Which type of accounting is legally required and must adhere to specific standards?

Financial accounting is the type of accounting that is legally required and must adhere to specific standards. This is because financial accounting focuses on the preparation of financial statements that provide a clear, standardized view of a company's financial performance and position. These financial statements, which include the balance sheet, income statement, and cash flow statement, must comply with Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS), depending on the jurisdiction. The purpose of this regulation is to maintain transparency and consistency across financial reporting, which is crucial for investors, creditors, and regulatory agencies.

Companies must ensure that their financial accounting practices are in compliance with these established standards, as they are often subject to audits and may face legal consequences for any misrepresentations. This contrasts with other types of accounting, such as management, tax, and cost accounting, which do not have the same level of regulatory oversight and are often tailored for internal use or specific purposes rather than external reporting.