Ace the AICPA Challenge 2026 – Master Your CPA Journey with Confidence!

The Securities and Exchange Commission (SEC) primarily functions to regulate the securities markets and oversee the financial reporting of public companies. One of its key roles is to ensure that investors have access to material financial information, which is achieved through the requirement for public companies to file regular financial statements. This regulation promotes transparency and protects investors by providing them with the necessary information to make informed investment decisions.

The SEC does not set auditing standards; that responsibility usually falls to the Public Company Accounting Oversight Board (PCAOB) or similar organizations. Additionally, while the SEC does have some influence over accounting principles, especially for public companies, it does not create accounting principles specifically for private firms, which are set by other standard-setting bodies like the Financial Accounting Standards Board (FASB). Furthermore, enforcing tax compliance among corporations is primarily the domain of the Internal Revenue Service (IRS), not the SEC. Therefore, the correct answer highlights the SEC's vital role in maintaining the integrity of the securities market and the financial reporting process for public companies.