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Theoretical concepts of accounting - Essay Example

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Theoretical concepts of accounting

Proponents of free market approach have also supported a wait and see approach in relation to economic and financial changes taking place all over the world. In fact, the free market proponents reject the idea of intervention by governments for the sake of adjusting the distracted economy, and have based their arguments on the claim that demand and supply forces interact to ultimately bring stability in the distracted economic conditions (Deegan and Unerman; Rankin, Stanton and McGowan). However, malpractices of those charged with the governance and misuse of authority often overrun the expected balances to be attained in a free market model through demand and supply interaction (Deegan and Unerman; Rankin, Stanton and McGowan). One of the most relevant and quotable example in this regard can be of the Enron Scandal, which obviously had nothing to do with the free market model and demand and supply forces, but government intervention to safeguard the interests of general public through Sarbanes Oxley Act (SOX) was deemed appropriate (Deegan and Unerman; Rankin, Stanton and McGowan)....
, under free market approach, shall be opted to enhance the role of market forces and when needed, government intervention, whether in the form of accounting regulations or other regulatory frameworks shall be introduced to ensure that no deviation from the objective of benefiting society and corporate entities takes place (Deegan and Unerman; Rankin, Stanton and McGowan). Certainly, after the recent experiences of financial crisis and the increasing debate regarding the lack of ethical practices towards corporate governance and corporate social responsibility, the need to bring regulatory measures have been felt as never before (Deegan and Unerman; Rankin, Stanton and McGowan). Before going into the details of differences between the assumptions underlying the capital market research and behavioural research, it is pertinent to understand what capital market research and behavioural research implies (Deegan and Unerman; Rankin, Stanton and McGowan). The capital market research evaluates the overall impact of financial reporting on investors only; whereas behavioural research takes into consideration the responses towards financial reporting by separate individuals, which is reflected by the decisions made by different users of financial statements. The assumptions for each of the research type are based on the nature of these researches (Deegan and Unerman; Rankin, Stanton and McGowan). As for instance, under capital market research it is assumed that investors are the most important stakeholders who take into consideration the financial reporting by business entities to base their decisions upon them. On the other hand, the assumptions used under behavioural research are entirely contrasting to the capital market research, as it is assumed that every stakeholder, ...Show more


This report presents a review and discussion related to the different theoretical concepts of accounting.The areas discussed in the report include arguments related to the free market perspective with respect to the regulation of accounting…
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Theoretical concepts of accounting essay example
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