Question

Question No 1: (5+5) a) Explain the importance of the FASB and SECP With respect to financial reporting.

Answer 1

a) Importance of FASB and SECP with respect to financial reporting

FASB and SECP are important organisation which helps in setting the standards and regulation of the financial reporting of the corporate. They are important due to following reasons:

· FASB issues accounting standards which are regarded as universal standards in preparation and presentation of the financial statements

· Due to financial reporting as per FASB standards it helps in bringing uniformity in accounting and implementation of best practices across the globe

· It helps in comparison of financial statements across entities and across periods due to common standards adopted in financial reporting

· It bring transparency in financial reporting by way of additional reporting requirements like for example : disclosure of accounting notes in additional to financial statements preparation

· The listing requirements of SECP are very stringent and it helps in bringing corporate governance in the firms.

· Both FASB and SECP help in bringing accountability and responsibility among the firms and its top management before financial reporting is finalised and reported since it is monitored

· SECP helps in holding accountability all senior officers and management of the firm and auditors who are responsible for issuing an audit opinion on financial statements.

· SECP also regulates external third parties like credit rating agencies, corporate secretaries, depository participants, brokers, sub-brokers, etc to avoid any malfunctioning of the capital markets.