Final answer:
The Financial Accounting Standards Board (FASB) is an organization that sets accounting and financial reporting standards, known as GAAP, for U.S. entities. These standards are essential for transparent reporting and are recognized by the SEC. The FASB's work maintains investor confidence and market efficiency.
Step-by-step explanation:
The Financial Accounting Standards Board (FASB) is an independent nonprofit organization responsible for establishing accounting and financial reporting standards for companies and nonprofit organizations in the United States. Following the Federal Securities Act on May 27, which established legal standards for disclosure of information regarding publicly traded securities, the role of FASB became particularly significant to ensure transparent financial reporting. The FASB's standards, known as Generally Accepted Accounting Principles (GAAP), are recognized by the U.S. Securities and Exchange Commission (SEC) as authoritative for public companies.
As the financial landscape evolves, the FASB updates and improves these standards to ensure that financial statements provide clear and consistent information that investors, creditors, and others can rely upon to make informed financial decisions. This is critical for maintaining investor confidence and the efficient functioning of capital markets.