The Role of Securities Exchange Commission

634 Words2 Pages
Part I. The system by which American companies compiled and present their financial accounting standards is the generally accepted accounting principles (GAAP). This system is "a common set of principles, procedures and standards" to ensure that there is a high level of consistency in accounting statements in the country (Investopedia, 2013). The IFRS (international financial reporting standards) is a similar set of standards that is widely used internationally, in over 100 countries including most of continental Europe.

The role that the Securities Exchange Commission (SEC) plays in financial statements is as one of the primary enforcement bodies. The SEC mandates, for example, that publicly-traded firms must produce financial accounting statements to GAAP standards four times per year, and the SEC has enforcement mechanisms to ensure that these statements accurately reflect the financial condition of the company (, 2007). Within the SEC is another body, the public company accounting oversight board (PCAOB), which is charged with overseeing the activities of the auditors of public company accounting statements. The financial statements that are compiled are presented, along with extensive notes explaining the figures, in the 10-K and 10-Q forms. An annual report is an optional document that a company has no legal obligation to produce, nor is there any guidance for its production. The annual report, however, will almost always be accompanied by the 10-K, which is
Get Access