Accounting Questions and Cases

This document provides a critical analysis of accounting questions and cases from a public interest theory perspective, capture theory perspective, and economic interest group perspective. It discusses the rational for government introducing legislation, types of constituents that benefit from social and environmental disclosure legislation, and the increase in accountability of corporations despite implications for financial success. The document also explains the meaning of accountability and aspects of corporate performance that businesses should be accountable for.

Accounting Questions and Cases 1
CRITICAL ANALYSIS OF A GIVEN ACCOUNTING QUESTIONS AND CASES (PART A AND B)
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Accounting Questions and Cases 2
Part A
a) Explain from a ‘public interest theory perspective’ the rational for the government introducing the legislation and
how the government will ultimately assess whether any proposed legislation should actually be introduced.
Based on the public interest theory perspective, there is the need for the government to introduce legislation as long as they
aim at bringing significant benefits to the community. However, these projected benefits should not surpass projected
expenditure. Evaluation of these benefits and costs is a dynamic action, which will affect various parties (so might benefit
partially while other reap more benefits) prior the introduction of legislation. The public interest theory caters for economic
regulations formulated as a result of the public demand aimed at achieving specific speculated results (Savage, 1994). Since
the business world cannot regulate itself, the government should undertake specific steps to ensure that markets are regulated
accordingly. Specific legislations are introduced to enable the government to rectify certain inefficiencies and inequitable
activities evident in the market. These inconveniences might be view as accounting inconsistencies between businesses.
The intervention of the government is necessary and of the best interest to the general public. The activities and practices
that are of common interest to the public, and which the government should focus on are: national security, legislative
institutions, education, national services among others (Pritchard, 1995). On the other hand, the government focusses on
social and environmental regulation to ensure certain activities are executive in the right manner. As for economic
regulation, the government ensures that businesses compete at a fair markets and times, whereas ensuring financial positions
and any relevant data concerning the public is properly evaluated. Environmental and social regulations include any relevant
standards on human and animal laws, child labour laws among others. This implies that the government should introduce
these based on a pending necessity that needs attention. For instance, the government introduced environmental regulations
including all the disclosures from relative entities and companies which have a significant effect on the environs.
A lot of entities have launching their own internal cells, which focusses on developing corporate social and environmental
responsibilities. This means that these companies are able to highlight any fundamental steps needed to ensure that the
environment is protected and free from pollution. In that, the government focuses on legislations, which will disclose any
potential harm on the surrounding. Companies are called upon by the government to put more emphasis on initiatives meant
to develop the environmental conditions, and ensure to report any adversative effect on the environment. Government
disclosures to such significant information have proven to instil logic responsibility towards the environment (Ljungdahl,
1997). The main focus of these environmental regulations is to enhance and enable a liveable and stable community while
sustaining the environment. Despite such disclosure resulting in much protest from companies, there are significant benefits
assessed from these legislations on entities and the environmental.
b) Predict from a ‘capture theory perspective’ the types of constituents that will benefit in the long run from any
social and environmental disclosure legislation.
The capture theory perspective suggests it is the mandated of the regulated parties to capture critical regulatory processes to
guarantee relevant subsequent regulations of the best interest to the general public. Due to the fact that the disclosures have
certain impacts (social and environmental implications) on entities like chemical, mining, transports and wood industries, it
is relevant for certain associations to undertake specific actions to ensure regulations are impacted (Buhr, 1998).These
actions include getting the contribution of individuals from regulatory bodies or being considered as members of these
bodies. This theory started to face significant challenges when relative findings advocated that regulatory bodies were not
operating to fulfil the best interests of the general public. Some entities criticised this frameworks arguing that particular
agencies were operating accounting to their own private interests that that of specific leading entities controlled by these
bodies.
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Accounting Questions and Cases 3
Surprisingly, the general public play no role in the whole process of economic regulations. However, this might be due to the
overall complexity of these disclosures or its relative minimal impact based on an individual level. The theory also suggests
that various regulations respond to various demands based on group interest aimed at enhancing their income. The main
obligation of this suggestion is to safeguard public interests. However, the regulated entities ultimately accomplish their
purpose of capturing these regulatory agencies.
In summary, this theory will service the common interests of entities and industry branches included. The dependence of
regulatory bodies on entity’s data is speculated to minimize the possible conflicts evident in businesses (Kisenyi and Gray,
1998). Moreover, career chances may arise in entities for respective regulators. Therefore, these regulatory bodies are
obliged to represent all the entity’s interests and operate for the detriment of the general public.
Bodies engaged in the disclosure include legislations entities and the government, whereby polices and regulations are made
and implemented to entities and the general public. In that case, the government profits through relevant political coalitions
whenever entity business-friendly regulations are introduced and exchanged for campaigning merits, which means that these
large companies will be on their side.
Companies also benefit when they capture regulated agencies and operate according to their own interests. This activity
enhances efficiency of an entity despite having adverse influence on the environs since most entities are more interested in
profitability while disregarding the environment (Hibbitt and Collison, 2004). Conversely, there is a considerable
improvement in ecological conditions; however, when the capture theory is introduced, the regulated and the regulator
collude.
c) Predict from an ‘economic interest group perspective’ whether any potential legislation to be introduced will lead
to an increase in the accountability of corporations in relation to their social and environmental performance
despite any implications that this increase corporate accountability might have for the financial success of large but
heavily polluting organizations.
Based on the economic interest groups’ hypothesis used in guiding propositions, it states that every individual, inclusive of
policy makers and politicians are always led by their personal interests. Thus relying on such notion, disclosure policies can
only be influenced by controllers in an event when the policies would be beneficial to the individual. This is due to the fact
that superior firm tend to possess great power basically, from financial aid from the government or votes. This results to
questioning of whether rigid legislation may impart negatively for the large organizations. Moreover, focused on the
economic interest group theory, opinions about regulatory measure emerged in order to respond to the apprehension theory.
Relating to the capture hypothesis that states how monopoly above a regulator agency can be squeezed narrowly by a strong
interest entity, thus the economic interest group theory suggests that several groups are constantly rivalling over monopoly
power. Same as the capture theory, assessed firms demand rules although the economic interest theory faces competition
amid their interested groups (Fowles, 1993).. On the other hand, financial assessor’s role is serving the private interests for
the politically influential groups. Therefore, the major postulation is that groups are created in order to protect a certain
economic interest. Moreover, there hasn’t been any conception of a group or public interest created that is in odds with each
other. Similar to the capture theory, most controllers are always biased. This involves meeting the interests of politically
influential groups which are aided while crowds with inadequate power are inefficient.
Maintaining the idea of economic interest group hypothesis of ruling the mind, focused on the capture theory, environmental
enactment, and social performance will thus diminish in the end (Buhr, 1998).. Environmental and social liability will
always be at the last as firms figure out how to improve profit. Considering meting the interest of the public and the
environment, certain legislations will be enacted and if the firms and the policy maker are in odds, then there will be poor
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Accounting Questions and Cases 4
performance of the company’s progress. Large industry pollutant will often neglect various policies and rules in order to
support them, therefore, it is evidently concluded that the firm’s liability will not augment.
Part B
Using the various theories that you have learnt so far, please explain in your own words:
a) What does ‘accountability’ mean?
Accountability is a responsibility assignment matrix, which is indicated the individuals answered for thorough and
effective completion of specific obligations. According to the role system theory, accountability was earlier considered as a
manner in distinguish how entities managed to produce and inculcate considerable behaviour from their workforce.
Moreover, the accountability theory is also linked to the desired definition of this term as a form of behavioural prediction.
Both the accountability and the role theory put more prominence on interpersonal relations and postulate a vital mandate to
defining interpersonal prospects; evaluating on the significance of relative compliance consequences and; linking activities
and tasks to individuals.
Research in various fields of studies e.g. social psychology have also intellectualised accountability as for an
explicit and implicit anticipation, which might be referred as one’s feelings, beliefs or actions on a specific obligation (Ortas,
Gallego and Álvarez, 2014). The management sectors refer this team to the general extent to which an individual’s behaviour
is evaluated by managers, whereby relevant rewards or penalties are applied depending on the magnitude of these
evaluations.
b) What aspects of corporate performance do you believe that a business organisation should be accountable for?
One of the aspects of corporate performance is the management autonomy in businesses. This aspect has critically
been considered based on characterizing accountability on performance basis. Public officials’ accountability is expected to
implement measures such as corporate governance regulations and defining the role of the public in business (Fowles, 1993).
Wide-range discretion is inevitable since performance-based perspectives fundamentally consider availing detailed
management procedures to the public. Consequently, management autonomy facilitates accountability to be more efficient.
Another significant aspect of corporate performance is compensation. Businesses are accountable for this since
that is what individuals are employed for. Positions or performance levels in the workforce determine the variation in
compensation. Thus, workers expect more compensation in case more responsibilities or duties are added to enhance
corporate performance. An effective compensation framework is relevant to fulfil the demands of accountability, whereby
implications like penalties and rewards are considered based on individual performance. When a firm is not accountable for
compensation, accountability level among the employee is likely to reduce. Moreover, expectancy and motivation levels will
decrease since rewards are not considered in case of better performance.
Focussing on the social structure is another relevant aspect to be considered by businesses. Accountability in
general provides a framework of social structuring by identifying the workforce as agents responsible for their own action;
thus, subjecting them to effective assessment (Davis, 1995). Mutual understanding between the workforce and the business
ensures that obligations are competed successful to guarantees improved performance and accomplishment of the company’s
goals and objectives. In that case, performance evaluation denotes the level of accountability as a form of organizational and
social structure.
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Accounting Questions and Cases 5
References
Buhr, N. (1998). Environmental performance, legislation and annual report disclosure: the case of acid rain and
Falconbridge. Accounting, Auditing & Accountability Journal, 11(2), pp.163-190.
Davis, M. (1995). A preface to accountability in the professions. Accountability in Research, 4(2), pp.81-90.
Fowles, A. (1993). Changing Notions of Accountability: A Social Policy View. Accounting, Auditing & Accountability
Journal, 6(3), pp.1-8.
Hibbitt, C. and Collison, D. (2004). Corporate environmental disclosure and reporting developments in Europe. Social and
Environmental Accountability Journal, 24(1), pp.1-11.
Kisenyi, V. and Gray, R. (1998). Social disclosure in Uganda?A research note on investigating absence. Social and
Environmental Accountability Journal, 18(2), pp.16-18.
Ljungdahl, F. (1997). Proposed environmental reporting legislation in Sweden. Social and Environmental Accountability
Journal, 17(1), pp.15-17.
Ortas, E., Gallego, I. and Álvarez, I. (2014). Financial Factors Influencing the Quality of Corporate Social Responsibility
and Environmental Management Disclosure: A Quantile Regression Approach. Corporate Social Responsibility and
Environmental Management, 22(6), pp.362-380.
Pritchard, M. (1995). Accountability in philosophical research. Accountability in Research, 4(2), pp.91-102.
Savage, A. (1994). Corporate social disclosure practices in South Africa: A research note. Social and Environmental
Accountability Journal, 14(1), pp.2-4.
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