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Private Sector vs Public Sector Accounting

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PRIVATE SECTOR VS PUBLIC SECTOR
ACCOUNTING STANDARD

1. INTRODUCTION

The global financial crisis has demonstrated that the public sector as well as the private sector needs the highest quality accounting standards. Around the world, accounting in the public sector is practiced in diverse ways and struggles to achieve comparable standard in accountability and transparency.

The Securities Act of 1933 gave the commission the authority to prescribe accounting standards to be followed by the companies for the purpose of complying with federal securities laws. The Commission has historical looked to the privates sector to help establish those standard, creating an important joint responsibility. This joint responsibility has recently being …show more content…

Private standard setting in the United States has included the Committee on Accounting Procedures and the Financial Accounting Standards Board. Given the FASB is the ongoing standard setting body in the private sector, it will be used to illustrate the advantages and the limitations of private sector regulation of accounting standards.

Private sector approach cite the following arguments in support of their positions:
• The FASB seems to be responsive to various constituents. First, it is composed of members of various interested groups in addition to the public accounting profession. Second, its financial support is derived from contributions of a diverse group of individuals, companies, and associations. Third, it has adopted a complex due process procedure that relies heavily on the responses of all interested constituents. Fourth, due to the process procedure generates an active concern about the consequences of its actions on the constituents.
• The FASB seems to be able to be attract, as member or as staff, people who possess the necessary technical knowledge to develop and implement alternative measurement and disclosure systems. As a unit, the standards are more likely to be acceptable to CPA firms, business firms and external users.
• The FASB seems to be successful in generating responses from its constituency

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