Advanced financial Accounting Essay Example | Topics and Well Written Essays - 2000 words

Advanced financial Accounting - Essay Example However, certain facts about accounting standards, and what they have achieved or failed to achieve, are behind the scepticism of some professionals who question the need for accounting standards. A brief look at these circumstances might be in order before proceeding further. Perhaps the most important among these is the spate of financial misrepresentations, and the fraudulent approaches that could be adopted by large and reputed organizations such as Enron, Worldcom and Arthur Anderson in spite of the existence of these standards. If expenses can be misstated in spite of standards, and the cautious investor has to look behind the published figures in any case, what purpose do accounting standards serve? The answer to this question lies in the fact that in the absence of accounting standards such misrepresentation would acquire legal status at least in some cases. The solution therefore is not to avoid accounting standards altogether but to strengthen them. One of the lacunae in the existing accounting standards is the lack of uniformity among various sets of standards followed nationally in various countries. With increasing globalisation, more and more organizations are exposed to multi-national working and require a common framework for financial reporting. Moreover, even in cases of national reporting most accounting standards have a number of weaknesses. For example, many accounting standards, including the one by US Financial Accounting Standards Board, are rules oriented, while the need of the day seems to be principle based accounting. Yet another issue is the inadequacy of accounting standards by themselves to prevent the occurrence of fraud as has been witnessed in several cases around the world. This, however, is understandable, as accounting standards are not a panacea for all evils related to financial reporting but are to be taken only as guidelines