chap 1-RC2-sec

chap 1-RC2-sec - final say in matters The first private...

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Explain the relationship between the SEC and the various private sector standard-setting bodies that have, over time, been delegated the responsibility for setting accounting standards. Can you think of any reasons why the SEC has delegated this responsibility rather than set standards directly? The Securities and Exchange Commission (SEC) was created by Congress from the 1934 Securities Exchange Act. The SEC was formed in order to remove insufficient and misleading financial statement information, which is what caused the stock market crash of 1929. Congress gave the SEC both the power and responsibility for setting accounting and reporting standards for companies whose securities are publicly traded. The SEC has delegated the primary responsibility for setting accounting standards to the private sector. By doing this, the SEC still has power to force a change in a standard as well as have the
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Unformatted text preview: final say in matters. The first private sector body to take the job of setting accounting standards was the Committee on Accounting Procedure (CAP), which was a committee of the American Institute of Accountants (AIA). The AIA was renamed the American Institute of Certified Public Accountants (AICPA). Later, the Accounting Principles Board (APB) replaced the CAP. It is necessary to have these private sectors to set the accounting standards for several reasons. First off, its never a good idea to have one group in charge of everything and making all the rules; this is how dictatorships and monopolies are started. By having these sectors, a system of balance is created. Also, it would be a big task and burden to give all the responsibility to the SEC for set the standards directly....
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