Question

Respond to the following in a minimum of 175 words: 
 
Explain the meaning of GAAP and Sarbanes-Oxley

Answer 1

GAAP is popularly known as US GAAP.

It is accounting standards accepted by the securities and exchange commission.

The full form of GAAP has generally accepted accounting principles. It is issued by the financial accounting standard board.

The public company in the USA must follow GAAP. GAAP improve the clarity, consistency and compatibility of the financial statements across companies in the same industry.
It helps ensures the completeness of the financial statement.

Some of the general concepts can help you remember the goal of GAAP is.

1. Principle of Regularity
2.Principle of Consistency
3. Principle of Sincerity
4. Principle of Prudence
5.Principle of Continuity
6.Principle of Periodicity
7.Principle of Materiality.

Sarbanes-Oxley:

Enron was well respected and regarded company in its time. People felt proud to work at Enron. It took everyone by surprise after the Enron scandal.

Enron scandal reveled in 2001. The company claimed a revenue of $101 billion in 2000.

The Sarbanes-Oxley Act of 202 was passed after this scandal to bring in accounting regularities and increase disclosures. It has increased transparency and accountability. It has also increased auditing Standards.

In fact, it has been observed that IPO cost has increased after the passing of SOX.