Regulatory Environment of Financial Reporting
Regulatory Environment of Financial Reporting
Nicholas Vujnich
Accounting 561
September 25th, 2014
Chelsea Bjorkman
Regulatory Environment of Financial Reporting
Over the last 100 years, there have been significant changes to the regulatory environment that shaped financial reporting requirements. The Securities Act of 1933, The Securities Exchange Act of 1934, and the Sarbanes-Oxley Act of 2002 are the most notable laws enacted to ensure transparency and accuracy in reporting. Each new law subsequently provided stricter guidelines on the internal controls, auditing and financial reporting of publically traded companies. Through a thorough review of these laws, we can establish the regulatory environment created to prevent fraudulent reporting.
Securities Act of 1933
One of the first corporate regulatory initiatives established was the Securities Act of 1933. This Act is often referred to as the "truth in securities" law. It served two specific purposes. First, it requires that publicly owned companies provide financial and other significant information concerning securities being offered for public sale. This act also prohibits deceit, misrepresentations and other fraud in the sale of securities (U.S. Securities and Exchange Commission, 2014).
The primary method in achieving the goals of this Act is the registration of securities offered by the publically traded companies. The registration process forces companies to provide disclosure of important financial information. The SEC requires that companies provide accurate information, but it does not guarantee the accuracy of the information with investors. According to the Securities Act of 1933, the information provided is merely a way to enable investors, not the government, to make informed judgments about whether to purchase a company's securities (U.S. Securities and Exchange Commission, 2014). This law also provided important rights for investors that allow them to pursue recovery if they can
Nicholas Vujnich
Accounting 561
September 25th, 2014
Chelsea Bjorkman
Regulatory Environment of Financial Reporting
Over the last 100 years, there have been significant changes to the regulatory environment that shaped financial reporting requirements. The Securities Act of 1933, The Securities Exchange Act of 1934, and the Sarbanes-Oxley Act of 2002 are the most notable laws enacted to ensure transparency and accuracy in reporting. Each new law subsequently provided stricter guidelines on the internal controls, auditing and financial reporting of publically traded companies. Through a thorough review of these laws, we can establish the regulatory environment created to prevent fraudulent reporting.
Securities Act of 1933
One of the first corporate regulatory initiatives established was the Securities Act of 1933. This Act is often referred to as the "truth in securities" law. It served two specific purposes. First, it requires that publicly owned companies provide financial and other significant information concerning securities being offered for public sale. This act also prohibits deceit, misrepresentations and other fraud in the sale of securities (U.S. Securities and Exchange Commission, 2014).
The primary method in achieving the goals of this Act is the registration of securities offered by the publically traded companies. The registration process forces companies to provide disclosure of important financial information. The SEC requires that companies provide accurate information, but it does not guarantee the accuracy of the information with investors. According to the Securities Act of 1933, the information provided is merely a way to enable investors, not the government, to make informed judgments about whether to purchase a company's securities (U.S. Securities and Exchange Commission, 2014). This law also provided important rights for investors that allow them to pursue recovery if they can