Which government agency is responsible for approving U.S. GAAP?

The U.S. Securities and Exchange Commission (SEC) plays a critical role in the establishment and oversight of accounting practices, particularly for publicly traded companies. While it does not set Generally Accepted Accounting Principles (GAAP) directly, it has the authority to oversee the standard-setting process and enforces compliance with GAAP. The SEC requires publicly traded entities to adhere to these standards in their financial reporting, thereby ensuring transparency and accountability in financial markets.

The Financial Accounting Standards Board (FASB) is the primary body that develops and establishes U.S. GAAP. However, the SEC has the ultimate authority on how these standards are applied within the context of publicly traded companies. The SEC also reviews financial statements and can enforce compliance with GAAP, giving it a significant role in the ecosystem of accounting standards.

In contrast, the U.S. Department of Treasury focuses on fiscal and monetary policy, and the Public Company Accounting Oversight Board (PCAOB) is responsible for overseeing the audits of public companies, not for creating or approving accounting standards. Thus, while they all contribute to the regulatory environment, it is the SEC that holds the pivotal position concerning the approval and enforcement of U.S. GAAP.