Accounting Theory and Contemporary Issues

This document discusses the concepts of public interest theory, capture theory, and economic interest group theory in accounting theory and contemporary issues. It explores the importance of accountability in the financial and non-financial performance of business organizations. The document also highlights the role of regulations and government intervention in ensuring the disclosure of necessary financial and non-financial information.

Running head: ACCOUNTING THEORY AND CONTEMPORARY ISSUES
Accounting Theory and Contemporary Issues
Name of the Student
Name of the University
Author’s Note

1ACCOUNTING THEORY AND CONTEMPORARY ISSUES
Table of Contents
Part A....................................................................................................................................................2
Requirement (a).................................................................................................................................2
Requirement (b).................................................................................................................................2
Requirement (c).................................................................................................................................3
Part B.....................................................................................................................................................3
Requirement (a).................................................................................................................................3
Requirement (b).................................................................................................................................4
References.............................................................................................................................................7

2ACCOUNTING THEORY AND CONTEMPORARY ISSUES
Part A
Requirement (a)
Public interest theory states that market failure leads to the need for specific regulations and
the introduced regulations help in protecting the public interest. The presence of regulators is needed
for the introduction of regulations. In order to develop regulated financial reporting environment, it is
needed to have the government intervention and this environment is needed to disclose the necessary
financial and non-financial information of the companies (Rosenbloom 2016). The responsibility is on
the government for ascertaining the failure or the success of the current regulations by observing the
market efficient and confidence of the investors and other stakeholders. It is also the responsibility of
the government to ascertain the aspect that what kind of incentives the companies receive through
disclosing both the financial and non-financial information like environmental and other corporate
social responsibility to the major stakeholders (Mansbridge 2018). The outcome of these assessments
will help the government to ascertain the success of the current regulations in protecting the interest of
the public. For this reason, it will be needed for the government to introduce the proposed regulation
in case it ascertains that the existing regulations have failure in implementing accountability to
disclose the information related to corporate social responsibility and environmental information.
Requirement (b)
According to the concept of the Capture theory, interest groups have major involvement in the
process to develop regulations in the presence of certain personal benefits and developed regulations
can be considered as the outcome of the demand of the interest group so that they can use these
regulations for earnings maximization and other benefits (Zingales 2014). In the presence of this
reason, specific interest groups demand the government to control the industry that is beneficial for
fulfilling their own personal interests. Due to this, the business organizations capture the introduced
regulations in a specific industry no matter procedures have been followed for the development of
those regulations. The presence of captured regulations is not good for the welfare of the society since
these regulations work for certain specific interest groups for their personal benefits. In this way,
increase in corruption can be seen when there is severe amount of regulations or regulatory reforms.

3ACCOUNTING THEORY AND CONTEMPORARY ISSUES
The above discussion is crucial to demonstrate the fact that the presence of regulation is beneficial for
some interest groups instead of the society (Carpenter and Moss 2013). Thus, from the perspective of
this particular theory, some interests groups will be benefitted in the long-run due to the introduction
of social and environmental disclosure legislations since they will get more time to manipulate these
legislations for the purpose of using them for their own benefits.
Requirement (c)
According to the concept of the economic interest group theory of regulation, legislations
consist of the supply power and demand power; interest groups are considered for demand and the
government is considered for supply (Hrebenar and Scott 2015). This theory states that industry has
the authority to develop and introduce regulations where these regulations are developed for make
certain industries advantageous. In the presence of this aspect, different types of interest groups will
compete for acquiring the advantage which can be obtained with the help of lobbying to influence the
government officials who have the responsibility of making the regulation related decision. Effective
consideration of the concept of this theory indicates towards the fact that the introduced legislations
are beneficial for the interest groups since they involve in lobbying to take the advantage (Berry and
Wilcox 2018). In this same manner, the interest groups in this case are managements of the heavily
polluted companies and these companies will use the newly introduced environmental and social
legislations to ensure their financial success through the disclosure of their undertaken initiatives for
the reduction of the negative effects of their operation on the environment and society. In actual, the
introduction of regulations will not lead to the increase in accountability of the companies towards the
social and environmental performance.
Part B
Requirement (a)
The concept of Accountability can be regarded as an obligation of a firm or individual to be
responsible for the undertaken activities so that they can take the required responsibility through the
disclosure of correct result. In other words, accountability is referred to the presence of sufficient
assurance on the fact that a company or a person will be evaluated based on their actual behaviour of

4ACCOUNTING THEORY AND CONTEMPORARY ISSUES
performance towards the aspects for which they are responsible (Ramasastry 2015). For this reason,
the term ‘responsibility’ is closely related to accountability while accountability is vastly considered
in the aspect of oversight. For example, in an organizational set-up, adequate respobslity must be
there on the employees to successfully complete their job so that they can provide the correct
explanation wither on success or failure (Belal, Cooper and Khan 2015). Corporate accountability
puts the obligation on the companies to be liable to the organizational stakeholders for their activities.
In this manner, corporate accountability makes them liable to answer for the decline in performance
while providing the correct reasons and justifications. At the same time, it puts the obligation on the
companies to adopt ethical as well as sustainable business operations for ensuring the success of the
business. Thus, accountability helps in establishing overall corporate governance mechanism for the
companies (Grossi, Papenfuß and Tremblay 2015).
Requirement (b)
There are some concrete reason to believe the fact that the business organizations are needed
to be accounted for certain sects of their corporate performance which can be divided into two major
aspects; they are financial performance and non-financial performance. It is the responsibility of the
companies to be liable to their stakeholders regarding these aspects of corporate performance which is
a crucial factor for ensuring the overall business success.
Accounting and financial department is considered as a crucial aspect for the companies and
the business organizations should be accounted for properly recording as well as reporting all the
accounting and financial information to their internal as well as external stakeholders in a transparent
manner (Almqvist et al. 2013). More specifically, the companies must be accounted for providing
financial information on their financial performance and financial position through the necessary
financial statements and the notes to these financial statements. These aspects ensures easy
understandability of the disclosed financial information. Accountability must be there from the side of
the companies to provide the required justification and clarification in case the financial performance
of them deteriorates massively and they should be able to take the responsibilities of the undertaken
actions and strategies. At the same time, the managements of these companies should be accountable

5ACCOUNTING THEORY AND CONTEMPORARY ISSUES
for providing the results of the final audit of their financial statements and information so that the
stakeholders can ascertain the risks related to their financial position, if any (Zietlow et al. 2018). At
the same time, these companies should be accounted for any kind of loopholes or issues in the overall
financial reporting system that can hamper the financial performance of the organization. The
presence of these accountabilities helps the companies in developing a cordial relationship with their
key stakeholders (Masruki and Shafii 2013). Lastly, it needs to be mentioned that the Boards of the
companies should be accounted for the ineffective performance of the overall business to the relevant
stakeholders while providing the appropriate reasons for the deviation in the performance. These are
the financial aspect of the corporate performance of the companies for which the companies should be
accounted for.
Along with the financial aspect of corporate performance, companies are also accounted for
the non-financial aspect of corporate performance. It needs to be mentioned that there is a massive
surge in the accountability of the business organizations all over the world in the presence of the
increase in concern of the stakeholders related to the environment, social and governance related
issues. This aspect puts the obligation on the companies to disclose the information of their
performance on the environmental, social and governance aspects of corporate performance (Bobby
Banerjee 2014). Increased importance of non-financial information can be seen in the current time
since it is largely helpful for the stakeholders in different decision-making process regarding the
companies. For this reason, these companies should be accountable for disclosing the information on
their actions and initiatives undertaken for minimizing the adverse impact of their operations on
society and environment (Wong and Millington 2014). In the presence of this aspect, the companies
are accounted for the devastation in non-financial performance where they have not been able in
achieving the envirmental and sustainability related targets. At the same time, accountability of the
companies can be seen for the adoption of ethical business practice which is considered as a major
determinant of business success. Corporate governance is considered as another major non-financial
aspect for which the companies are accounted for since the presence of effective corporate
governance mechanism is needed to conduct the business operations in effective manner (Utting

6ACCOUNTING THEORY AND CONTEMPORARY ISSUES
2015). These are the non-financial aspect of the corporate performance of the companies for which
they should be accounted for.

7ACCOUNTING THEORY AND CONTEMPORARY ISSUES
References
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accountability. In Critical Perspectives on Accounting (Vol. 24, No. 7-8, pp. 479-487).
Belal, A.R., Cooper, S.M. and Khan, N.A., 2015. Corporate environmental responsibility and
accountability: what chance in vulnerable Bangladesh?. Critical Perspectives on Accounting, 33,
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Berry, J.M. and Wilcox, C., 2018. The interest group society. Routledge.
Bobby Banerjee, S., 2014. A critical perspective on corporate social responsibility: Towards a global
governance framework. Critical perspectives on international business, 10(1/2), pp.84-95.
Carpenter, D. and Moss, D., 2013. Preventing capture through consumer empowerment programs:
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Grossi, G., Papenfuß, U. and Tremblay, M.S., 2015. Corporate governance and accountability of
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perspectives. International Journal of Public Sector Management, 28(4/5), pp.274-285.
Hrebenar, R.J. and Scott, R.K., 2015. Interest group politics in America. Routledge.
Mansbridge, J.J., 2018. A deliberative theory of interest representation. In The politics of
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Masruki, R. and Shafii, Z., 2013. The development of waqf accounting in enhancing
accountability. Middle-East Journal of Scientific Research, 13(13), pp.1-6.
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gap between responsibility and accountability. Journal of Human Rights, 14(2), pp.237-259.
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8ACCOUNTING THEORY AND CONTEMPORARY ISSUES
Utting, P., 2015. Corporate accountability, fair trade and multi-stakeholder regulation. Handbook of
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