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Generally Accepted Principles and Sarbanes Oxley

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I would like an expert's help to expound on the purpose of the "Generally Accepted Accounting Principles" and the "Sarbanes-Oxley Act" and the role that both of these play within the arena of financial markets or marketplaces.

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The answer to this problem explains the purpose of GAAP & SOX and their impact on financial markets . The references related to the answer are also included.

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1. The purpose of GAAP or the Generally Accepted Accounting Principles is to present a set of rules, standards, and practices that can be used by the accounting profession to prepare financial statements issued by a company. The purpose of the GAAP is to provide accounting standards, enable investors and creditors to compare companies, and increase transparency in the manner in which companies perform (1). From the perspective of financial markets, transparent financial statements will lead to lower volatility and more accurate stock valuations. The purpose of GAAP is to focus on the information needs of the investors (2). The GAAP seeks to provide information in a timely manner, make the financial statements comparable to those of other companies in the industry, and improves consistency of financial reporting. In the financial markets, this means improved comparability of results with global competitors, better ...

Solution provided by:
Hatim Baxamusa, MBA
Education
  • BSc , University of Calcutta
  • MBA, Eastern Institute for Integrated Learning in Management
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