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Critically examine and discuss the impact of lobbying on standard setting in accounting. Illustrate your discussion / your analy - Essay Example

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Critically examine and discuss the impact of lobbying on standard setting in accounting. Illustrate your discussion / your analy

These standards setting have a very significant role in the determination of the profitability of the different businesses that follow these accounting standards. The meaning of political influence has been interpreted in different places in various forms. However the most appropriate definition of influence is the intervention in the entire process of standard setting with a definite purpose. This kind of intervention is generally carried out by an economic agent (Zeff, 2002, pp. 43-54). The goal of the person is to make the make affect the outcome of the accounting process which would not be in tune with the missions of the accounting standards board’s like FASB or IASB. The main motive behind the entire process is to increase the wealth of the entity or to inflate the results or the financial performance of the business. The influence of political forces is not however limited to lobbying but is extended to other forms of power influence (Ramanna, 2008, pp. 253-281). This essay makes an attempt to analyse the theoretical framework behind the entire situation and in the later half justify the theories in light of the present day example. Theoretical Framework of Political Influence As stated in the introductory section of the essay, the wealth maximisation motives are entailed in the concept of purposeful intervention of the political forces. Thus the politics would have an adverse effect whereby the people who would be involved in the standard setting process would move away from the ideal way to achieve the goals. In other words, the influence of political forces would defy the mission that is set by the accounting standards Boards. For example the mission of FASB is to carry out the accounting procedure as per the conventional accounting norms. Along with that the FASB aims at making the entire process a transparent one. The managers of an organisation should not be provided with such flexibility that would allow them to move away from the desired goals of the FASB. In the United States for example a lot of intervention on part of the government is notice which may alter the ways in which the accounting process would be carried out in the various organisations across the country (Day, 1999, pp. 293-319). According to the various scholars who have carried out their research on this topic state the fact that the firms and the business managers generally take part in the lobbying process along with the government mainly because of the fact that they want the profits of their companies to be maximised. There are several avenues through which the managers undertake this kind of operations (Ball, 2009, pp. 277-323). The accounting firms are also active participants in the process of lobbying. Their role is in the manipulation of the reporting standards. This would include the specification of the various areas of accounting that have remained ambiguous till date and therefore has provided the reason for discrepancy in the financial reporting of the various companies. These firms work on behalf of their clients. It is most likely that the accounting and audit firms would not look into the interest of the respective clients. Hence whether the accounting firms would work in favour of the regulatory bodies is subject to discussion. There may be numerous angles for this. First of all the accounting fi ...Show more

Summary

Impact of lobbying on standard setting in accounting Contents Contents 2 Introduction 3 Theoretical Framework of Political Influence 3 Models of Standards setting 5 Empirical Evidence of the process of Lobbying 6 Criticism of the lobbying process 7 Conclusion 8 References 9 Bibliography 11 Introduction The influence of politics on the process of accounting has been a widely debated topic of discussion…
Author : hartmannderon
Critically examine and discuss the impact of lobbying on standard setting in accounting. Illustrate your discussion / your analy essay example
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