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Chapter 1: Q25Q. (page 23)

What is the 鈥渆xpectations gap鈥�? What is the profession doing to try to close this gap?

Short Answer

Expert verified

The 鈥渆xpectations gap鈥� is the distinction between the actual and the estimated performance of accountants. It is a challenging gap to close. The accounting profession realizes it must play a vital role in reducing the gap.

Step by step solution

01

Meaning of Accounting Profession

The accounting profession is the profession of maintaining records and auditing and organizing financial reports for a business for the purpose of presenting financial statements.

02

Expectations gap and role of the accounting profession in closing the gap

The expectation gap is the variation in the people鈥檚 expectations regarding accountants鈥� performance and what accountants can actually perform. However, is not easy to close the gap. The accounting profession identifies that it must play a significant role in decreasing the gap. For meeting the requirements of society, the profession is advancing its efforts in progressing accounting standards, like issuance of various pronouncements by the FASB, providing support in recording and handling business transactions in the dynamic environment.

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Most popular questions from this chapter

Question: What was the Committee on Accounting Procedure, and what were its accomplishments and failings?

CA1-7 WRITING (Need for GAAP) Some argue that having various organizations establish accounting principles is wasteful and inefficient. Rather than mandating accounting rules, each company could voluntarily disclose the type of information it considered important. In addition, if an investor wants additional information, the investor could contact the company and pay to receive the additional information desired.InstructionsComment on the appropriateness of this viewpoint.

Presented below are comments made in the financial press.InstructionsPrepare responses to the requirements in each item.

a) Rep. John Dingell, at one time the ranking Democrat on the House Commerce Committee, threw his support behind the FASB鈥檚 controversial derivatives accounting standard and encouraged the FASB to adopt the rule promptly. Indicate why a member of Congress might feel obligated to comment on his proposed FASB standard.

b) In a strongly worded letter to Senator Lauch Faircloth (R-NC) and House Banking Committee Chairman Jim Leach (R-IA), the American Institute of Certified Public Accountants (AICPA) cautioned against government intervention in the accounting standard-setting process, warning that it had the potential of jeopardizing U.S. capital markets. Explain how government intervention could possibly affect capital markets adversely.

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?

Question: What is the benefit of a single set of high-quality accounting standards?
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