In the United States, accounting and auditing standards are promulgated and regulated by various federal, state, and self-regulatory agencies. Accounting and auditing standards are also influenced by practitioners from businesses, nonprofits, and government entities (federal, state, and local). Congress has allowed financial accounting and auditing practitioners to remain self-regulated while retaining oversight responsibility. At certain times, Congress has sought to achieve specific accounting- and auditing-based policy objectives by enacting legislation such as the Sarbanes-Oxley Act of 2002 (SOX) and the Federal Credit Reform Act of 1990 (FCRA). The next three sections of the report discuss how accounting and auditing standards are created and regulated in the private sector, the federal government, and state and local governments. Background

The informational needs of stakeholders differ between the private and public sectors. As a consequence, different accounting and auditing standards have evolved in these sectors to address stakeholders' specific needs. In the private sector, financial statements communicate to stakeholders such as investors, creditors, company employees, regulators, and others how the company used its resources to generate profit and expand its business, or how the company incurred loss and the likelihood the business will survive over the long run. Public-sector entities such as the federal, state, and local governments issue reports to communicate how tax revenues were used to benefit citizens. State and local governments have standards distinct from those of the federal government. Thus, accounting and auditing standards can be classified into three areas: (1) private industry standards, (2) federal government standards, and (3) state and local government standards. The accounting and auditing standards created for publicly traded firms are subject to the Securities and Exchange Commission's (SEC's) oversight. However, Congress has oversight over the SEC and annually appropriates its funding. Currently, the SEC recognizes the Financial Accounting Standards Board (FASB) as the designated organization for establishing GAAP for the private sector. SOX created the Public Company Accounting Oversight Board (PCAOB) as a nonprofit corporation to provide independent oversight of audits of public companies. The standard-setting body for federal financial reporting is the Federal Accounting Standards Advisory Board (FASAB). Accounting

The accounting standards established by GASB are considered Generally Accepted Accounting Principles (GAAP) for states and municipalities. Policy Issues

Two policy issues might be of particular interest to Congress and investors. The first is the relationship between accounting and auditing standards in the United States and other countries—in particular, whether or to what degree international accounting and auditing standards should influence U.S. GAAP and U.S. GAAS, respectively. The second is the newly emerging sustainability accounting standards for businesses, which encompass environmental, social, and governance (ESG) issues. A counterpart to U.S. GAAS is International Standards on Auditing (ISA). Although the SEC has the Office of the Chief Accountant, whose primary mission is to establish and enforce accounting and auditing policy to ensure that financial statements improve investment decisions, the SEC has relied on the private sector to establish accounting and auditing standards in the United States. Sustainability Accounting Standards Board

The Sustainability Accounting Standards Board (SASB) was founded in 2011 as an independent organization to promulgate sustainability accounting standards for the private sector. The board has not been recognized by Congress or sanctioned by the SEC as an official standard-setting body for ESG issues. Responsibilities
Responsibilities principle.
Accounting and auditing standards in the United States are promulgated and regulated by various federal, state, and self-regulatory organizations (SROs). Accounting and auditing standards are also influenced by practitioners from businesses, nonprofits, and government entities. Congress has allowed financial accounting and auditing practitioners to remain largely self-regulated while retaining oversight responsibility. At certain times, Congress has sought to achieve specific accounting- and auditing-based policy objectives by enacting legislation such as the Sarbanes-Oxley Act of 2002 (SOX; P.L. 107-204) and the Federal Credit Reform Act of 1990 (FCRA; P.L. 101-508).
The informational needs of stakeholders differ between the different sectors of the economy—the private sector, the federal government, and state and local governments. As a consequence, different accounting and auditing standards have evolved in these sectors. In the private sector, financial statements communicate to stakeholders how the company used its resources to generate profit and expand its business, or how the company incurred loss and the chances the business will survive over the long run. In comparison, public-sector entities such as the federal, state, and local governments issue reports to communicate how tax revenues were used to benefit citizens. State and local governments have standards distinct from those of the federal government. As such, accounting and auditing standards can be classified into three areas: (1) private industry standards, (2) federal government standards, and (3) state and local government standards.
The accounting and auditing standards created for publicly traded companies are subject to the Securities and Exchange Commission's (SEC's) oversight. Congress has oversight over the SEC and annually appropriates its funding. Throughout its history, the SEC has relied on SROs to establish financial reporting standards for the private sector; these are known as Generally Accepted Accounting Principles (GAAP). Currently, the SEC recognizes the Financial Accounting Standards Board (FASB) as the designated authority for establishing GAAP. SOX created the Public Company Accounting Oversight Board (PCAOB) to oversee the auditing profession for the private sector. The SEC has oversight responsibility over FASB and PCAOB.
The Federal Accounting Standards Advisory Board (FASAB) was created to establish the financial reporting and accounting standards for the federal government. The Government Accountability Office (GAO) has responsibility for establishing auditing standards for federal government agencies, including federal grant recipients in state and local governments.
A counterpart to FASAB for state and local governments is the Government Accounting Standards Board (GASB). Many of the underlying principles between FASAB and GASB are the same, but each state or territory is allowed to choose whether it follows GASB standards in full or modifies the standards to fit local needs. Auditing standards vary by state and local governments.
Two policy issues might be of particular interest to Congress and investors. The first is the relationship between accounting and auditing standards in the United States and in other countries. In particular, there is debate over whether or to what degree international accounting and auditing standards should influence U.S. GAAP and U.S. Generally Accepted Auditing Standards (U.S. GAAS), respectively.
The second is to what degree business risk should be evaluated based on sustainability issues. Increasingly, investors expect firms to respond to environmental, social, and governance (ESG) issues. The Sustainability Accounting Standards Board (SASB) has created a series of provisional standards for the private sector. SASB is an independent organization that is not recognized by Congress or the SEC as an official standard-setting body.