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Concept of adequate disclosure issues facing accountants

The concept of adequate disclosure continues to be one of the most important issues facing accountants. Disclosure may take various forms.
If you should analyze the following:
The various forms of disclosure available in published financial statements
.The disclosure issues addressed by the:
.AICPA's Code of Professional Ethics
.SEC Act of 1933
.SEC Act of 1934
.Foreign Corrupt Practices Act of 1977
REQUIRED:
(1).Provided points of analysis on the various forms of disclosure available in published financial statements
(2).Provided points of analysis of the disclosure issues addressed by the AICPA's Code of Professional Ethics
(3).Provided points of analysis of the disclosure issues addressed by SEC Act of 1933
(4)Provided points of analysis of the disclosure issues addressed by SEC Act of 1934
(5)Provided points of analysis of the disclosure issues addressed by Foreign Corrupt Practices Act of 1977
Cited one reference.

Solution Preview

PREMISE: In Financial Accounting, adequate disclosure continues to be one of the most important issues facing accountants and may take various forms.

REQUIRED:

(1).Provided points of analysis on the various forms of disclosure available in published financial statements

"Companies that are privately owned are not required by law to disclose detailed financial and operating information in most instances. They enjoy wide latitude in deciding what types of information to make available to the public. Small businesses and other enterprises that are privately owned may shield information from public knowledge and determine for themselves who needs to know specific types of information. Companies that are publicly owned, on the other hand, are subject to detailed disclosure laws about their financial condition, operating results, management compensation, and other areas of their business. While these disclosure obligations are primarily linked with large publicly traded companies, many smaller companies choose to raise capital by making shares in the company available to investors. In such instances, the small business is subject to many of the same disclosure laws that apply to large corporations. Disclosure laws and regulations are monitored and enforced by the U.S. Securities and Exchange Commission (SEC).

All of the SEC's disclosure requirements have statutory authority, and these rules and regulations are subject to changes and amendments over time. Some changes are made as the result of new accounting rules adopted by the principal rule-making bodies of the accounting profession.

In any event, SEC regulations have a direct impact on what are known as generally accepted accounting principles (GAAP). The rule-making bodies of the accounting profession, most notably the Financial Accounting Standards Board (FASB) and the American Institute of Certified Public Accountants (AICPA), must rely on "acceptance" of their statements. While FASB and AICPA statements do not have the force of law, they are widely accepted in the accounting profession and in some cases influence subsequent SEC rules on disclosure.

*** SEC regulations require publicly owned companies to disclose certain types of business and financial data on a regular basis to the SEC and to the company's stockholders. The SEC also requires disclosure of relevant business and financial information to potential investors when new securities, such as stocks and bonds, are issued to the public, although exceptions are made for small issues and private placements. The current system of mandatory corporate disclosure is known as the integrated disclosure system. By amending some of its regulations, the SEC has attempted to make this system less burdensome on corporations by standardizing various forms and eliminating some differences in reporting requirements to the SEC and to shareholders.

Publicly owned companies prepare two annual reports, one for the SEC and one for their shareholders. Form 10-K is the annual report made to the SEC, and its content and form are strictly governed by federal statutes. It contains detailed financial and operating information, as well as a management response to specific questions about the company's operations.

Historically, companies have had more leeway in what they include in their annual reports to stockholders. Over the years, however, the SEC has gained more influence over the content of such annual reports, primarily through amending its rules ...

Solution Summary

The concepts of adequate disclosure is discussed as it pertains to accountants. Points of analysis on various forms of disclosure are also available.

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