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REVIEW -Ethics in Accounting: – US GAAP Plus: – US GAAP Plus- FASB and ISAB Standards Codification, Interpretations and Pronouncements: – AICPA- American Institute of CPAs – Accounting Organization, News, Publications, and CPA Exam Information: RESOURCE: Intermediate Accounting, 16th Edition: Chapter 1, 2, and 3 (attached) RESPOND: Selected literature suggests that having a number of regulatory agencies responsible for the formation of accounting guidelines and principles is inefficient and unnecessary. Supporters believe that companies should focus on voluntary disclosure and outside users could pay for additional financial information. Discuss the challenges associated with this argument. In your response, explain the role of GAAP, as well as evolving international standards in the fulfillment of accrual accounting practices. Are there any real-world operational changes in business that reinforce the need for governance? In addition, taking into consideration Biblical principles, in what manner are financial accountants challenged in making ethical decisions? Include at least one commentary reference and at least one scholarly peer reviewed reference beyond the textbook. (300 – 400 word count) DISCUSS: (Separate Discussion) 100 Word Count Response to Post: If everyone held ethics equally then voluntary disclosure would be sufficient, however that is not the case. Unfortunately, there can be an extreme variation in ethical behavior, individually as well as at the organizational level, which requires regulation in financial reporting. Regulatory agencies aren’t immune to corruption so multiple agencies keeping tabs on each other is necessary. This is where the Securities Exchange Commission (SEC), American Institute of Certified Public Accountants (AICPA) and the Financial Accounting Standards Board (FASB) are necessary for financial regulation. According to Kieso, Weygandt and Warfield (2016) these “three organizations are instrumental in the development of financial accounting standards (GAAP) in the United States”. GAAP provides a uniform standard for financial reporting in the United States. As the globalization of business continues, it is important that the Financial Accounting Standards Board (FASB) and the International Account Standards Board (IASB) continue to converge the GAAP and IFRS standards in an effort to improve compatibility. In addition to financial reporting, corporate social responsibility and sustainability are becoming more relevant in measuring corporate performance. According to Paine and Srinvivasan (2019) “companies have faced heightened demands to provide various types of non-financial information, especially about their social and environmental impacts. These demands range from calls for specific types of disclosures—about climate-related risks, conflict minerals in the supply chain, political spending, or various pay ratios”. While these areas are important to consider, financial reporting will always be the main source of measurement which reinforces the need for governance in this area. “No one can serve two masters, for either he will hate the one and love the other, or he will be devoted to the one and despise the other. You cannot serve God and money. (Matthew 6:24, ESV). Kieso, et al. (2016) mentions the “conflict and pressure” that can be placed on accountants when working for a business looking to maximize the bottom line. It’s important that the ones ethics are aligned with that of the organization they work for. That way by serving God they serve the best interest of the company as well. (Separate Discussion) 100 Word Count to Response to Post: While I can agree that perhaps having multiple regulatory agencies is inefficient, it is critical in the financial world to have regulations. Currently, in a broad-spectrum view, there is US Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS), with additional local agencies as well (FASB, IASB, SEC, AICPA, etc.). If there were no regulations in place, each financial report would have to be explained to understand each company’s specific practices. Additionally, the world of business is shrinking in that international markets are more readily accessible due to technology and therefore, having different accounting standards can create reporting discrepancies between countries and their businesses. As author Warfield (2016) questions, “The main controversy in setting accounting standards is, ‘Whose rules should we play by, and what should they be?’” (p. 7). My current employer exhibits a perfect example of this as I work for the subsidiary of an Austrian manufacturer. The Enterprise Resource Planning (ERP) software that we use (SAP) was implemented on a global scale and certain ERP background processes and settings had to be changed to accommodate some of the differences between GAAP and IFRS. This has caused some challenges between my international colleagues when they see something that is done differently in Europe and do not understand why our processes are different. Harvard Business Review journalists Sherman and Young (2016) confirms, “[…] understanding the true value of a firm and comparing company accounts across countries continue to be major challenges” (If there could be an adoption of one single regulatory agency, many companies would benefit in having a single source of measurement in reviewing financial reporting. The concept and execution of revenue recognition is a real-world example of operational challenges in business that reinforce the need for oversight and regulation. Sherman and Young (2016) describe, “The shortcomings of revenue-recognition practices have also caused companies to increasingly use unofficial measures to report financial performance, especially for businesses operating in the virtual space” (Sherman, Young, 2016). Consequently, businesses such as Amazon, Facebook, Twitter, eBay, etc. struggled with traditional guidelines of reporting the recognition of revenue and expenses in a manner that accurately reflected the value of their businesses in those accounts. Because of this challenge, those companies began to find alternatives to accurately report their earnings which was not GAAP compliant. This ties back into the earlier assessment of having regulations to ensure consistency, and ethical, scalable, and measurable reporting. The Bible teaches faith and love of course, but also about morals and ethics. Many verses within the Bible discuss the importance of morality to obtain ultimate oneness with God and the entrance to Heaven. Proverbs highlights this concept, “The integrity of the upright will guide them, But the crookedness of the treacherous will destroy them” (Proverbs 11:3, NIV). In this, accountants are incumbent in their faith to report data accurately and correctly, but additionally for the benefit of the company. This has been a challenge for many individuals and companies over the years as greed attempts to weaken the moral resolve to project positive financial reporting for future gains.


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