![]() For example, companies with GAAP-compliant financial records have higher trust ratings among investors, which means they are more confident about the company’s financial data accuracy.Īn external audit from a certified public accountant (CPA) can check for GAAP compliance on a company’s financial statements. ![]() Whatever the case, adherence to GAAP is not legally required, though it still offers benefits to businesses. states comply with GAAP, the degree of compliance varies. This makes reading, interpreting, and communicating financial reports more accessible and transparent, which can also protect investors from fraud or misleading information. The Securities and Exchange Commission (SEC) recommends public companies, government offices, and nonprofit organizations in the United States use GAAP when they file their financial reports. GAAP combines standards set by boards, such as the Financial Accounting Standards Board (FASB), and commonly used methods of recording and compiling accounting data.
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