Comprehensive Professional Portfolio on Accounting Standards - Coursework Example

Comprehensive Professional Portfolio Final Report

Question 1

Studies have indicated that politics have diverse impact on how accounting standards are set. Thus, due to this impact, politics have direct effect on accountants. Political influence over standard setting has been defined as “focused intercession in the standard-setting process by a financial entity with the objective of upsetting the result of that method to upsurge that body’s financial worth or affluence or attain some other self-centered drive fickle with the FASB’s mission” (Gipper et al. 2013, p. 1). This political influence arises when the aim is to change the standard setters’ locus away from what it realizes as the “right answer,” indicating a standard that realizes its intents. According to Kothari et al. (2010, p. 247), this effect results to the increased question surrounding the main objective of standard setting.

Compared to other regulations, accounting standard setting is somehow different, which indicates that prototypes of regulation, such as those established in the economics works relate to only a restricted degree in accounting. After the economic crash of 1920s, the issue of regulation on accounting become a throbbing issue, which, steered by other things, and led to the hunt for accounting ideologies (Gaffakin 2005, p. 2). A foremost goal of accounting is to make available information to concerned parties who might not have contact to comprehensive (or the essential) information to make financial decisions – as the concerned parties are at an information drawback so there is information irregularity. This information irregularity is frequently used to validate the necessity for accounting regulation.

Though, the regulation encompasses well past the information to the contributors of evidence. In other words, the proficient competency of those referring to themselves certified public accountant or inspectors and normally thought to be the utmost gifted to offer and/or oversee the delivery of financial information. In contemporary society, accountants and accounting has become subjected to many regulations. For all organizations that are disclosing financial information, there have been established laws to protect and guide this firms. Also, there is taxation laws which are impacting the formation and maneuver of certified entities, which, in turn execute regulations on their associates. And so, regulations have become part of accountants’ daily lives.

Nonetheless, several existing literatures have argued that there is clear reasons for regulations. Regulations such as the anti-trust regulation were meant to preserve competition. Australian Competition and Consumer Commission (ACCC) in Australia has been established to ensure that there is equal competitiveness and also rule against anti-competitive behavior. Thus, despite the nature of the operating environment, accountants will always be affected by regulations. On the other hand, regulatory agencies such as SEC will always impact accounting and accountants. This is because, the agency encounters political burdens that force the agency to take places that are varying with those of the FASB.

For instance, SEC judgment to predominate SFAS-19 in 1970s when it approved a rule permitting grease and air firms to apply either the full cost or fruitful efforts methods of accounting for examination and expansion costs when the FASB rule (SFAS 19) had banned full cost accounting (Ramanna 2008, p. 251). Furthermore, as the SEC chair and officials are political selections, its opinions on standard-setting are implausible to be reliable over time and will imitate the opinions of the officials of the day.