act requires companies to maintain effective internal controls over the recording of transactions and the preparing of financial statements. The transaction recording and the financila statements reporting should be filed with the company's annual 10-k report with the Securities Exchange Commission (SEC). During the financial scandals of the early 2000s , stock holders , creditors, and other investors lost bilions of dollars. As a result the US congress passed this act in 2002. The purpose of this act is to restore the public confidence and trust in the financial reporting of the companies. This act highlighted the importance of assesing the financial controls and reporting of all companies. As a result, companies of all sizes have been influenced by sarbanes oxely. Sarbanes-Oxely emphasizes the importance of effective internal control. Internal control is defined as the procedures and processes used by a company to; 1. safegaurd its assets. 2. Process information accurately. 3. Ensure compliance with laws and regulations. This act requires companies to maintain effective internal controls over the recording of transactions and the preparing of financial statements. The transaction recording and the financila statements reporting should be filed with the company's annual 10-k report with the Securities Exchange Commission (SEC).