Adverse selection might arise. Some accounting professionals concentrate on developing descriptive frameworks to express how accounting was generally performed. Corporate disclosure policies are considered to represent one important means by which management can influence external perceptions about their organization.
This states that a company may not hire a member of the audit team before a certain time has passed. Stakeholder Theory Freeman, R.
Accounting theory essay provides another lens through which to view economic resource dependency incentives for accounting rule choices. According to above reason, accountant might followed some bias rules and regulations to prepare the financial statement.
In addition, these descriptions reveal flaws in the behavior and often suggest remedies for these deficiencies. The standardized accounting practices can provide meaningful information for potential investors and encourage them to put resources into the organizations.
Companies must develop good relationships with the media to influence the community to support the particular organizations or industries by providing sponsorships to the media. In the copy of the AICPA code of conduct, there is not a part that says that an auditor may not be friends with an audit client.
Managers as well as accountants will make asset acquisition decisions on the foreseeable values of the individual assets instead of the abilities of profit generation.
Their families were friends and on occasion spent holidays together. That is the reason why the government is working on the regulations of minimum salaries.
Those theories can explain the phenomenon in selection of accounting practices and information disclosures of organization as well as predictions of particular managerial decisions. The costs associated with using accounting data are therefore decreasing because the accounting information does not necessary to be adjusted due to the different accounting approaches across different organizations.
The company may hide large amounts of cash illegally to avoid taxation or to increase profits. Further, asset valuation process may introduce a degree of subjectivity into the financial statements.
Critical accounting theories explain that accounting professionals tend to highlight the key role of accounting in society via critical analysis. Another situation is if an auditor finds the top executives miss-reporting large amounts of payroll.
Open-system theories have reconceptualised organizational boundaries as porous and problematic. In general, prescriptive accounting frameworks are established based on the descriptive accounting frameworks. As a result, accounting professionals are considered as watchdogs to ensure corporations operated with sufficient social and economic controls.
There were plenty of red flags that she had noticed giving her a good enough reason to continue on with the procedure. The goodwill of the asset is not taken into account as well. The opportunity for market failures such as insider trading might be decreased.
Some accounting professional develop prescriptive frameworks focused on the standards and presentations of financial reporting. Apart from annual reports provided to the public, CLP prepares sustainability reports to report the company strategy, performance and commitments related to climate change expand this scope to include all operating units in which CLP has an ownership interest.
If the inconclusive tests are included in the work papers, it might open eyes up for others such as in the case in the court room.
Companies obtain and disclosure huge amount of information that are not relevant for the stakeholders to make decisions accordingly. When there is some sort of relationship to where a member of a company and a member of the auditing team see each other multiple times outside of work that is when there should be an independence issue.
Companies will adapt similar reporting practices in a particular industry. The feminine stereotypes are seldom associated with the accounting theories because those critical theories with feminine characteristics that the theorists cannot provide solutions to what they see as perceived problems.
The extent of social and political disclosure must be meaningful to report recipients. Further, new regulations are imposed to monitor the organizations within a particular industry if the key stakeholders have enough powers to influence the governments. The motivations of scholars in performing their studies, the society needs of new regulations as well as the information disclosure behaviors of entities can also be explained by theories.
With this in mind, the optimal set of accounting policies are described as a compromise between fixing accounting policies to minimize contract costs and providing flexibility in times of changing circumstances considering the effects of opportunistic behaviour.Accounting Theory Essay Sample.
Introduction. Many accountants are familiar with the accounting standards and practices. They are always keeping their eyes on new standards and regulations roll-out. On the back of the new accounting practices, there are many accounting theories supported.
Published: Mon, 5 Dec Accounting has evolved since it was first developed and has continued to evolve. The aim of this essay is to explore and discuss why accounting, both financial and management has changed over the last millennium.
Accounting theory and its application is very fundamental to students and professional in accountancy. It equips people in the accountancy profession with financial accounting theory and associated research.
Relevance of this theory is that it provides accountants with knowledge to critically investigate and analyze contemporary accounting issues. Financial Accounting Theory: Reducing Balance Method vs. Straight Line Method - Accounting is a multifaceted discipline.
It is neither a dull profession nor a simple practice as how it has been viewed by lay people. This essay demonstrates the side of accounting that is complex and intriguing.
An accounting theory makes it easier to understand accounting in a professional way. Developing Accounting Theory: Approaches and Methods An accounting theory should provide accountants with guidelines for how to represent a summary of financial data for activities during a year.
Positive Accounting Theory is the branch of academic research in accounting that tries to make good predictions of real world events and translate them to accounting transactions. This contrasts with normative accounting theory, which that tries to recommend what should be done.Download