Solution Manual For Financial Information Analysis The Role of Accounting Information in Modern Society, 4th Edition By Philip O'Regan Chapter 1-17
Answers to Review Questions Chapter 1
Question 1 Accounting information can be described as the „language of business.‟ It reflects, impacts and determines the nature and consequences of various business and personal relationships. As a source of information and power, therefore, it dramatically impacts modern life. Any such potent source of influence is an ideal candidate for regulation, whether by the state, professions or regulatory bodies, all of whom are actors in this scenario. The nature of these regulatory interventions has changed over time, as political, social and macro-economic contexts have developed. In general, however, as the role and significance of accounting information in society have evolved, it has attracted increasing regulation and oversight. In an accounting context, the regulatory framework describes that system of rules and principles that controls and shapes the nature and content of financial information. One of the characteristics of recent years, however, has been a „light touch‟ regulatory approach, where there has been a reluctance to fully apply extensive regulations. This approach has been identified as responsible, in part, for the onset of frauds and the international financial crisis. One consequence has been a gradual return to a stricter regulatory environment. This is reflected in, for example, increased legislative and other interventions.
Question 2 Accounting information is socially constructed. That is, it is a consequence of social relationships and, as these relationships change and mutate over time, so does the manner in which accounting information expresses itself. This allows various interested parties to compete with a view to impacting the form and preferences of accounting information at any moment in time. Accounting, therefore, is not a „science‟ in the sense that there is some „correct‟ accounting scheme underpinned by immutable laws just waiting to be discovered! Instead, it can be considered as an art, in the sense that it is socially constructed, and, like other art forms, open to design preferences and interpretation. One significant consequence of the relative power and influence of vested interests is that accounting practice is typically the outcome of the political and social struggles