Accounting Concept and Conventions

The AICPA published the generally accepted auditing standards (GAAS). GAAS are those guidelines which auditors must follow while conducting an audit of a company's financial statements. It must also be stated in the audit report that the audit was conducted following GAAS.

B. An examination of financial statements and underlying records for conformance with generally accepted accounting principles (GAAP).

Generally accepted accounting principles (GAAP) allow companies wide latitude in the choice of accounting policies. After a firm chooses a set of accounting policies, current accounting rules permit changes from one alternative policy to another at the discretion of the management. Since reported accounting figures are widely used by a number of external parties, managers of firms have incentives to choose accounting policies in order to influence the behavior of these parties. A variety of managerial motives for

The last GAAP is the consistency principle. The consistency principle suggests that once an organization agrees upon the utilization of an accounting principle or method, they should consistently use the same method for future fiscal years. This will provide a more accurate comparison for the individuals dealing with the massive amounts of numbers and transactions each fiscal year.

The documents that comprise GAAP vary in format, completeness, and structure. As a result, financial statement preparers sometimes are not sure whether they have the right GAAP; determining what is authoritative and what is not becomes difficult. In response to these concerns, the FASB developed the Financial Accounting Standards Board Accounting Standards Codification. The FASB’s primary goal in developing the Codification is to provide in one place all the authoritative literature related to a particular topic. Professional accountants pay for access to the FASB. The OU Accounting Department has paid for academic access to the FASB Codification. Our Login information is:

When organizations present financial statements for review, the information contained in the statements should be appropriate and clear enough as to enable evaluators or auditors of the information to make accurate estimations of the presenting organization’s financial status.

Representations are faithful if there is a correspondence or agreement between the accounting measures or descriptions in the financial reports and the economic phenomena they purport to represent (FASB, 1980: 6; FASB, 2005: 3). The difference between reliability and a faithful representation is ambiguous. Since the attributes neutrality, completeness and substance of economic phenomena (substance over form) can be classified as qualities of faithful representation, reliability becomes redundant. Consequently, a point of attention is to discuss what exactly the notions reliability and faithful representation mean and what they do not mean (FASB, 2005: 2-3).In both frameworks neutrality is defined as free from bias. 'To that end, the common conceptual framework should not include conservatism or prudence among the desirable qualitative characteristics of accounting information. However the framework should note the continuing need to be careful in the face of uncertainty' (FASB, 2005: 3).

GAAP is an international convention of good accounting practices. It is based on the following core principles. In certain instances particular types of accountants that deviate from these principles can be held liable.

GAAP (Generally Accepted Accounting Principles) determine the content and format of financial statements. SEC (Securities and Exchange Commission) requires publicly traded companies to issue annual audit. Concerns are about adequacy of disclosure; and behavioral implications are secondary.

The accrual basis of accounting conforms to the GAAP financial statements preparation provisions for external users. The US GAAP website describes financial guidelines, provides an understanding of the financial guidelines, and describes management's general flexibility. You must understand the flexibility in the GAAP standards and relate it to the individual company and its industry. Regulators view earnings quality as high when generally accepted accounting principles are adhered to.

GAAP is exceptionally useful because it attempts to regulate and normalize accounting definitions, assumptions, and methods. Because of generally accepted accounting principles one is able to presuppose that there is uniformity from year to year in the methods that are used to prepare a

The US Generally Accepted Accounting Principles (GAAP) is a set of international accounting rules which originated from the United States. US GAAP can be defined as a set of accounting principles, standards and procedures that companies use to compile their financial statements (Elliott & Elliott, 2008). The International Financial Reporting Standards (IFRS) on the other hand are accounting rules originating from the United Kingdom. International Financial Reporting Standards (IFRS) are a set of accounting rules designed with a common global language for business affairs so that financial accounts of companies are understandable and comparable across international boundaries (Devinney, Pedersen & Tihanyi, 2010).

In the U.S., generally accepted accounting principles, commonly abbreviated as US GAAP or simply GAAP, are accounting rules used to prepare, present, and report financial statements for a wide variety of entities, including publicly-traded and privately-held companies, non-profit organizations, and governments. Generally GAAP includes local applicable Accounting Framework, related accounting law, rules and Accounting Standard.

Accounting is the art of measuring and communicating financial information. To maintain uniformity and consistency in preparing and maintaining books of accounts, certain rules or principles have been evolved. These rules or principles are classified as concepts and conventions. One of the important concept in accounting is “Measurement” (Mattessich, 1977)

An important function of the accounting field is to provide external users of financial statements with assurance that the financial information being presented is both reliable and accurate. This basic function of accounting is so important that there is an entire field of experts, called auditors, dedicated to assuring its proper performance. Throughout history there have been many instances in which the basic equilibrium between an institution and current/potential investor has been threatened due to a lack of accountability and trust between the two parties. This issue has been the catalyst for many discussions regarding the proper procedures a firm should follow in order to provide