The Impact of Lobbying on Standard Setting in Accounting Essay - 1

The Impact of Lobbying on Standard Setting in Accounting - Essay Example Since these standards must be complied, under the pain of â€Å"penalties† or consequences, companies or entities subject to it are necessarily interested on how should the guidelines or rules of action be made. Standards just like any other laws could be favorable to one person or group but may be unfavorable to another person or group. Standard setting therefore implies a balancing act in terms of its effect among different interested individuals or groups. 2.1.1 What the institutions are involved in standard setting in accounting? Two institutions must come together to have the accounting standards set or financial reporting standards accomplish the latter’s purpose. These are the United States Securities and Exchange Commission (SEC) and the Financial Accounting Standards Board (FASB). SEC was established was created first in 1934 by the U.S. Congress while FASB’s creation followed in 1973. While SEC is basically an independent regulatory agency which should afford or allow investors information or facts about their investment before buying and while holding the same (Securities and Exchange Commission, 2011. , FASB is an independent, private and not-for-profit organization and recognized authoritative by the SEC (Financial Accounting Standards Board, n.d.). While the first is a government agency which implements laws enacted by congress and the second a private and non-profit organization, both must be independent.