The financial reporting framework in the United States is established under several laws and regulations, such as the Securities Exchange Act of 1934 (the Act), the Sarbanes–Oxley Act of 2002, and the Accounting Standards Codification issued by the Financial Accounting Standards Board (FASB).

The Accounting Standards Codification, commonly known as the U.S. Generally Accepted Accounting Principles (U.S. GAAP), is developed for application by all nongovernment entities; however, only public business entities are legally required to prepare financial statements. In accordance with the FASB definition, a public business entity meets one of the following criteria:

• It is required by the U.S. Securities and Exchange Commission (SEC) to file financial statements, or does file financial statements, with the SEC;
• It is required by the Act, to file financial statements with a regulatory agency other than the SEC;
• It is required to file financial statements with a foreign or domestic regulatory agency in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer;
• It has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market; and
• It has one or more securities that are not subject to contractual restrictions on transfer, and it is required by law, contract, or regulation to prepare U.S. GAAP financial statements and make them publicly available on a periodic basis.

Although nonpublic entities are not required by law to use U.S. GAAP, there are numerous situations, such as obtaining credit or seeking investors, which require, by contract, those entities also to follow U.S. GAAP when preparing their financial statements. Recognizing the differences in the reporting needs and objectives of public and nonpublic entities, the FASB also considers through its Private Company Council the appropriate accounting treatment for these types of entities. The FASB and the International Accounting Standards Board have been working together since 2002 to achieve convergence of IFRS and U.S. GAAP; however, differences still exist.

United States

The SEC has the authority to establish the standards for public business entities under the Act of 1934; however, it relies on the FASB to fulfill this responsibility and officially recognizes the FASB-issued U.S. GAAP through the Financial Reporting Release No. 1, Section 101, which was most recently reaffirmed in its April 2003 Policy Statement.

Banks and saving institutions are regulated by three agencies: the Federal Reserve, responsible for regulating state member institutions; the Federal Deposit Insurance Corporation, responsible for regulating non-member banks; the Office of Comptroller of the Currency, regulating national banks and savings institutions. These agencies require regulatory reporting to be conducted in accordance with generally accepted accounting principles that are also used for general-purpose external financial reporting. However, in some cases, the regulators can limit the options available under U.S. GAAP.

Accounting Standards in  United States

Similar to the preparation of financial statements, only public business entities are legally required to be audited. Nonpublic entities are not generally required to be audited. However, entities seeking funding through private placements or debt or equities securities may, in certain circumstances, be required to produce audited financial statements. Entities in regulated industries that have Government contracts, that are seeking government funding, or that have contractual or other reasons to produce audited financial statements, are expected to be audited in accordance with auditing standards generally accepted in the United States. These standards are promulgated by the Auditing Standards Board (ASB) of the American Institute of Certified Public Accountants (AICPA) and constitute what is known as the U.S. Generally Accepted Auditing Standards. The ASB has completed its clarity project whereby all auditing standards have been redrafted using the format of the IAASB and where possible based on ISA and ISQC 1.

Per the Sarbanes–Oxley Act of 2002, auditing standards for public business entities are established by the Public Company Accounting Oversight Board (PCAOB) and approved by the SEC. The PCAOB requires the use of the AICPA Statements on Auditing Standards, as in existence of April 16, 2003 (also referred to “Interim Standards”) as well as 18 Audit Standards issued by the PCAOB. The standards differ from ISA. The PCAOB requires that auditors of public business entities be subject to external and independent oversight. Firms auditing public business entities are required to be registered with the PCAOB and to adhere to all PCAOB rules and standards in those audits.