One of the major groups that has been involved in the standard-setting process is the American Institute of Certified Public Accountants. Initially, it was the primary organization that established accounting principles in the United States. Subsequently, it relinquished its power to the FASB.

Instructions

1. Identify the two committees of the AICPA that established accounting principles prior to the establishment of the FASB.
2. Speculate as to why these two organizations failed. In your answer, identify steps the FASB has taken to avoid failure.
3. What is the present role of the AICPA in the rule-making environment?

Certified Public Accountants are the accounting professionals who perform a detailed study of auditing, accountancy, and its similar subjects for providing services later. The authorities concerned permit CPA for revising financial statements.

The committee established by AICPA before setting up the FASB includes the Committee on Accounting Procedure (CAP). During the period (1939-1959), 51 Accounting Research Bulletins (ARB) were issued by the Committee on Accounting Procedures (CAP). AICPA formed Accounting Principles Board (APB) in 1959 to replace the CAP. However, before getting substituted by the FASB, 31 official pronouncements called APB opinions were released by APB.

The committee on Accounting Procedure (CAP) used a problem-to-problem-based method to overcome accounting issues but did not succeed in providing a collection of standardized accounting principles that were essential. Accounting Principles Board (APB) was created to provide such standards, but it wasn’t beneficial. Moreover, the Accounting Principles Board (APB) did not respond to the accounting abuses and usually met with opposition from various organizations.

Steps taken by FASB to prevent failure are as follows:

• Smaller membership
• Full-time salaried membership
• Larger autonomy
• Increased Independence
• Broader representation

The AICPA boosts the FASB’s efforts in the present standard-setting environment. Issues papers prepared by the Accounting Standards Executive Committee (ASEC), recognize present financial reporting issues for particular industries and present alternative treatments of the problem. Additionally, the AICPA plays a great role in advancing auditing standards with the help of the Auditing Standards Board. These standards provide rules for regulating auditing practice and for enforcing and developing professional ethics.