Question

1 – Securities Exchange Commission (source: BYP4-5 of Kimmel textbook)

What event spurred the creation of the SEC? Why was the SEC created?

What are the five divisions of the SEC? Briefly describe the purpose of each.

What are the responsibilities of the chief accountant?

2. Financial Accounting Standards Board (source: BYP7-5 Kimmel textbook). The FASB is a U.S. private organization established to improve accounting standards and financial reporting. The FASB conducts extensive research before issuing a "Statement of Financial Accounting Standards," which represents an authoritative expression of generally accepted accounting principles.

What is the mission of the FASB? (Hint: Select Facts about FASB.)

How is a standard created? (Hint: See Standard Setting Process.)

Describe the make-up of the board members. (Hint: Select Board Members.)

3. Public Company Accounting Oversight Board (PCAOB) (source: PYP7-6 Kimmel textbook.) The PCAOB was created as a result of the Sarbanes-Oxley Act. It has oversight and enforcement responsibilities over CPA firms in the United States.

What is the mission of the PCAOB?

Briefly summarize its responsibilities related to enforcement.

Answer 1

1) The event which spurred the creation of Securities and exchange commission was the after the stock market crash in 1929.

SEC was created to regulate security market which is open and fair and also to protect investors interest by issuing regulatory standards.

Five division of SEC and their purpose are as follows :

Division of corporate finance : This division looks after the corporate disclosure by the companies of important information to the investors.They review the documents which listed companies are required to file with SEC. They also provide interpretation of the securities act and it was monitors the activities of accounting profession

Division of Trading and markets : They are develop for the purpose to maintain fair, efficient and regulated security market. They look after the daily activities of the security markets,

Division of Investment management : This division was formulated to protect investor protection and also to promote capital formation through regulation of the US investment management which generally includes mutual funds, research anaylst and investment advisers to retail customers.

Division of Enforcement : The purpose of this division is to formulate laws and executing its law enforcement function.

Division of Economic and Risk Analysis : the purpose of this division is to provide economic analysis and providing risk analysis and assessment to the SEC.

Responsibility of Chief Accountant

This office is most important office for setting the standards. It provides technical expert guidance on the accounting principles, financial requirements diclosure and audit standards, they issue position papers for SEC to consider and it is the link between SEC and the accounting profession and it provides standard setting issue on behalf of SEC

2)Mission of the Financial Accounting Standard Board : The mission of this board is to establish and improve the financial accounting and the reporting standards so that useful information can be provided to investors and other people who uses the financial reports.

The standard is created as below

a) The board forst identifies the financial reporting issues based on the request and recommendations received from the stakeholders

b) The board than decides whether a project needs to be added to the technical agenda based on the staff analysis of the issues.

c)Than the board at public meetings discloses the various issues which have been share and the analysis done by the staff on the issue.

d) It than issues an Expsoure draft to obtain broad stakeholder's input

e) It also at times holds public roundtable meeting on the Exposure draft

f) Than the staff analyzes the various feedback and comments received in the meeting and on the exposure draft after which the board develops the proposed provisions after considering the stakeholder input received

g) The board than issues an Accounting Standards Update which describes amendments to the Accounting Standards Codification

3) Mission of the Public company accounting oversight Board

The mission of this board is to look after the audits of public companies so that interest of the investors is protected and also the public interest in the preparation of informative, accurate and independent audit reports.

Responsibilities related to enforcement

The board has the authority to investigate and to discipline the accounting firms and the persons associalted with those firms for Non compliance with Sarbanes-Oxley act, SEC and other regulatory acts. They can impose appropriate sanctions of violations are found.

It uses disciplinary authority that auditors which run afoul of their professional obligations will face real consequences. They take action again auditors who violates the various laws in force.