Why is it required that financial statements are prepared under Generally Accepted Accounting Principles?

Expert Solution

GAAP - Generally accepted Accounting principles is a standard framework of guidelines for financial accounting. It is a set of rules that encompasses the details, methods and complexities of financial accounting. Mostly, all government, or companies in USA prepare their financial accounting under GAAP , it is built to eliminate misleading accounting statements and Regulate financial accounting practices.

REASONS FOR PREPARING FINANCIAL ACCOUNTING UNDER GAAP

1. Consistency -. GAPP ensures that all organisations uses the same methods of preparing accounts year to year , which leads to consistency and makes it easier for stakeholders to evaluate financial data.

2. Decision - Making - GAAP provides standards for recording and analysing the transactions and give information that helps users of financial statements to make effective decisions. It makes financial reporting accurate and relevant.

3. Reliability and Transperancy- GAAP allows auditors to verify the accounting statements which makes finance Accounting more reliable and transparent for external users like stakeholders , investors etc.

4. Comparability - As all the organisation uses same standards given by GAAP , it enhances the comparability and firms are able to compare their reports , profit or losses with other firm.

5, Analysing and Interpretation - The main aim of GAAP is to ensure that all financial statements are complete and consistent. This makes it easier for stakeholders , investors and other external users to analyze and get information from the financial statements of firm. It also interpret the statements to make decisions.

Nightingale answered 1 year ago

1. An auditor's report on financial statements prepared in accordance with generally accepted accounting principles should...

1. An auditor's report on financial statements prepared in accordance with generally accepted accounting principles should include all of the following except: an opinion as to whether the basis of accounting used is appropriate under the circumstances. a statement that the basis of presentation is a basis of accounting other than generally accepted accounting principles if management wants to do it reference to the note to the financial statements that describes the basis of presentation as GAAP. an opinion as...

The standards for compilations and reviews of financial statements are called Generally Accepted Accounting Principles Services...

The standards for compilations and reviews of financial statements are called Generally Accepted Accounting Principles Services Generally Accepted Auditing Standards Services Statement on Standards for Accounting and Review Services Statement on Auditing for Review and Compilation Services Which service can an accountant provide without being independent: Audit Compilation Review Select the amount of evidence (High, None, Limited): needed for each of the following: Compilation ________________________ Audit _______________________________ Review ______________________________ In an attestation engagement, the CPA reports on the reliability of...

Financial statements are based on generally accepted accounting principles (GAAP) and are audited by CPA firms....

Financial statements are based on generally accepted accounting principles (GAAP) and are audited by CPA firms. Do investors need to worry about the validity of those statements?

What parts of Generally Accepted Accounting Principles, are not generally accepted?

When financial statements are affected by a material departure from generally accepted accounting principles, the auditors...

When financial statements are affected by a material departure from generally accepted accounting principles, the auditors should: A. Issue an "except for" qualification or a disclaimer of opinion. B. Withdraw from the engagement. C. Issue an unmodified opinion with a basis for modification paragraph. D. Issue an "except for" qualification or an adverse opinion.

The Financial Accounting Standards Board is the primary source of generally accepted accounting principles (GAAP) for...

The Financial Accounting Standards Board is the primary source of generally accepted accounting principles (GAAP) for all health care organizations. Do you agree with this statement? Why or why not?

The Financial Accounting Standards Board (FASB) is responsible for the Generally Accepted Accounting Principles (GAAP). Select...

The Financial Accounting Standards Board (FASB) is responsible for the Generally Accepted Accounting Principles (GAAP). Select a Concept or Principle and explain how it impacts business.

Auditors must be concerned with both generally accepted auditing standards and generally accepted accounting principles in...

Auditors must be concerned with both generally accepted auditing standards and generally accepted accounting principles in performing an audit. Compare generally accepted auditing standards with generally accepted accounting principles. Summarize two of the three generally accepted auditing standards known as the general standards. . Note: The answer must be 400 to 500 words please

Managerial accounting places consider able weight on: a. generally accepted accounting principles. b. the financial history...

Managerial accounting places consider able weight on: a. generally accepted accounting principles. b. the financial history of the equity. c. ensuring that all transactions are properly recorded. d. detailed segment reports about departments, products, and customers.

Prepare a chronology of generally accepted accounting principles (US, GAAP).

Question