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Ethical And Legal Obligations

Introduction
Accounting is the systematic record keeping and reporting of an organization's performance in monetary terms. Accounting provides a summary of the economic results of organizational decisions for internal use and transmits them to external stakeholders such as volunteers, donors, creditors and regulatory agencies. Accounting and financial reporting date back to clay tablets used by the Mesopotamians to record tax receipts around 3000 BC. In 1494, Luca Pacioli, a Franciscan monk and mathematics professor, published the first known text to describe a comprehensive double-entry bookkeeping system. Then in the 1800's, England began an independent audit function that added credence to financial reports. As British capital was invested in a growing U.S. economy in the late 19th century, British chartered accountants and accounting methods came to the United States. Since, no group was legally authorized to establish financial reporting standards, alternative methods of reporting financial conditions formed that caused confusion and fraud. Accounting professionals in the U.S. did not organize themselves until the early 1900's. Accounting and financial reporting has developed over time in response to users of financial statements. Financial reporting has seen a drastic change in the U.S. in the past several decades. The following few pages will address the relationship amongst the federal security agencies, basic accounting principles and the role of ethics in financial reporting.

Relationships amongst SEC

The accounting, financial reporting and auditing weaknesses that related to the 1929 stock market crash gave impetus to the creation of the Security Exchange Commission in 1934. With more responsibility being placed on the arms of the SEC there came a need to delegate some of the financial reporting regulation to a sub committee within the SEC. In 1973, as a result of congressional and other criticism of the accounting standard-setting process...