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Financial Accounting Theories - Essay Example

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The perspective taken by those who follow the Political Economy Theory is one which questions the use and value of such disclosures in society. The Political Economy has been defined by Cunningham (2006), as "the social, political and economic framework within which human life takes place." (1) Political Economy Theory, therefore, focuses on the idea that social, economic and political issues all have a bearing on the other and one issue cannot be successfully evaluated with the incorporation of its effects on the other two issues…
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Financial Accounting Theories
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Financial Accounting Theories

..that are taken for granted in current accounting research".
Political Economy Theory (PET) is divisable into two broad streams of thinking. One being the Classical Political Economy Theory, the other, Bourgeois Political Economy Theory. For the purpose of this writing the Classical Approach will be the main focus. Classical Political Economy Theory follows the basic ideas of P.E.T, but goes further in its bid to highlight and scrutinise structural conflicts and inadequacies within society. The followers of the Classical approach are of the strong opinion that within society even in these modern and seemingly liberal times, a class divide is still very apparent. This theory is based around the works of such philosophers as Karl Marx and therefore opposes the very basis of the Capitalist system. In the writing of Howieson (2006) it is stated that "a Classical Political Economy places structural conflict, inequality and the role of the state at the heart of the analysis".
The Critical Perspective is a branch of the Classical Political Economy Theory. ...
Critical theorists do not simply question which methods of accounting should be used, instead they investigate the role accounting as an entity takes within society and cast doubt upon the very underpinnings of the profession. In order to understand the critical theorist's view of unregulated corporate disclosures, the bigger picture of their theory must be investigated. The basis for most of the Critical theorists judgements is based upon the idea that "most rights, opportunities and associated power resides in a small (but perhaps well defined) elite," Deegan (2000). They believe that power is not spread evenly throughout society and is not something one can easily acquire but is instead controlled by this so-called "elite". Included in these elite are those who are already in power and who use this power to remain in such a position while also keeping those without power in a position where they will not be able to achieve power.
The Critical view is that these elite will inevitably wish for their own good to maintain the status quo, which is already in existence and is to their benefit. If these powerful individuals were to work towards giving more opportunities to those without power it would decrease their own power level, and, in effect, their social standing. The only people who would benefit from the radical reforms, which would be entailed in the re-distribution of power throughout the various social levels, are those who do not have the ability to bring about those changes. The elite comprises of, the state, those who hold a large capital share in the economy, accountants, accounting researchers, large corporations etc. These groups of powerful people may seem very separate, but, are in fact interlinked in their control of power ... Read More
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