Chapter 14, Problem 14.2Q

To determine

Introduction: The SEC is the regulatory body having the power to control the trade of securities and direct publicly held companies about the financial disclosures they must make. It also has the ultimate legal authority to establish disclosure requirements. SEC has also worked closely with accounting professionals to recommend the accounting principles and standards used to measure and report companies’ financial conditions and results of operations. The SEC’s role is to ensure full and fair disclosure.

The basis of the SEC’s legal authority to regulate accounting principles.