Complete Question:
What is the relationship between the Securities and Exchange Commission and accounting standard setting in the United States?
A) The SEC requires all companies listed on an exchange to submit their financial statements to the SEC.
B) The SEC coordinates with the AICPA in establishing accounting standards.
C) The SEC has a mandate to establish accounting standards for enterprises under its jurisdiction.
D) The SEC reviews financial statements for compliance.
Answer:
C) The SEC has a mandate to establish accounting standards for enterprises under its jurisdiction.
Explanation:
Accounting principle can be defined as a general guideline to be followed by accountants or financial institutions when they record and report their financial transactions.
The Securities and Exchange Commission (SEC) is a governmental agency saddled with the sole responsibility of regulating the securities or capital markets, as well as protecting investors in a country.
In the United States of America, the Securities and Exchange Commission (SEC) as an independent government agency was established under the Securities Act of 1933 and the Securities and Exchange Act of 1934 of the United States of America. It has the power to propose securities rules and regulations, and enforce federal securities law in the securities market.
GAAP is an acronym for Generally Accepted Accounting Principles, it comprises of the accounting standard, procedures and principles used by public institutions in the United States of America. The U.S GAAP is issued by the Financial Accounting Standards Board (FASB) and adopted by the U.S. Securities and Exchange Commission (SEC).
IFRS is an acronym for International Financial Reporting Standards, it comprises of a set of accounting standards or rules issued by the International Accounting Standards Board (IASB). The International Financial Reporting Standards ensures that statement of income, when reported by accountants is consistent, transparent and comparable globally.
Hence, the relationship between the Securities and Exchange Commission and accounting standard setting in the United States is that, The SEC has a mandate to establish accounting standards for enterprises under its jurisdiction.
