Roles of SEC and FASB [CMA Adapted]
The development of accounting theory and practice has been influenced directly and indirectly by many organizations and institutions. Two of the most important institutions have been the Financial Accounting Standards Board (FASB) and the Securities and Exchange Commission (SEC).
The FASB is an independent body established in 1972. It is composed of seven persons who represent public accounting and fields other than public accounting.
The SEC is a governmental regulatory agency created in 1934 to administer the Securities Act of 1933 and the Securities Exchange Act of 1934. These acts and the creation of the SEC resulted from the widespread collapse of business and the securities markets in the early 1930s.
Required
a. What official role does the SEC have in the development of financial accounting theory and practice?
b. What is the interrelationship between the FASB and the SEC with respect to the development and establishment of financial accounting theory and practice?
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