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Briefly explain the statement, " setting accounting standards is a political process"

Briefly explain the statement, " setting accounting standards is a political process"

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Answer #1

Investors in a company expects that financial reports prepared basis established GAAP gives unbiased, transparent financial information but special interest groups undermine the usefulness of financial reports by pressurizing government to issue inferior accounting methods and disclosures suiting corporate needs.

The government through SEC influences accounting standards by exerting pressure on FASB to issue accounting standards and vetoo accounting standards promulgated by FASB.

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