Evolution of Accounting and Financial Regulation

Vocabulary flashcards covering key terms from the lecture on the historical development of accounting, capital markets, and major U.S. financial regulations.

Accounting

The language of business that measures, reports, and communicates a company’s financial performance, risk, and opportunity.

Industrial Revolution

A 19th-century period of rapid industrialization that created a massive need for capital to fund factories, steam engines, and new machinery.

Capital Markets

Markets where companies raise funds from investors, including stock exchanges such as those in London and New York.

Stock Exchange

A marketplace where shares of public companies are issued and traded, enabling businesses to compete for investor capital.

Financial Statements

Formal records—such as the income statement and balance sheet—used to show past performance and future potential to investors.

Securities Act of 1933

U.S. law that mandated companies disclose critical information to investors before selling stocks or bonds.

Securities Exchange Act of 1934

Legislation that created the Securities and Exchange Commission (SEC) to oversee trading in primary and secondary markets.

Securities and Exchange Commission (SEC)

Federal agency established in 1934 to act as the watchdog of U.S. financial markets and enforce securities laws.

Sarbanes-Oxley Act of 2002 (SOX)

Regulation introduced after early 2000s scandals, requiring stronger internal controls and making executives personally liable for financial accuracy.

Board Financial Expert

A requirement under SOX that public company boards include members with proven expertise in accounting or financial oversight.

Financial Crisis of 2008

Global economic shock triggered by excessive risk-taking and collapsing mortgages, leading to widespread bank failures.

Dodd-Frank Act

2010 legislation aimed at curbing risky behavior in the financial system through stricter regulations on banks and other institutions.