Reasons Why Accounting Firms Exist

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 is important to manage finances efficiently and accurately to avoid accusations of fraud, financial mismanagement, and jail visits.

History of the Regulations

The accounting firm profession came under pressure 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, ultimately, to 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 US 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 electronic securities markets in the US The SEC has delegated responsibility for setting US financial and accounting 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. One 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 history. Instead of profits, investors received returns on their own money or another investor’s cash. Fortunately, in this case, Madoff bragged to his children, who sued him before 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 financial collapse of the United States 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 financial statements seems daunting, it may be worth hiring an accounting firm to set up your core business functions.

Taxes are a reality that all business owners must face: City, state, and federal agencies will wait for 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 tax return information and will make sure your tax is filed on time and accurately. The details seem daunting, but getting everything right will pay dividends in the long run.