Commissions, Ethics, and Accounting Abstract: P

When auditing a publicly traded company's financial statements, accountants face a duality of answerability. The purpose of an audit is to assure users outside of the company that management is fair in its reporting. Auditors must be loyally vigilant in the interest of these outside users. On the other hand, the company pays for the audit of the financial statements. To reflect negatively upon the company risks harming the company's ability to negotiate with other companies and devalues the stock and stock options held by shareholders and employees. To make the audit too costly with additional tests risks losing money for the auditors and not being asked back the next year. Since management is directly involved with the audit, and the outside users are not, there is a strong temptation to lean toward the interests of management. The United States Government, through its independent commissions, has found it increasingly necessary to impose regulations and criminal penalties on the financial representation process to assure that the interests of the shareholders ar

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egistration and oversight of public accounting firms and their auditors. This commission was created by the Sarbanes-Oxley Act of 2002 (U.S. Congress). The purpose of the PCAOB is to assure that GAAP, on which the SEC depends, is sufficient to reasonably reflect the financial health of the company. The PCAOB also sets and enforces standards on auditor independence and managerial accountability. It is not yet clear whether the FASB will continue to make the accounting rules and then have them approved by the PCAOB or whether the PCAOB will make the rules and the FASB will only exist for research purposes. There are general underlying philosophies that influence the development of GAAP. Whether or not these philosophies are appropriate are among the issues being investigated by the PCAOB. The assumption that a company is a going concern, conservatism, usability, and auditor independence are all critical components of financial statement preparation. The government is trying to add accountability to this list. The price of equity securities is based upon the sum of the expected future cash flows discounted back to the present day by an interest rate that has been adjusted for risk. Likewise, the valuation of a company's
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Some common words found in the essay are:
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Approximate Word count = 1423
Approximate Pages = 6 (250 words per page)