Financial Accounting for Public Companies: Role of the SEC | Test Prep

Role of the SEC in Financial Accounting for Public Companies

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Question

Regarding financial accounting for public companies, the role of the SEC as currently practiced is to

Answers

A. make rules and regulations regarding filings with the SEC but not to regulate annual or quarterly reports to shareholders.

B. develop and promulgate most generally accepted accounting principles.

C. make rules and regulations pertaining more to disclosure of financial information than to the establishment of accounting recognition and measurement principles.

D. none of these answers.

E. regulate financial disclosures for corporate, state, and municipal reporting.

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Explanations

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A. B. C. D. E.

The SEC has authority to regulate external financial reporting. However, its role is to promote disclosure rather than to exercise its power to establish accounting recognition and measurement principles. Its objective is to allow the accounting profession (through FASB) to establish accounting principles.

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