2.

1 The Stockholders Report

Every corporation has many and varied uses for the standardized records and
reports of its financial activities. Periodically, reports must be prepared for regulators,
creditors (lenders), owners, and management. The guidelines used to prepare
and maintain financial records and reports are known as generally accepted
accounting principles (GAAP). These accounting practices and procedures
are authorized by the accounting professions rule-setting body, the Financial
Accounting Standards Board (FASB).
In addition, the Sarbanes-Oxley Act of 2002, enacted in an effort to eliminate
the many disclosure and conflict of interest problems of corporations,
established the Public Company Accounting Oversight Board (PCAOB), a notfor-
profit corporation that oversees auditors of public corporations. The PCAOB
is charged with protecting the interests of investors and furthering the public
interest in the preparation of informative, fair, and independent audit reports.
The expectation is that it will instill confidence in investors with regard to the
accuracy of the audited financial statements of public companies.
Publicly owned corporations with more than $5 million in assets and 500 or
more stockholders1 are required by the Securities and Exchange Commission
(SEC)the federal regulatory body that governs the sale and listing of securities
to provide their stockholders with an annual stockholders report. The
stockholders report summarizes and documents the firms financial activities
during the past year. It begins with a letter to the stockholders from the firms
president and/or chairman of the board