Accounting's role in the financial crisis

This paper discusses the role accounting had in the financial crisis. It delves into how accounting helped invoke the financial crisis, what impacts the financial crisis is having on accounting and what can be done now. The research method used is literature review. The causes of the financial crisis in relation to accounting were the housing bubble and burst, shadow banking, fair-value accounting, and troubles with the GAAP model. The impacts of the financial crisis are increased financial regulations and a decrease in reputation and assurance. As for what can be done, companies need to focus on corporate social responsibility to build back reputation and a new external monitor should be created to help prevent future financial crises by identifying warning signs before the problems actually occur. The financial crisis shows that accounting needs to become even more prevalent in the field of finance.