Remuneration PolicyEssay Preview: Remuneration PolicyReport this essayThere is too much accounting regulation. In order to address this comment, this essay will focus on how theories of regulation apply to accounting practices and the necessity of accounting regulation.
First of all, according to Oxford Dictionaries, accounting means the process or work of keeping financial accounts. While regulation is a rule or directive made and maintained by an authority. (Oxford Dictionaries 2013) Since long ago the necessity of accounting regulation has been keep questioning. Efficient markets theory claim that accounting regulation is not necessary since the forces of supply and demand will help to maintain markets efficient by serving the society to the best and enhance the allocation of resources. Then, by applying this theory to the market of accounting information, the users will demand for accounting information and companies tend to supply such information, thats why the market is always instantaneously getting relevant information. Plus, the free-market forces can determine the right accounting data to be supplied and suitable accounting practice to be used. However, this theory is rather unrealistic, when the accounting information is treated as public product and it is available to everyone. Further on, free-rider problem such as certain people getting benefit from something that paid by other people will distorts the market. More problems coming up when users cannot decide on what they need and accountants not satisfy on procedures. All this causes inefficiency in accounting information market. At this point, government intervention is needed. Through regulating the procedure of accounting, they can help to resolve the outcomes and improve the market conditions. (Gaffikin 2005)
According to agency theory, the connection between owners and managers are known as principal-agent relationship. The manager as the agent will acts on behalf of the owner (principal) to achieve the principals goals. Atkinson and Feltham explain that agency theory considers mainly the stewardship demand for information. (Atkinson and Feltham 1982, 260) Accounting plays a vital role in providing useful information to interested parties for economic decisions making purpose. However, (Jensen and Meckling 1976, 305) argue that “agency problems deriving from conflicts of interest are general to virtually all cooperative activity among individuals, whether or not they occur in the hierarchical fashion suggested by the principal-agent analogy”. When there is self-interest issues, the information supplies by the agent might be inadequacies due to act of fraud and can lead to information asymmetries. Therefore, regulation in the form of accounting standards is needed to address the problem. Information asymmetry is frequently used to vindicate the need for accounting regulation. (Gaffikin 2005)
In addition, accounting regulation helps to identify the social, political and economic factors that related with the progress of accounting rules and also inspected the events that formed the different international regulatory frameworks. Under theories of regulation, public interest theory assumes that economic markets are imperfections and lack of well-functioning, which, if left uncorrected, may cause inequitable outcomes. Meanwhile market failure usually happens due to barriers to entry, information asymmetry, lack of competition or public-good products problem. These so-called market failures causing the price mechanism that regulates supply and demand broke down and then forcing government to take action. (Theories of Economic Regulation 2013) According to (Taylor and Turley 1986), “accounting regulation is necessary to ensure this market efficiency”. So, this theory suggested that government intervention in the accounting standard setting process is necessary when the markets are unable to regulate themselves. From this point of view, government intervention in marketplaces is essential, this is to ensure the public interest is protected and negative impacts are avoided. Thus, accounting regulation is unavoidable because market efficiency is bounded with it.
In meanwhile, regulatory capture theory explains that the vision of public interest theory is not achieved, is because, in the process of regulation those being regulated come to dominate the regulator. Plus, the individual regulatory agencies of government ignores public interest and just focus on private interests who actually required to be regulated as tactic of enhancing profits. Thus, under the capture view, the accounting standards needed to be backed by legislation in order to make accounting standards mandatory for corporates entities, as well as, designed the regulatory intervention in the accounting standard setting process equally with the public interest theory framework, so as to protect the
In summary, the capture view of public interest theory, based on the following principle in the accounting standard framework, takes into account the public interest, and in doing so is not limited to the economic interests (in a regulatory way), but the individual legislative interests and public interest, and thus requires not only private interest, but also a particular analysis. A case in point is the legal actions taken by the corporations involved in this scheme.
In short, with public interest the market must always remain, unless there is some new market that will benefit from the capture approach to management or, indeed, from any combination of the two, to some extent from market structure. We’ll see below some examples of this new approach to management. What do these types of actions mean, however, for the accounting method we use?
The Basics
When the accounting approach is the general idea of governance, the goal here is to reduce the need, of being held accountable for decisions taken, for the management of the business process for, for the business activities or of any third-party, and so on. The aim is not only to improve management efficiency to the satisfaction of all stakeholders, but, therefore, to improve the cost and quality of management decisions. The process of management is governed from those who live and work under the supervision of other managers, often by some other public body. In theory, a process can be set up in such a way that it is not possible for a management entity to be held criminally accountable only for the fact that they are using the accounting technique of accounting to make a gain or a lost profit, and those who use that mechanism to do so are called “disciplineally lazy managers”. In practice, the procedure of accounting is only applicable as the public interest argument. The public interest claims on behalf of the management of the business are not enough. Public interest claims must have an appropriate impact. What are the possible outcomes from such a system, in principle?
For example, perhaps the following scenarios are different, but as with accounting, they would be valid for other firms to look into, including both in relation to accounting regulations and management accountability. (The current case could not be better. In fact, we are not even discussing the issue. Here’s a typical example of an example of which the current public interest case could really be.) The following discussion will then focus purely on the implications of this method of accounting for general business practice.
A Public Interest Claim
In a Public Interest Claim, there is the possibility to collect a profit but only if the plaintiff’s company does not charge the management fee, and only if there is profit in the profits. Of course, we could then ask ourselves what this means for the individual companies whose services are protected and not only whether the company is liable for costs, damages or loss under such a claim. The result of this scenario is a similar public interest theory as this example