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Professor Zeff [Accounting and Business, February 1999; p. 16] views the US Securities and Exchange Commission [SEC] as a 'control agency'. Examine this statement and some of the major issues currently facing the SEC.

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Essay Question: Professor Zeff [Accounting and Business, February 1999; p. 16] views the US Securities and Exchange Commission [SEC] as a 'control agency'. Examine this statement and some of the major issues currently facing the SEC. Professor G. Muller classified the USA accounting system in 1967 as pragmatic1. It provides an efficient and effective service to business. Pragmatic is an independent discipline that develops on an ad hoc basis, normally when problems occur within industry. It tends to take place on a piecemeal basis feeding from judgement and trial-and-error.2 The UK also has a pragmatic system. Being a pragmatic system it develops without the influence of governments and economic theories.3 The USA has 50 federated states which agreed to adopt the overriding national laws regarding administration, economic, political and/or social advantage.4 No national company legislation like that of the Companies Act within the UK exist within the USA. There is also no exclusive accounting profession and no formulation and application of stock exchange reporting requirements. This is due each state having responsibility to create its own legislation concerning corporate regulations, almost total autonomy is vested in each states legislative authority. The only constraint to complete autonomy is the US Congress, the ultimate legislation assembly, who have the powers to override any aspects of corporate regulation enforcement. ...read more.


The threat of government intervention hangs over the SEC. For this reason the SEC has not hesitated to intervene when FASB are moving too slowly or in the wrong direction. In the past the SEC has imposed its own requirements, delayed or even overruled a private sector pronouncement.10 Even though the SEC has in the past overruled the FASB, it is said that "too few public companies had their annual reports reviewed by the SEC, with more than half....not being reviewed over a three year period..."11 This brings into question how dedicated is the SEC? Recent investigations by the SEC include, Spear, Leeds Kellogg, and a unit of Goldman Sachs; Bear Wagner.12 If the outcome goes against these companies it could result in the SEC rejecting their filing of accounts and therefore them becoming unregistered from the Stock Exchange. The investigations can be considered to be a very minor issue. More important current issues surrounding the SEC include their involvement in international standard setting. SEC is a member of the International Organization of Securities Commissions (IOSCO) who have been working with the International Accounting Standards Committee (IASC) to attempt to, "improve the IASC's standards so that they might become an acceptable framework for financial reporting in cross-border securities offerings".13 The outcomes from the discussions brought about three key elements that were agreed. ...read more.


It is therefore the SEC's job not to create, but to regulate the standards. The SEC has to control the FASB in terms of making sure they are not moving too slow or in the wrong direction. SEC have the powers to override any standards created by the FASB and to take action against companies who do not comply with the standards. It is for this reason that the SEC can be classed as being a "control agency", they have not been developing standards rather controlling the work of the FASB and making sure companies comply. Even though the SEC can be classed as a control agency it has not been that affective as shown by the scandals highlighted in Enron and WorldCom. Could it be said that SEC therefore should have been investigated themselves? Many issues surrounding the SEC comes from the implementation of International Accounting Standards. The IOSCO has been colluding with the IASC to come to an agreement on future standards. Even after this, problems have occurred, such as receiving pressure from companies to make standards less prescriptive, trying to not implement the IASC in order to stop companies from relocating to less demanding areas, and improving the reviewing of annual companies reports. The issues regarding International Accounting Standards may result in the US Congress intervening and therefore reducing its overriding status. ...read more.

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