Accounting Theory and Practices: Organisational Legitimacy, Damage Control, Ethical and Managerial Branch, Externality, Integrated Reporting

ACCOUNTING THEORY AND PRACTICES
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Question 1
In accordance with organisational legitimacy, it is imperative that organisations need to be
perceived as entities which are in compliance with the expectations and norms of the
community. This would imply that these are functioning in accordance with the underlying
social contract. This theoretical concept highlights the need of people perceiving that the
organisation is going the right thing (Dunn, 2010). Thus, it is imperative for the company to
make corporate disclosures so that the community becomes aware of the activities of the
company and thereby reinforces the legitimacy of the company. This view is supported by
Lindblom as highlighted in the chapter (Deegan, 2015).
Question 2
The key damage that happens in case of any major incident or accident is that the legitimacy
of the company is undermined and there is a perception in the community that the social
contract is breached. It is imperative that the firm must act in a manner which is consistent
with the values and norms of the community so as to emphasize and reaffirm the legitimacy.
This requires a communication strategy which highlights the performance of the company to
relevant public in a bid to re-establish legitimacy (Elliot& Elliot, 2017). Also, various actions
and the underlying communication of these, an attempt is made to alter the public perception.
In addition to this engagement with the stakeholders, disclosures in the form of annual report
and sustainability reports can be used to highlight the actions taken by the firm in the
aftermath of the incident (Deegan, 2015). However, the immediate damage is contained by a
prompt communication and PR strategy.
Question 3
The prime concern of the ethical branch is to highlight the manner in which the management
must act in relation to the key stakeholders. This theory aims on emphasizing that the
companies must act in the interest of all stakeholders and fails to acknowledge the power
difference between the various stakeholder groups. Also, it propagates that there are certain
irrefutable rights of stakeholders which cannot be infringed on irrespective of the underlying
power of stakeholders. As a result, the ethical branch would advocate that information be
provided to all stakeholders irrespective of their ability to impact the organisation and
survival and whether they decide to us3e the information or not (Deegan, 2015).