Question

One criticism raised regarding the AICPA’s two standard-setting committees is that they were not independent. Explain the characteristics of these Boards that might have caused this criticism. Why should we care whether an accounting standard setter is independent?

Answer 1

The Financial accounting standards board (FASB) is a private and a non profit organization and which one body is setting the standards which are generally accepted accounting principles with public interest of United States. It was replaced the American institute of certified public accountants (AICPA) Accounting Principles Board(APB). These are authorised by all including state board accountancy and AICPA.

In 2002, both boards came to the agreement that the AICPA would no longer issue statements of positions that are considered authoritative GAAP.

The President of AICPA appointed a wheat committee consisting of seven men for examining the operations of APB, their findings results proposed several changes including establishing the financial accounting foundation which is seperated from proffessonal firms. The US SEC will be the substantial authoritative support stated by their pronouncement. For some criteria, accounting standards setter is independent..

1.same quality as the information resulting from U.S. accounting standards

2.consistent as the application and enforcement of U.S. accounting standards

3.sufficient resources

4.standard-setting board and staff that are free of bias and possess the technical expertise necessary to fulfill their important roles.

5.process that adequately protects the standard setter’s technical decisions and judgments (including the timing of the implementation of standards) from being overridden by government officials or bodies.