Is Generally Accepted Accounting Principles (GAAP) LAW?

In the US, is it illegal if an accountant(s) did not follow one or more of the GAAP? Does SEC enforce the GAAP? What happens when an accountant doesn’t follow GAAP?

GAAP is not law. And, it is close.

if a listed company does not follow GAAP and the reasons therefore do not fit within what their auditors believe is correct interpretation, the auditors may refuse to express an opinion on the statements, or may even express an adverse opinion.

Either would result in the exchange immediately suspending trading in the company’s securities until the issue is restored to normal condition.

SEC has enforcement powers, yes. they’re a bit cumbersome.

auditors can be sued by investors when the investors believe the company’s accounting was wrong and the auditors knew or should have known it was wrong. Enron’s auditors went bankrupt from the lawsuits, for example.

Video on the Convergence of Accounting Standards (US GAAP Vs. IFRS)

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