Accounting firms exist for the purpose of providing accounting services to businesses. This can mean payroll, financial statements, taxes, or financial planning. Financial statements highlight information about the company’s operations: profit and loss, net profit, and revenue. Bankruptcy is never the ultimate goal of a business. Finances are complicated. There are many loopholes, windows of opportunity, and ways to make mistakes. As a business owner, it’s important to manage finances efficiently and accurately to avoid accusations of fraud, financial mismanagement, and jail time.
History of the Regulations
The accounting firm profession was pressured to establish uniform accounting standards after the stock market crash of 1929. Some groups feel that insufficient and misleading information was a crucial factor leading to inflated stock prices and eventually the stock market crash and subsequent depression. The Securities Act of 1933 and the Stock Exchange Act of 1934 were designed to restore investor confidence. The 1934 Act also created the Securities and Exchange Commission (SEC).
The U.S. Securities and Exchange Commission (SEC) has primary responsibility for enforcing federal securities laws, proposing securities rules, and regulating the securities industry, stock and options exchanges and other activities and organizations, including the U.S. electronic securities markets. The SEC has delegated responsibility for setting U.S. accounting and financial reporting standards for public companies and accounting firms, among others, the Financial Accounting Standards Board (FASB).
scandals
There have been quite a few financial scandals, which serve to illustrate the importance of accounting firms, financial investors, and a strong system of checks and balances. A well-known incident is the Bernie Madoff scandal of 2008. Bernard L. Madoff Investment Securities LLC, a Wall Street investment firm founded by Madoff, cheated investors out of $64.8 billion through the largest Ponzi scheme in the world. history. Instead of profits, investors received returns on their own money or another investor’s cash. Fortunately, in this case, Madoff bragged to his sons, who reported him to the SEC. He was arrested the next day, sentenced to 150 years in prison and ordered to pay $170 billion in restitution. This fraud came to light just a few months after the US financial collapse in 2008.
day to day
Businesses don’t run themselves. A business is not passive. It does not respond to market activities and records its own financial activities. A company is dynamic and creative. Owners must make plans, set goals, and adapt when situations change. If running a business and managing its financials seems daunting, it may be worth hiring an accounting firm to set up core business functions.
Taxes are a reality that all business owners must deal with: City, state, and federal agencies will expect their share of the cash, including income, income, and payroll taxes. Additional penalties and interest will apply if these areas are neglected. Accounting firms help keep track of information on your tax return and will make sure your tax is submitted on time and accurately. The details seem daunting, but doing everything right will pay dividends in the long run.
