Reliant Accounting Culture - Dissertation Example

? Is Accounting Culture Reliant Introduction Violet (1983) s that, culture in reality, is an evolved manner and is the outcome of man's actions.Winthrop (1991) says "that culture plays a significant role in every one's life and forms the character attributes and features of the human being." Accounting is subjective to culture and the desire of accord in accounting practices between countries is as accounting is not technical but comparatively cultural (Fechner and Kilgore 1994). The traditions of a country influence the option of its accounting techniques and the penetration of its different accounting evolutions (Belkaoui and Picur, 1991). In contrast, countries have distinguished their own accounting criterion that has tended to mirror their own precise environments (Evan and Taylor, 1982). According to Hopwood (1991) According to Hopwood (1991) “accounting can be conceived as a technical development formed by the cultures, the socio-historical situations and the institutional forms of the definite societies from which it issues.” Perera (1989, p.42-43) indicates that culture influences accounting pattern as it is a human action and only not a physical process. According to him culture as such is a commanding environmental attribute which impacts the accounting arrangement of a country. Accounting is a socio-technical activity and demands wherewithal from both human being and machine with an interface between human and machine. Although the technological aspect implicated in reporting is little reliant on culture, the human aspect is more reliant and as the two acts jointly, accounting can not be free of culture. This paper probes the kinship between culture and reporting and makes a study as to whether accounting is dependent on a country’s culture. Problem Statement This research will help me to discover a key for the following problem statement: Does culture have any influence on reporting or the other way round is there any impact of culture on accounting? Research Questions The following queries will be answered with this research work: 1. Is there any authority of culture in a firm’s accounting policies? 2. Does culture influence the judgment or even the decision involved in the accounting procedures of a firm? 3. Is accounting culture reliant? Literature Review Belkaoui (1995, p.3) states that: “Culture in its real meaning influences the judgment or decision procedure involved in accounting. Culture, by its constituents, factors and proportions, prescribes the organisational construction acquiring the micro-organisational conduct and the psychoanalysis operation of individuals, in a manner which finally affects their opinion or assessment course when they are confronted with an accounting or auditing development.” Since accounting is culture dependent, it is essential to comprehend which vistas of culture determine accounting pattern and how it is affected. Doupnik and Salter (1995) suggest that the accord of how culture affects cross-national accounting variety can contribute towards the attempts made to reduce that diversity and increase comparison of accounting info collectively. Perera (1989, p.43) indicated 2 linked modes to study the ethnical squeezes on accounting patterns. The 1st implies fixing some precise societal measures or ethnic elements probably to link straightaway with reporting pattern. The 2nd is to authenticate whatsoever connection between social measures and exact report exercises. By surveying Hofstede and Gray’s (1988) works, Perera (1989) extended an academic model for probing the influence of civilization on method of accounting. He debated that the method of accounting patterns and arrangements of diverse nations are determined by their ethnical measures thus regulating their method of accounting patterns. He submitted that the decisions of former works disclose a universal variety of reporting wants and exercises that are predominately understandable with relation to the internal ethnical deviations. He in addition indicated that “any exercise to analyse the cultural influence on accounting should identify a set of specific societal values or cultural factors which are likely to be directly associated with accounting practices” (p.43). The Moslem method of accounting uses a prescriptive-analytical method. Gambling and Karim (1991), suggest that under the Moslem accounting assumption, the prescriptive analytical method is suggested. They state that “Normative-deductive hypotheses are object oriented and so are value laden since they begin from a value judgment." Gray et al, (1987), submits that normative-deductive principles look for solutions to queries like: will the accounting practice meet the objective? Baydoun and Willett (1994) consent with Gambling and Karim when they suggest that, “Islamic accounting theory has the nature of prescription about how things should be done to satisfy Islamic objectives rather than description about how things are done in practice (p2)”. Cultural range in the Malaysian accounting sub-culture depicts differences in the accounting motivational values. These differences in the motivational measures are connected with deviations in the apprehensions and opinions in financial accounting. As a result, a cross-cultural study in accounting that equalizes cultures on the basis of nationality may abandon the consequence of intra-country cultural variations (Doupnik & Tsakumis, 2004). Gray (1988) put forward four propositions that reflect associations between Hofstede's ethnical properties and his accounting value properties. Gray concludes that joint cultural measures in a country guide collective accounting values thus helping in shaping the quality of a nation's accounting system (Doupnik & Tsakumis, 2004). Gray never tested the hypothesis or carried any experimental tests to stick to his model; rather he left this for other accountants to research and prove the validity of his hypothesis. Gray (1988) made out four accounting value symmetries that can be enforced to verify a country's accounting (sub) culture: ‘uniformness against conformity; ‘expertise against hope.’ The primary 2 proportionalities connect to power and social control of accounting pattern at a national level, and the second two connects to, the measure and revelation of accounting info at a country level. Confidentiality against clearness is a substantial accounting measure factor that themes as from organization and the accountant due to the assurance of the board on the quality and quantity of report revealed to third parties. Confidentiality, in business relationships is also a fundamental accounting outlook. Privacy is also slightly and intimately connected to conservatism (Doupnik & Tsakumis, 2004). Both values conservatism and secrecy entail a careful advance to business fiscal accounting in common. On the other hand secrecy pertains to Societal Values, Culture, and accounting of the admission proportion, whereas conservatism links to the measuring attribute. The level of privateness is different throughout nations. Lesser degrees of revelation mean secret reserves and exist in Japan and transcontinental European states like Switzerland, Germany and France. Conservatism against Optimism is a very important accounting measuring feature. The underlying principle is that ‘conservatism’ is maybe “the most early and possibly the most all-encompassing principle of accounting valuation” (Sterling, 1967). Cautiousness in asset evaluating and the accounting of gains is conceived to be an elemental approach of controllers throughout the globe. In addition, conservatism alters based on a country. The magnitude of change is from a robustly traditional advance similar to Japan and a few transcontinental European states like France, Switzerland, and Germany to a less significant conservative, venturesome approach of accountants in the UK and the US, and, to some level in the Netherlands. This conservatism has also shaped on the culture of accounting patterns of these nations. Such deviations appear to be tolerant by the practical growth of capital markets, the contradictory drives of consumer wellbeing, and the pressure of tax policies on accounting exercise in the nations referred (Sterling, 1967). Expertise against Statutory Control is a principal argument in many Western countries, and connects to the effect as to whether the accounting occupation should be made subject to world culture and Accounting guideline or constitutional rule or should be legalized to hold authority over accounting principles. For instance the UK holds the design of establishing “a true and fair view” of a company’s fiscal situation and the result reckons a lot on the verdict of the comptroller as an independent expert. But France and Germany have a conventional arrangement when it comes to the professional comptroller’s part. They have been fundamentally pertained with the performance of moderately constricted and comprehensive effectual prerequisites (Sterling, 1967). Consistency against Tractability is a substantial accounting value proportion as characteristics about homogeny, stability, or comparison are basic features of accounting rationales all over the world. This measure can be understood differently ranging from a very rigid inter-company and inter-temporal standardization, to constancy in companies. Countries like France and Spain, for example have a consistent method of accounting arrangement and the burden of duty regulations for evaluating intentions have been in process. In disparity the UK and the US have established other apprehension with inter-temporal steadiness and a slight amount of inter-company comparison due to an apparent need for plasticity (Sterling, 1967). Wallace and Gernon (1991) have accomplished in their conclusion of cross- national accounting literature over the last 25 years, in spite of the truth that a good deal of research and hierarchy building has occurred. Wallace and Gernon (1991) state that "a complete theory, which explicates existent cross-national variations in the arrangement and exercise of financial accounting even now, does not exist." As all practices linked to accounts is a human action it will without doubt be shammed by the understanding and judgments in the practical use of accounting conceptions and rationales. Research Pattern A proportional and cross-sectional pattern will be utilized to facilitate collection and comparing of data. Numeric data linked to a few variables to perceive practices which can optimistically answer the investigation queries will be collected. Data Compilation A series of mechanics for conducting an exploratory study has been suggested which will be utilized for the research work. Derivative Data Written matters like text, periodicals, papers and studies will be utilized to describe the conditions of the projected study. Other modes of study will be conducted to analyze and determine the resemblance if any and to investigate further facts. Interviews Interviews will deepen the understanding of the different accounting principles conformed to and the affect of culture on them. The investigator would carry on 5-6 partially-integrated interviews on a matched footing. This will facilitate research worker to develop queries to some fundamental issues, with the elasticity to extend the projects model. Every interview will take 30 to 45 minutes and tape-recorded with the conformity of the contender making it helpful for research worker and his team to take notes pertaining to body lingo and reflections. A disadvantage of this technique is that it could “make respondents anxious and less likely to reveal confidential information” (Blaxter et al. 2001). Data Analysis Different methods of statistical ratio analysis will be applied and the effects will be manifested in the shape of a chart. Graphic portrayal of the statistically analysed information will also be presented. This will not at all go beyond the level specified in the example with two arguments for 3 variables to keep off from too high complications. Using these studies, the research team will demonstrate in dissimilar forms of graphs and tabulates detached according to the objects of the study, and will also compare where ever potential to indicate as to how to carry on with the research issues. Moreover, the study team would arrive at an equivalence of schemes in diverse market phases if suitable. Interviews will be analyzed by class and also within their setting. A combination of an inductive and analytic method will be utilized, and thus some proposal deduced. To attain a sensible measure of helpful data, the information will be condensed and cut down so that they can be exposed in matrix form. Statistical tools like linear graph, correlation is nowadays used to gauge financial performance of a company. These statistical means are not only complete in nature but also very precise to study about the company financial performance. References 1. Belkaoui, A. R. and Picur, R. D. “Cultural Determinism and the Perception of 2. Accounting Concepts”, The International Journal of Accounting, No. 26 (1991), 118-130. 3. Belkaoui, A.R. The cultural shaping of accounting, Quorum Books, Westport, 1995. 4. Doupnik, T. S., Tsakumis, G. T. “A Critical Review of the Tests of Gray’s Theory of Cultural Relevance and Suggestions for Future Research”, Journal of Accounting Literature, Vol. 23 (2004): 1-30. 5. Doupnik, T.S. & Salter, S.B. “External environment, culture, and accounting practice: A preliminary test of a general model of international accounting development”, The International Journal of Accounting, vol. 30 (1995):189-207. 6. Fechner, H. H. E. and Kilgore, A. “The Influence of Cultural Factors on Accounting Practice”, The International Journal of Accounting, No. 29 (1994), 265-277. 7. Gray, R., Owen, D. and K. Maunders. Corporate Social Reporting: Accounting and Accountability. Prentice-Hall International, UK, 1987. 8. Gray, S. J. “Towards a Theory of Cultural Influence on the Development of Accounting Systems Internationally.” Abacus (March, 1988.): 1–15. 9. Hofstede, G. Culture's consequences: International differences in work-related values. London: Sage Publications, 1980. 10. Hopwood. “The Future of Accounting Harmonization in the Community”. European Accounting, (1991): pp12-21. 11. Lorraine Blaxter et al, How to Research, Buckingham: Open University Press, 2010, pp.328, Baydoun, N. and R. Willett. Islamic Accounting Theory. Proceeding of AAANZ Annual Conference, Sydney, Australia: (1994). 12. Perera, M.H.B. “Towards a framework to analyse the impact of culture on Accounting”. The International Journal of Accounting, vol. 24 (1989): 42-56. 13. R. H, Winthrop. Dictionary of Concepts in Cultural Anthropology. USA: Green Wood Press, 1991. 14. Sterling, Robert R. “Conservatism: The Fundamental Principle of Valuation in Traditional Accounting.” Abacus (December) 1967: 109–132. 15. Tsui, J.S.L. “The impact of culture on the relationship between budgetary participation, management accounting systems, and managerial performance: An analysis of Chinese and western managers”, The International Journal of Accounting, vol. 36 (2001):125-146. 16. W. J. Violet. "The Development of International Accounting Standards: An Anthropological Perspective." The International Journal of Accounting Spring no. 1 (1983): 12. 17. Wallace, R. S. O., and H. Gernon. Frameworks for international comparative financial reporting. Journal of Accounting Literature 10 (1991): 209-264. Read More