Regulatory environment and capture theory - Literature review

RUNNING HEAD: CONTEMPORARY ACCOUNTING THEORY
Regulatory environment and capture theory
Literature review

Contemporary accounting theory 1
Contents
Introduction...........................................................................................................................................3
Part A....................................................................................................................................................3
India...................................................................................................................................................3
Australia............................................................................................................................................5
Part B.....................................................................................................................................................6
Regulatory Capture Theory...............................................................................................................6
Characteristics to be captured............................................................................................................8
Conclusion.............................................................................................................................................9
References...........................................................................................................................................11

Contemporary accounting theory 2
Executive Summary
This report is a brief summary of the regulatory environment prevailing in India and Australia
for financial reporting. It also explains the concept of regulatory capture theory along with
the characteristics to be captured by a regulatory framework.
The first part of the report deals with the review of literature about India’s and Australia’s
regulatory environment that regulates and monitor the financial reporting practices of both
the country. It also includes a detailed discussion about the problems faced by these
regulatory authorities. In India, SEBI and Companies Act 2013 lay down some guidelines
and requirements which are to be complied by all the publically listed companies. Similarly,
Australia has APRA, ASIC and RBA as its regulatory authorities responsible for financial
reporting of the listed companies. A review of the country’s progress towards the IFRS
adoption is also done in the report.
The second part of the report deals with the literature review on the regulatory capture theory
and its usefulness. It also explains the features or characteristics which are to be captured by
the regulatory frameworks in order to work in public interest. The theory explains that the
authorities must work in interest of public rather than working for some specific interest
groups. In last, a conclusion is given which consist of the findings of the report and review
done.

Contemporary accounting theory 3
Introduction
The regulatory framework for financial reporting provides some guidelines and standards on
the basis of which companies prepare their financial reports. The framework consists of some
authorities and agency who formulates some rules and regulations, to which every listed
company is required to comply with. It is very necessary to have a regulatory requirement for
reporting as it will ensure many things, such as need of the users are met, content mentioned
in financial reports is relevant and it also monitors the behaviour and the activities of the
companies towards their investors.
This report contains a literature review of the regulatory environment of India and Australia,
problems faced by the framework and the progress related to IFRS adoption. It also discussed
the review of regulatory capture theory and the characteristics that are required to be captured
by a regulatory framework. The report is followed by a conclusion which examines the
regulation framework of both the countries on the basis of the theory.
Part A
India
The regulatory environment for financial reporting in India mainly consists of the Companies
Act 2013 and Securities and Exchange Board of India. The act lay down some requirements
of financial reporting for the companies registered under it and the requirements imposed by
the SEBI according to its guidelines are to be fulfilled by the companies listed on Indian
stock exchanges. These two together provide the regulatory environment of corporate
reporting in India. The act is administered by the Ministry of Corporate Affairs (MCA) and
SEBI works according to the provisions of Securities and Exchange Board of India Act 1992.
The chairman of SEBI is Shri Ajay Tyagi.