Accounting in the United States

Accounting in the United States
Name	Accounting in the United States
Established	18th century
Type	Economic practice
Location	United States

Accounting in the United States is the system and practice of recording, classifying, reporting, and analyzing financial information for businesses, nonprofits, and public entities within the United States of America. It has evolved through interactions among legal decisions, corporate crises, professional associations, and legislative acts, shaping standards used by entities from small firms to multinational corporations like General Electric, Apple Inc., and ExxonMobil. The field integrates influences from landmark events such as the Great Depression, the Enron scandal, and the passage of the Sarbanes–Oxley Act.

History and Development

Accounting practices in the United States trace roots to colonial commerce in Boston, New York City, and Philadelphia, and adoption of double-entry bookkeeping influenced by European merchants and texts like those of Luca Pacioli and practices in Amsterdam. The expansion of railroads such as the Transcontinental Railroad (United States) and the rise of firms like Carnegie Steel Company and Standard Oil drove demand for managerial accounting and consolidation methods. Progressive Era reforms intersected with decisions from the Supreme Court of the United States and regulatory responses to the Stock Market crash of 1929, prompting institutions like the Securities Act of 1933 and the Securities Exchange Act of 1934. Mid-20th century developments were influenced by organizations including the American Institute of Certified Public Accountants and firms like PricewaterhouseCoopers, Deloitte, Ernst & Young, and KPMG; corporate failures in the early 2000s such as Enron and WorldCom led to the Sarbanes–Oxley Act and reshaped auditing and corporate governance.

Regulatory Framework and Standard-Setting

Regulation in the United States combines legislative action by bodies like the United States Congress with rulemaking by agencies such as the Securities and Exchange Commission and standard-setting by private-sector organizations including the Financial Accounting Standards Board and the Governmental Accounting Standards Board. Accounting regulation has been shaped by landmark statutes and cases like the Securities Act of 1933, Securities Exchange Act of 1934, and judicial rulings from the United States Court of Appeals for the Second Circuit. The Public Company Accounting Oversight Board was created after Enron under Sarbanes–Oxley Act oversight of auditors including firms like Arthur Andersen. International interactions involve the International Financial Reporting Standards Foundation and debates with the International Accounting Standards Board over convergence and adoption.

Professional Practice and Certification

Professional practice centers on credentials such as the Certified Public Accountant license administered by state boards like the New York State Board of Public Accountancy and national organizations including the American Institute of Certified Public Accountants. Other certifications include Certified Management Accountant from the Institute of Management Accountants and Certified Internal Auditor from the Institute of Internal Auditors. Large public accounting firms termed the "Big Four"—PricewaterhouseCoopers, Deloitte, Ernst & Young, and KPMG—dominate audit markets for public issuers listed on exchanges like the New York Stock Exchange and NASDAQ. Professional responsibilities and ethics have been framed by guidance from entities such as the AICPA Professional Ethics Division and enforcement actions by the Public Company Accounting Oversight Board and the Department of Justice.

Financial Reporting and Standards (US GAAP)

United States Generally Accepted Accounting Principles (US GAAP) are established principally by the Financial Accounting Standards Board and applied by entities subject to the Securities and Exchange Commission. Financial statements prepared under US GAAP follow frameworks that address recognition, measurement, and disclosure for assets, liabilities, equity, revenue, and expenses, with authoritative pronouncements including Statements of Financial Accounting Standards issued historically by the Accounting Principles Board. Standards on consolidation, fair value, revenue recognition, and leases have been influenced by projects involving the International Accounting Standards Board and by high-profile issues in corporations such as Enron, WorldCom, and Lehman Brothers. Audit opinions on US GAAP financials are provided by registered public accounting firms and reviewed in enforcement proceedings before the Public Company Accounting Oversight Board and the Securities and Exchange Commission.

Tax Accounting and Compliance

Tax accounting in the United States operates under the Internal Revenue Code administered by the Internal Revenue Service and shaped by legislation such as the Tax Reform Act of 1986 and later acts passed by the United States Congress. Corporate and individual taxpayers, including multinationals like Microsoft Corporation and Google LLC (Alphabet Inc.), employ tax accounting methods to comply with rules on income recognition, deferred tax assets and liabilities, and transfer pricing; controversies have reached tribunals like the United States Tax Court and courts including the United States Court of Appeals for the Federal Circuit. Compliance and planning interact with international instruments such as Base Erosion and Profit Shifting initiatives and bilateral tax treaties negotiated by the Department of the Treasury.

Accounting Education and Workforce

Accounting education is delivered by universities and colleges such as Harvard University, University of Pennsylvania, University of Michigan, and University of California, Berkeley, with curricula aligned to licensing requirements of state boards and accreditation by organizations like the Association to Advance Collegiate Schools of Business. Professional pathways often include internships and campus recruiting by firms such as PricewaterhouseCoopers and Deloitte, and continuing professional education mandated by the AICPA. Workforce issues intersect with labor markets in cities including New York City, Chicago, and San Francisco, and with policy topics heard before bodies like the United States Department of Labor.

Trends, Technology, and Future Challenges

Recent trends include adoption of technologies from XBRL tagging initiatives promoted by the Securities and Exchange Commission to automation and analytics using platforms developed by companies like IBM and Microsoft Corporation. Emerging issues engage regulators and practitioners in debates over adoption of International Financial Reporting Standards proposed by the International Accounting Standards Board, implications of blockchain prototypes tested in consortiums such as those including JPMorgan Chase and Goldman Sachs, and climate-related financial disclosure initiatives discussed at forums like the Financial Stability Board. Challenges include audit market concentration, cybersecurity risks highlighted in incidents involving firms like Equifax, and evolving oversight responsibilities of the Public Company Accounting Oversight Board and the Securities and Exchange Commission.

Category:Accounting