
Introduction: The SEC is the regulatory body having the power to control the trade of securities and direct publicly held companies about the financial disclosures they must make. The SEC has control over both the trading of securities and disclosure requirements of a publicly held company.
The basis of the SEC’s legal authority to regulate accounting principles.

Answer to Problem 14.1Q
The basis of the SEC’s legal authority to regulate accounting principles stems from the Security Exchange act 1934.
Explanation of Solution
The periodic reporting of publicly held companies is regulated by the Security Exchange Act of 1934. The SEC has control over both the trading of securities and disclosure requirements of a publicly held company. This control makes SEC an ultimate legal authority. SEC has also involved itself accounting professionals to develop and recommend the accounting principles and standards, for reporting requirements to ascertain the financial condition resulting from its operations. Thus SEC has the legal authority to regulate accounting principles.
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Chapter 14 Solutions
Advanced Financial Accounting
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