Contemporary Accounting Theory

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Running Head: CONTEMPORARY ACCOUNTING THEORY
Contemporary Accounting Theory
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CONTEMPORARY ACCOUNTING THEORY
Executive summary
This study aims at analyzing the corporate crisis era and their contribution to the setting
of accounting standards. Moreover, the report outlines the political lobby that is influential
during the setting of accounting standards. Finally, the study provides for example of political
influence on accounting standard setting in the world. The study used journal reviews to come up
with the report as well as the findings of this study. The study found out that every corporate
crisis leads to an improvement in the accounting standards. Moreover, the study found out that
political influence [plays a major role in the drafting and setting of accounting standards.
Introduction
A corporate crisis is an event, or a situation or even an initiative by the public which
threatens the capability of a company to operate its businesses effectively. A corporate crisis can
lead to the escalation of a disaster or into long term business growth impediment if the crisis is
not handled by all the involved parties with sensitivity and efficiency. Most of the crises have
their roots at the local levels, nevertheless. They can affect a company or an industry nationwide.
Recovery from these crises requires maximum preparation for different unknown scenarios such
as cybersecurity to employee criminal actions (Müller, 2015). During the past decades, an end of
a crisis era leads to the development of accounting standards which are used to mitigate such
incident in future.

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CONTEMPORARY ACCOUNTING THEORY
How corporate crises/failures in every era lead to improved accounting
regulations/standards for financial reporting in the subsequent periods
The Satyam Scandal
In 2009 there was an issue which was discovered to be affecting the financial
performance of the firm. This fraud case of Raju was a clear indication of the unethical side of
the Satyam to compliance to accounting standards, lack of corporate responsibility, management
duty negligence as well as criminal activities. Raju the chairman of the company was alleged to
have been falsifying more than thirteen thousand ghost workers in the company (Bhasin, 2013).
The ghost workers had been allocated a monthly wage of four million United States dollars. The
money which was generated by the misrepresented employees was deviated and used by the
chairman to fund a purchase contract of a piece of land. The chairman admitted to the fraud and
e was arrested, charged with fraud, inside trading, embezzlement as well as forgery.
From this scandal, it can be clearly seen that Satyam was providing a space for corruption
through the misrepresentation of more than thirteen ghost workers. Having a master’s degree
from Ohio University Raju was supposed to act according to professional ethics and in
accordance with the provision of the provision. , moreover, Raju was aware of the right thing and
the wrong act. His act of entertaining fraud knowingly was an act of ethical standards violation.
Moreover, this case of Satyam also violated the corporate social responsibility standards as the
actions of Raju were negatively affecting the shareholders of the company and more so the
economy as a whole. Satyam through Raju acts was violating social, financial and community
responsibility (Vishwanath & Narapareddy, 2014). In addition, the Satyam scandal represented

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the lack of transparency as the company neglected moral reasoning in the creation of
dependability, trustworthiness, and organization credibility.
Indian Corporate stakeholders were given a cataclysmic jolt by the Satyam scandal of
2009. Resulting from misconducts on bleach of accounting standards and acting unethically
knowingly Raju, who was the chairperson of the company, was sentenced for seven years. The
shocking news was that price water coopers the auditors of Satyam had not realized whether the
fraud of more than Rs 7000 had occurred. The neglecting by the auditor firm as well as the scale
of the scandal brought to light the loopholes which existed in the nations land regulatory
framework which deals with the directors and company auditors (Singh, Kumar, & Uzma, 2010).
After the scandal, several reforms were made and a committee was formed to suggest reforms of
corporate governance and ethics in software service companies (Vishwanath & Narapareddy,
2014). In 2009 the SEBI committee issued a discussion paper with the following provisions;
1. The voluntary international financial reporting standards adoption
2. Chief financial officer appointment requirement such as by qualification, background, and
experience
3. Auditors rotation after every five years to ensure that familiarity doesn’t lead to
mismanagement as well as malpractice (Bhasin, 2013).
Moreover, the ministry of corporate affairs in India released corporate governance
voluntary guidelines. The guidelines dealt with the directors' independence, audit committee
roles and responsibilities, the policy of whistleblower, roles, and responsibility of the board of
companies, office separation of the chairman and the chiefs executive officer for independence