A. What Factors Besides Sound Accounting Policy Influence the Standard Setting Process? Give an Example of a Standard That Was Influenced by a Political Process.

a. What factors besides sound accounting policy influence the standard setting process? Give an example of a standard that was influenced by a political process.

Sound accounting is one of the main roles of FASB's standards but along with sound accounting FASB must look at what will happen to the economy after a new standard is set. Influences can come from many different sources including public pressure. Public pressure can sometimes outweigh conceptual merits. An example is in 1995 FASB folded to public pressures and no longer requires companies to record stock compensation at fair value but instead encourages it.

 b. What is the relationship between the FASB and the IASB (International Accounting Standards Board)?

FASB is the U.S.'s standard setting body for financial accounting and IASB is the international accounting standards that attempts to create a uniform international accounting standard. FASB and IASB signed an agreement in 2002, the Norwalk agreement, agreeing to remove the differences in their standards and work on global standards that will comply in the global market.

c. What are some key provisions of the Public Company Accounting Reform and Investor Protection Act of 2002 (also known as Sarbanes-Oxley Act or SOX)? What governmental organization did the legislation create?

Corporate executive accountability is one provision of the Sarbanes-Oxley Act, it states that corporate executives (CEO, CFO) must personally certify the financial statements and company disclosures. Another provision is section 404 of the act which requires that company management must monitor and assess the extent to which internal control can affect financial reporting. The Sarbanes-Oxley Act created the Public Company Accounting Oversight Board (PCAOB) which oversees accounting firms in their roles of auditors of public companies.