SEC - Role and Standard Setting Process

Question 1

What does the Securities and Exchange Commission (SEC) strive to do?

Answer 1

Ensure that there is adequate information in the public domain before a company issues or trades securities.

Question 2

When the Securities and Exchange Commission (SEC) finds an accounting irregularity, what happens?

Answer 2

The SEC sends a “deficiency” letter to a registrant when an accounting irregularity is found.

Question 3

Define “Staff Accounting Bulletins (SAB)”.

Answer 3

Bulletins that provide the Security and Exchange Commission’s current position on technical issues.

Question 4

Does the Securities and Exchange Commission (SEC) have legal authority to prescribe accounting standards to public companies?

Answer 4

Yes, it has that authority.

Question 5

What purpose does Accounting and Auditing Enforcement Releases (AAER) serve?

Answer 5

Report the enforcement actions taken against accountants.

Question 6

Define “Financial Reporting Releases (FRR)”.

Answer 6

Formal pronouncements that rank the highest in authority for public companies.

Question 7

Does the Securities and Exchange Commission (SEC) have the authority to penalize firms when financial statements are not in accordance with Generally Accepted Accounting Principles?

Answer 7

Yes, they may penalize firms.

Question 8

How many divisions does the Securities and Exchange Commission (SEC) have?

Answer 8

Four (The Division of Corporation Finance, The Division of Enforcement, The Division of Trading and Markets, and The Division of Investment Management).