Unformatted text preview: an Journal (Spring 1978), pp. 41–50.
G. J. Benston, “The Value of the SEC’s Accounting Disclosure Requirements,” The Accounting Review
(July 1969), pp. 515–32. mes25435_ch01_001-032.indd 5 26/05/11 9:24 PM Conﬁrming Pages 6 Part 1 Introduction to Assurance and Financial Statement Auditing larger and needed to raise capital to ﬁnance expansion.4 Over time, securities
markets developed, enabling companies to raise the investment capital necessary
to expand to new markets, ﬁnance expensive research, and fund the buildings,
technology, and equipment needed to deliver products to market. A capital market allows a public company to sell small pieces of ownership (i.e., stocks) or to
borrow money in the form of thousands of small loans (i.e., bonds) so that vast
amounts of capital can be raised from a wide variety of investors and creditors.
A public company is a company that sells its stocks or bonds to the public, giving
the public a valid interest in the proper use of the company’s resources. Thus,
the growth of the modern corporation led to diverse groups of owners wh...
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