Which entity primarily oversees the enforcement of GAAP?

• A. Financial Accounting Standards Board (FASB)
• B. Securities and Exchange Commission (SEC)
• C. International Accounting Standards Board (IASB)
• D. General Accounting Office (GAO)

Answer: (B)

The Securities and Exchange Commission (SEC) is the primary entity overseeing the enforcement of GAAP. The SEC was established to regulate the securities industry and protect investors by ensuring the integrity of financial markets. It has the authority to prescribe accounting principles for public companies and requires them to prepare their financial statements in accordance with GAAP.

While the Financial Accounting Standards Board (FASB) plays a significant role in establishing GAAP by setting accounting standards, it does not have enforcement authority. The International Accounting Standards Board (IASB) develops international financial reporting standards (IFRS), which can differ from GAAP and is not directly involved in the enforcement of GAAP. The General Accounting Office (GAO) primarily audits government agencies and does not oversee GAAP for public companies. Therefore, the SEC’s role in ensuring compliance with GAAP among publicly traded companies makes it the correct answer.