Political Process For Establishing Accounting Standards- Accounting Essay
This paper explains how the political sector has its role in the establishment of accounting standards. There have been incidences the past showing how political lobbying had influenced the accounting standard setting, and to avoid raising problems with the regulatory boards, companies or interested parties can actually create ways of lobbying their political principles instead directly tying to take part in accounting standard setting, which explains the meaning of the political process of establishing accounting standards (Bertomeu & Magee, 2011).Political influence over standard setting is a deliberate involvement in the standard setting process by an economic body with the main aim of influencing the outcome of that particular process in order to increase that entity’s economic value (Allen & Ramana, 2013).
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The accounting standard setting hierarchy in the United States stars from the U.S congress, the legislator has endorsed powers to the Security and Exchange Commission to disseminate and enforce financial reporting standards in the securities Acts of 1933 and 1934.The SEC has in turn delegated the powers to organizations of the private sector, Financial Accounting Standards Board. The accounting regulation is therefore made of two principal relationships, between the U.S Congress and SEC and between the SEC and FASB.
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It is therefore evident that both the legislator and SEC have veto powers over standards promulgated by FASB. From the FASB, promulgated standards are disseminated to the users like investors, managers and auditors (Allen, 2013).The main mission of financial accounting setting board is to establish and improve standards of financial accounting and reporting that foster financial reporting by non governmental entities that provides decisions and useful information to investors and other users of financial reports.
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