Accounting and Regulation

Accounting and Regulation

Over the years commentators have not been unaware of the need to view regulation in a broader framework. Some, while recognising the political implications in the process of regulation have argued that political considerations be excluded and that accounting remain only concerned with measuring the “facts” (Solomons, 1978). In light of the above discussion, taken at face value, this sentiment would seem unduly naïve. However, over the years it has been the hallmark of much accounting debate: that is, the false belief that accounting is value neutral and only concerned with reporting the economic facts!

For most of the twentieth century the accounting profession sought to maintain a regime of self-regulation. Accounting professional bodies worked hard to avoid the imposition of regulation on the discipline. For this reason the professional bodies have attempted to develop, first generally accepted accounting principles (GAAP) and then a conceptual framework that would serve as the basis of an accounting theory. Most of the

[6 Certainly not all business acts this way – consider this statement in the 2004 HSBC Corporate Social

Responsibility Report (p 4):

While our strategy involves growing revenues by meeting customer needs, our goal is not, and never has been, profit at

any cost. We know that tomorrow’s success depends on the trust we build today.]

developments took place in the USA and therefore the approach to regulation was the

United States approach described above. That is, confidence was maintained in the operation of the market with regulation seen as necessary to provide rules to correct the slight imperfections in the workings of the market. There is a paradox in that the principles, standards and other associated factors were viewed by many as necessary for the development of an accounting theory yet accounting practice was seen as only needing “minor corrections” to be able to work efficiently (in the market)....