Standard accounting practice
are required to follow certain accounting rules to prepare financial statements
so that the readers of the statements can easily compare different companies. Private companies are also often required by banks
, for example, to prepare according to the rules.
Usually, countries practicing civil law system write standards in law and countries with English common law system have private organizations to set the rules.
The lack of transparent accounting standards in some nations has been cited as increasing the difficulty of doing business in them. In particular. the Asian financial melt down in the late 1990s has been partially attributed due to the lack of a detailed accounting standards.
Giant firms in some Asian countries were able to take advantage of their ill devised accounting standards to cover up horribly huge debts and losses which yielded a collective effect that eventually lead to the whole region financial crisis.
The accounting scandals of the early 21st century which affected companies such as Worldcom and Enron however have shown the limits of accounting standards in the United States.