State BPA Fundamental Accounting Practice Exam

The governing body determining accounting policies and procedures is primarily?

1. IRS

2. SEC

3. FASB

4. GAAP

The correct answer is: FASB

The correct answer is FASB, which stands for the Financial Accounting Standards Board. FASB is recognized as the primary entity responsible for establishing accounting standards that govern financial reporting in the United States. This body develops and issues Statements of Financial Accounting Standards that provide a framework for accounting practices. FASB aims to provide information that is useful to investors, creditors, and others who benefit from transparent and consistent financial reporting. By setting these standards, FASB plays a crucial role in ensuring the integrity and comparability of financial statements across different entities. While the IRS deals with tax regulations and the SEC oversees securities markets and enforces federal securities laws, it is FASB that specifically focuses on establishing and improving accounting standards. GAAP, which stands for Generally Accepted Accounting Principles, comprises the accounting standards themselves but is a product of the work done by FASB. Therefore, FASB is the governing body that officially determines the accounting policies and procedures.