20.1: Standards Overview Flashcards
What is the objective of financial reporting according to the IASB Conceptual Framework for Financial Reporting?
To provide information about the firm to current and potential investors and creditors that is useful for making their decisions about investing in or lending to the firm.
What is a standard-setting body? What are the two standard-setting bodies?
A standard-setting body is a professional organization of accountants and auditors that establish financial reporting standards.
2 standard-setting bodies:
1. FASB which sets GAAP
2 IASB which sets IFRS
What is a regulatory authority? Provide an example of a regulatory authority.
A regulatory authority is a government agency that has the legal authority to enforce compliance with financial reporting standards.
An example of a regulatory authority is the SEC.
Which commission do national authorities (regulatory authorities) belong to?
International Organization of Securities Commissions (IOSCO). Note that IOSCO is not a regulatory body.
Who enforces the Sarbanes-Oxley Act of 2002? What does the Act state?
SEC enforces the Sarbanes-Oxley Act of 2002.
- Act prohibits company’s external auditors from providing certain additional paid services to the company.
- Act requires a company’s executive management to certify that the financial statements are presented fairly and include a statement about the effectiveness of the company’s internal controls of financial reporting. Auditor must also provide a statement confirming the effectiveness of company’s internal controls.
What are the three objectives of IOSCO?
The three objectives of the financial market regulations according to the IOSCO or International Organization of Securities Commission are:
- Protect investors
- Ensure fairness, efficiency, and transparency of markets
- Reduce systematic risk
What is Form S-1 as required by the SEC?
Form S-1 is the registration statement filed prior to the sale of new securities.
What is Form 10-K as required by the SEC?
Form 10-K is the required annual filing that includes information about the business, audited financial statements and disclosures, and disclosures about legal matters involving the firm.
What is Form 10-Q as required by the SEC?
Form 10-Q requires US firms to file the form quarterly, with updated financial statements.
What is Form DEF-14A as required by the SEC?
Form DEF-14A is the proxy statement.
What is Form 8-K as required by the SEC?
Form 8-K is a form companies must file to disclose material events, including significant asset acquisitions and disposals, changes in management or corporate governance, or matters related to its accountants, financial statements, or the markets in which its securities trade.
What is Form 144 as required by the SEC?
Form 144 allows companies to issue securities to certain qualified buyers without registering the securities with the SEC but must notify the SEC that it intends to do so.
What are Forms 3, 4, and 5 as required by the SEC?
Forms 3, 4, and 5 involve the beneficial ownership of securities by a company’s officers and directors.
