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Vanderbilt Law Review

First Page

201

Abstract

This article will discuss accounting principles and auditing standards and the respective roles played in their development and regulation by the Securities and Exchange Commission, the organized accounting profession and other public and private agencies. Accounting principles and auditing standards comprise two fundamentally different and distinct bodies of convention and practice. Generally accepted accounting principles and generally accepted auditing standards are those principles and standards which for a number of reasons have come to be accepted and applied by issuers, accountants, and auditors. Combined with the procedures and techniques attending their observation and application, generally accepted accounting principles and auditing standards comprise the two professional disciplines that are central to the preparation of financial statements and to the accountant's work as an independent auditor in examining and reporting upon audited financial statements. The complexity of generally accepted accounting principles and generally accepted auditing standards is belied, and perhaps obscured, by their familiar acronyms, "GAAP" and "GAAS." Also obscured are the important distinctions that inhere in their different natures, evolutions, purposes and applications. These distinctions are particularly important to an understanding of how generally accepted accounting principles and generally accepted auditing standards have come to be established differently, and why, to the extent they are within the reach of the Securities and Exchange Commission, they are regulated differently.

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