Financial statement analysis

2014

9/16/2014
SUBMITTED BY: ASIF ALI
ID NO: 1310-MBA006

ASSIGNED BY: DR MUNIR AHMED AHMDANI
Q NO: 03Discuss the role of each of fallowing

1. AICPA
2. FASB
3. SEC

01: AICPA (AMERICAN INSTITUTE OF CERTIFIED PUBLIC
ACCOUNTANTS)

The American Institute of CPAs (AICPA) is the worlds largest member association representing
the accounting profession, with more than 400,000 members in 128 countries, and a history of
serving the public interest since 1877. When the AICPA was founded in 1887, we were named
the American Association of Public Accountants. The original members of the AICPA were
primarily English and Scottish chartered accountants working in what had been a poorly defined
profession. Founding members wanted to ensure that accountancy gained respect as a profession
and was practiced by ethical, competent professionals. Even though the AICPA has merged with
other professional accounting organizations and reorganized over the last hundred years, we have
always retained these goals. AICPA members represent many areas of practice, including
business and industry, public practice, government, education and consulting.

The AICPA sets ethical standards for the profession and U.S. auditing standards for private
companies, nonprofit organizations, federal, state and local governments. It develops and grades
the Uniform CPA Examination, and offers specialty credentials for CPAs who concentrate on
personal financial planning; forensic accounting; business valuation; and information
management and technology assurance. Through a joint venture with the Chartered Institute of
Management Accountants (CIMA), it has established the Chartered Global Management
Accountant (CGMA) designation which sets a new standard for global recognition of
management accounting

02: FASB (FINANACIAL ACCOUNTING STANDARD BOARD)

Since 1973, the Financial Accounting Standards Board (FASB) has been the designated
organization in the private sector for establishing standards of financial accounting that governs
the preparation of financial reports by nongovernmental organizations. Those standards are
officially recognized as authoritative by the Securities and Exchange Commission (SEC) and the
American Institute of Certified Public Accountants.
A seven-member independent board consisting of accounting professionals who establish and
communicate standards of financial accounting and reporting in the United States. FASB
standards, known as generally accepted accounting principles (GAAP), govern the preparation of
corporate financial reports and are recognized as authoritative by the Securities and Exchange
Commission




03: SEC (SECURITIES AND EXCHANGE COMMISSION)

The U.S. Securities and Exchange Commission (SEC) is an agency of the United States federal
government. It holds primary responsibility for enforcing the federal securities laws and
regulating the securities industry, the nation's stock and options exchanges, and other activities
and organizations, including the electronic securities markets in the United States.
In addition to the Securities Exchange Act of 1934 that created it, the SEC enforces the
Securities Act of 1933, the Trust Indenture Act of 1939, the Investment Company Act of 1940,
the Investment Advisers Act of 1940, the SarbanesOxley Act of 2002, and other statutes. The
SEC was created by Section 4 of the Securities Exchange Act of 1934 (now codified as 15
U.S.C. 78d and commonly referred to as the Exchange Act or the 1934 Act).

The Securities Exchange Act of 1934, which created the SEC, was designed to restore investor
confidence in our capital markets by providing investors and the markets with more reliable
information and clear rules of honest dealing. The main purposes of these laws can be reduced to
two common-sense notions:
Companies publicly offering securities for investment dollars must tell the public the
truth about their businesses, the securities they are selling, and the risks involved in
investing.
People who sell and trade securities brokers, dealers, and exchanges must treat
investors fairly and honestly, putting investors' interests first.

Q NO: 4.What is ratio? How do ratios help to alleviate the problems of size of
differences among firms?
A ratio is a fraction comparing two numbers. Ratios make the comparisons in relative, rather
than absolute, terms, which helps alleviate the problem of size difference.

The primary advantage of ratio is that they can be used to compare risk and return relationship of
firms of different size. Ration can also provide a profile of a firm, its economic characteristics
and competitive strategies, and its unique operating, its financial and investment characteristics.

Ratio analysis is designed to facilitate comparisons by eliminating size difference across firms
and overtime