Which of the following statements about the Securities and Exchange Commission (SEC) is true?
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A. B. C. D.B
The Securities and Exchange Commission has issued specific rules and regulations concerning the preparation of financial statements and the degree of detail that they contain.
The correct answer is B. The SEC has issued specific rules and regulations concerning the preparation of financial statements and the degree of detail that they contain.
Explanation: The Securities and Exchange Commission (SEC) is a regulatory agency in the United States that oversees the securities industry, including the activities of publicly traded corporations. It was created in 1934 through the Securities Exchange Act to protect investors and maintain fair and efficient markets.
Option A, which states that the SEC must audit all financial statements of publicly traded corporations, is incorrect. The SEC does not perform audits of financial statements. Instead, it requires public companies to have their financial statements audited by independent registered public accounting firms. The role of the SEC is to review and regulate the financial reporting of these companies to ensure that they are accurate and in compliance with the established rules and regulations.
Option B, which states that the SEC has issued specific rules and regulations concerning the preparation of financial statements and the degree of detail that they contain, is the correct answer. The SEC has indeed issued various rules and regulations that govern the preparation and presentation of financial statements by public companies. These regulations include the disclosure requirements of the Securities Act of 1933 and the Securities Exchange Act of 1934, as well as the reporting requirements of the Sarbanes-Oxley Act of 2002. The SEC's rules and regulations provide guidance on the content, format, and timing of financial statements, as well as the disclosure of material information to investors.
Option C, which states that none of these statements are true, is incorrect as option B is indeed a true statement.
Option D, which states that the SEC functions as the standard-setting body of the accounting profession, is incorrect. The Financial Accounting Standards Board (FASB) is the primary standard-setting body for accounting in the United States. The FASB establishes and improves financial accounting and reporting standards for public and private companies. While the SEC has oversight authority over the FASB and its standards, it does not directly function as the standard-setting body.
In summary, option B is the correct answer because the SEC has indeed issued specific rules and regulations concerning the preparation of financial statements and the degree of detail they contain.