Federal Accounting and Auditing Standards Affecting the Private Sector

Pursuant to a congressional request, GAO provided information on federal entities with authority to establish and enforce auditing and accounting standards affecting private companies.

GAO found that at least 19 federal agencies establish auditing or accounting standards affecting the private sector, of which 3 may prescribe standards for other entities if they provide financial assistance or other services to those entities. The Securities and Exchange Commission (SEC) has the most prominent role in oversight of financial reporting by private sector entities. It generally requires auditing standards promulgated by the Financial Accounting Standards Board and generally accepted accounting principles advocated by the American Institute of Certified Public Accountants (AICPA). A number of financial regulatory agencies and the Federal Communications Commission allow certain variances from the AICPA standards; however, any entity which reports to SEC is required to follow the AICPA standards regardless of what other agencies it must report to. GAO also found that all of the agencies it identified have procedures for reviewing compliance with established standards and could take remedial actions against noncompliant entities; however, only five of the agencies have means for disciplining independent auditing firms that fail to comply with prescribed standards.