Accounting Theory

Accounting Theory 1
Accounting Theory

Accounting Theory 2
1. Financial markets require the financial information as it satisfies the B option which
states that for the proper allocation of resources by the capital market it is necessary
that the participants have necessary as well as the sufficient information so that they
can make the investment decisions. This will help the investors to understand the
information and based on that make potential investment decisions. Financial market
is a place where the financial securities are traded and in order to trade the stocks the
investors must have the required information before investing in it. Therefore option
B is the answer and it is necessary (Otley, 2016).
2. The accounting profession requires the creation of the GAAP because it is associated
with the third option which states that investors will not be able to assess the
operations of the companies. Generally Accepted Accounting principles determine the
necessary as well as appropriate guidelines on the basis or proper methodology for the
recording of the transactions and events that can create direct impact on the financial
position of the company. Many investors would struggle to assess the financial
statements without the presence of the Generally Accepted Accounting principles.
Henceforth the option C is the right option, thereby defining the responsibility of the
accountants
3. When applying the cost benefit criterion the cost must is bear by the companies that
implement the disclosure requirements as the part of the financial reporting. Therefore
the option C is correct. Usually it is the responsibility of the companies to follow the
guidelines for the purpose of the financial reporting. The auditor’s job is to vouch the
work of the accountants, where the regulatory bodies provided the guidelines for
better reporting and assessment and development of the disclosure regulations. Hence
the cost needs to be paid by the company only and not by auditors, accountants or
Regulators who formulated.
4. Option D is the correct option is recently the Financial Accounting Standards Board
have replaced the American institute of Certified public accounting with the
Securities Exchange Commission Board not for the purpose of funding but for the
purpose of setting up the standards. The FASB definitely includes the bench f the
seven people who are required to maintain the complete independence in terms of
employment or investments. Also Financial Accounting foundation selects the
member of FASB and its funds the organisation. The members are from different