Criticism of Current Reporting Practices and Theories of Corporate Activities

Running head: ADAVANCE FINANCIAL ACCOUNTING
Advance Financial Accounting
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2ADAVANCE FINANCIAL ACCOUNTING
Question 1
The given report deals with the criticism of current reporting practices like IFRS. The qualitative
characteristics of conceptual framework are
 relevance,
 faithful representation,
 timeliness
 understandability
However, it has been found that the current financial reporting standards or IFRS has failed to
abide by the norms of qualitative statistics of conceptual framework. Faithful representation
reflects the different types of disclosures in the annual report. This further increases the
complexities of financial statements and the investors are unable to analyze information from it.
Relevance has resulted higher chances of misstatements in financial reports of the companies.
This further resulted in decline of quality of financial reports. The characteristic of
understandability has increased the chances of long disclosures, which further increased the
length of the report. In addition to this, timeliness also resulted various complexities within the
report (Francis et al. 2015).
Due to this reason, from the views of the article, it can be inferred that the financial report
framework like IFRS fails to meet the qualitative characteristics of conceptual framework and it
is not meeting the requirements of the investors when it comes to making investment among
various companies (Tan 2015).

3ADAVANCE FINANCIAL ACCOUNTING
Question 2
It has been highlighted the Corporation Act needs to be amended in accordance social and
environmental responsibilities. However, it is also reflected that the activities of the
organizations are market driven which can be evaluated from the below three theories.
Public Interest Theory
The Public Interest Theory emphasizes more on the people than on the society. This
theory has been implemented for the benefit of public at large. This theory reflects that
operations need to be carried out for the benefit of the common people. It is the sole
responsibility of the organizations to manage the interests of the people and work for the benefits
of the public. In addition to this, if the public interest theory is implemented then, it will result in
different regulations of CSR activities carried out by the organizations (Tschopp and Huefner
2015). A regulatory body upholds the society’s interest more than the individual person’s interest
and the regulatory body should not safeguard the regulators by passing laws in their favor (Berry
2015).
Capture Theory
The Capture Theory states that the industry workers dictate the agencies of the
Government and these workers are driven by the motive of safeguarding the interests of the
industry. There exists a nexus between the government agencies and the industries and the
industrial workers go to the extreme to even jeopardize the equal distribution of resources in the
society by manipulating the distribution in such a manner that the societal needs are not fulfilled.
This theory infers that organizations within the same industry follow the same set of rules and