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... it mean that the report is essentially objective. It is a complex task, which is in need of on-going and sophisticated refinement by the individual and the profession. Every policy choice represents a trade off among differing individuals preferences, and possibly among alternative consequences, regardless of whether the policy makers see it that way or not. In this sense, Accounting policy choices can never be neutral (Committee on Social Consequences, 1978, pg. 24). Users of information expect a high level or 'reliability and objectivity' in regards to these financial reports.
Interestingly, accountants often see themselves as engaged in an objective, value-free, technical enterprise, representing reality "as is." But in fact they are subjective "constructors or reality" (Morgan, G. , 1988, vol 13). Users should be aware that accounting can never be truly objective, and that the accountants are really in the business of trying to persuade others that his / her concepts and figures, "give a true and fair view" when in reality this view is as partial as any other (Morgan, G. , 1988, vol 13). So why do users of financial information still say they prefer it to have a high degree of reliability, if information cannot be neutral, it therefore cannot be reliable. The issue of the non-existence of neutrality and objectivity in Accounting reports has an inverse effect on the matter of ethics. As professionals, accountants have an obligation to themselves not just to comply with accounting standards but, to adhere to high standards of ethical conduct. (Hilton, R.
W. , 2000, pg. 21) This means they have a responsibility to be competent, confidential, have high standard of integrity and 'objectivity'. The lack of objectivity is an ethical behavioural matter as well as an Accounting Standards matter. There is no universal agreement about the desirability of Accounting Standards (Solomons, D. , 1983, vol 13). The Australian Accounting Board have as their primary objective, improving the quality of financial reporting by Australian reporting entities. The Board's primary responsibility is to develop Accounting Standards in respect of general purpose financial reporting that is 'true and fair' for all users. The Board consults with members of its broadly constituted consulting group to increase the involvement of various interested groups in the standard setting process. (Accounting Handbook 2001, Policy Statement xxii) Members from interest groups of economic, political and social areas raise issues and provide advice to the board on project priorities and matters of relevance.
These interest groups influence the way in which the board views possible Accounting Standards. In practice as well as in theory, the social welfare impact of accounting reports is closely monitored. Therefore it is no surprise that the financial accounting standards board, is a political body and, consequently, that the process of selecting an acceptable accounting alternative is a political decision. If the social welfare impact of accounting policy decisions were ignored, the basis for the existence of a regulatory body would disappear (Solomons, D. , 1978, Journal). Solomons observation shows that the external influences of economic, political and social factors on Accounting Standard setting are so all encompassing that they drive nearly all actions by report-writers. A "stakeholder perspective" has grown in importance.
Increasingly, organizations are becoming viewed as being as much the property and concern of employees, customers, and managers and the general public, as they are of 'owners' (Morgan, G. , 1988, vol 13). And this stamp or style influences the ensuing accounting reports. Accounting standards are therefore set to the guidelines of, 'everybody has a voice and everyone wants to be heard. ' The process of setting accounting standards can be described as democratic because like all rule-making bodies the board's right to make rules depends ultimately on the consent of the ruled (Solomons, D. , 1978, Journal). So eventually the standards are set based on the influence of external factors and to an idealism of 'true and fair' view; and reports are compiled in accordance with these standards, "are they neutral and objective?" Of course not!
The standard setting process has been so influenced that it would be impossible for the standards to be totally free from bias. The external influencing factors will naturally affect the accountant's objectivity. It would be unrealistic and naive to believe that accountants of financial reports always put the good of the community before that of their corporate clients. How 'can 'poachers's imultaneously act as 'gamekeepers'?' (Mitchell, A. , et al, 1994, vol 13) Accounting Standard setters try to enforce concepts and standards to generate high-quality reports that are neutral and objective, but the external influences that are apparent right from the time of setting the standards make this idea just that, an idea. Accountants have an obligation to not only cater to the economic, political and social issues, but to try and stick to a rigid idealism of neutrality. Compiling only reports that meet all the guidelines of the regulatory boards, and being as impartial as humanly possible.
Expectations of Accountants these days are of mixed feelings, at one end is society hoping that objective and unbiased reports are 'maintained', and then on the other side of the spectrum are the companies who want subjective reports 'manufactured' to their needs. One might ask, 'where is the honesty, the truth?' The competitive nature of markets, investment and fickle clients demands a "creativity" in financial reporting which is the "truth" in at least a few peoples' view. Choices are made by human beings, who in the main can be described as consistent professionals. But who can absolutely sure when, and to what extent, one is being influenced or even manipulated by outside influences.
Accountants and Accounting Standard setters face a trade-off; either succumb to the external influences or try and fool themselves that objectivity and neutrality is attainable. As Ralph Waldo Emerson once said 'People only see what they are prepared to see'. LIST OF REFERENCES Accounting Handbook 2001, Policy Statements & Standards of Accounting Concepts, Prentice Hall, pg's. xxii - 13, Vol 1, 2001 Arrington, C. E. & Party, A. G. , Accounting, Interests and Rationality: A Communicative Relation.
Critical Perspectives on Accounting, Vol 2, 1991 Committee on Social Consequences of Accounting, Report of the committee on the social consequences of Accounting information, Sarasota, FLA: AAA, pg. 24, 1978 Hilton, R. W. , Managerial Accounting, Irwin/McGraw-Hill, 4 th Ed, pg. 21, 2000 Mitchell, A. , et al, Ethical Statements as Smokescreens for Sectional Interests: The case of the UK Accountancy Profession, Journal of Business Ethics, Vol 13, pg. 39 - 51, 1994 Morgan, G. , Accounting as Reality Construction: Towards a New Epistemology for Accounting Practice, Accounting Organisations and Society, Vol 13 No 3, 1988 Shanahan, J. , Consolidations: a lawyers' picnic, Australian Business, July 25 th, 1990 Solomons, D. , The Politicization of Accounting, The Journal of Accountancy, Nov, 1978 Solomons, D. , The Political Implications of Accounting and Accounting Standard Setting, Accounting and Business Research, Vol 13, 1983 The Macquarie Dictionary, Macquarie Library Pty Ltd, 1985
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Research essay sample on Accounting Standards Social Consequences
