Final answer:
The FASB is responsible for prescribing accounting practices and standards for companies. The Financial Accounting Standards Board (FASB) prescribes accounting practices and standards for companies in the U.S. The Sarbanes-Oxley Act strengthened the role of FASB following major accounting scandals.
Step-by-step explanation:
The body that has the power to prescribe the accounting practices and standards to be employed by companies that fall under its jurisdiction is the FASB (Financial Accounting Standards Board).
The Financial Accounting Standards Board (FASB) prescribes accounting practices and standards for companies in the U.S. The Sarbanes-Oxley Act strengthened the role of FASB following major accounting scandals. Corporate governance, which includes the board of directors, auditing firms, and major shareholders, also plays a key role in maintaining financial transparency.
The body that has the power to prescribe accounting practices and standards to be employed by companies that fall under its jurisdiction is the Financial Accounting Standards Board (FASB). The 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 Generally Accepted Accounting Principles (GAAP).
After a number of accounting scandals such as those involving Enron and WorldCom, the Sarbanes-Oxley Act was enacted in 2002 to increase investor's confidence in the financial information provided by public corporations and to protect them from accounting fraud. This act also reinstated the importance of the FASB, amongst other institutions, in prescribing accounting standards that firms must comply with.
The role of corporate governance is critical in the financial oversight of a company. Key institutions such as the board of directors, auditing firms, and significant shareholders play an important role in ensuring that companies adhere to accounting standards and provide investors with accurate financial information. However, as seen in the case of Lehman Brothers, sometimes corporate governance fails, leading to severe consequences for investors and the broader financial markets.