Accounting firms exist for the purpose of providing accounting services to businesses. This may mean payroll, financial statements, taxes or financial planning. Financial statements highlight information about the operations of the business – 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.
The accounting firm profession came under pressure to establish uniform accounting standards after the stock market crash of 1929. Some groups believe that insufficient and misleading information was a crucial factor that led to stock price inflation and ultimately to the stock market crash and subsequent depression. The Securities Act of 1933 and the Securities Exchange Act of 1934 were designed to restore investor confidence. The 1934 Act also created the Securities and Exchange Commission (SEC).
The United States Securities and Exchange Commission (SEC) is primarily responsible for enforcing federal securities laws, proposing securities rules, and regulating the securities industry, stock exchanges stocks and options and other activities and organizations, including electronic securities markets in the United States. The SEC has delegated responsibility for setting US accounting and financial reporting standards for public companies and accounting firms, among others, the Financial Accounting Standards Board (FASB).
There have been quite a few financial scandals, which illustrates 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 biggest Ponzi scheme never created. Instead of profits, investors received returns of their own money or another investor’s money. 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 forced to pay $170 billion in restitution. This fraud came to light just months after the US financial collapse of 2008.
Day by day
Companies do not run themselves. A company is not passive. It does not respond to market activities and records its own financial activities. A company is dynamic and creative. Owners need to 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 basic business functions.
Taxes are a reality that all business owners must face – city, state and federal agencies will all expect them to cut back on money, including income, income and payroll taxes. . Additional penalties and interest will apply if these areas are overlooked. Accounting firms help keep track of tax filing information and will ensure that your tax is remitted on time and accurately. The details seem daunting, but getting it right will pay dividends in the long run.
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