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Congress and the Securities and Exchange Commission

In 1934, Congress created the Securities and Exchange Commission (SEC) and gave the commission both the power and responsibility for setting accounting and reporting standards in the United States.

1. Explain the relationship between the SEC and the various private sector standard-setting bodies that have, overtime, been delegated the responsibility for setting accounting standards.

2. Why has the SEC delegated this responsibility rathen than set standards directly?

Solution Preview

1. Since the creation of the SEC, we've seen many authoritative bodies come into being. The FASB, the PCAOB, state boards of accountancy and several other regulatory and professional accounting organizations have evolved. The primary responsibility of the FASB is to establish, monitor, and revise GAAP and other accounting standards as needed. The main responsibility of the PCAOB is to monitor public companies and their adherence to SOX. The state boards of accountancy have the role of setting state compliance and advice on certain items to ensure that the accountant is in compliance with GAAP. The SEC has the most limited contact with state boards of accountancy when compared to the other oversight bodies. The SEC works hand in hand with the PCAOB to ensure companies are complying with SOX. For ...

Solution Summary

1. Explain the relationship between the SEC and the various private sector standard-setting bodies that have, overtime, been delegated the responsibility for setting accounting standards.

2. Why has the SEC delegated this responsibility rathen than set standards directly?

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