A Public Accountability Model Of Accounting Regulation

Abstract

Accounting as a social choice function has an important impact on societal welfare. The significance of two important societal intermediate goals, efficiency and equity, is highlighted. It is argued that corporate reporting must give explicit consideration to both these criteria. The accountability framework is selected as the most appropriate societal viewpoint because of its broader perspective. The principle of public accountability is advocated and the need to report financial and non-financial information to stakeholders with a legitimate interest in the enterprise is advanced. The accountability paradigm views corporate reports as essential to provide feedback to stakeholder groups. Goals of efficiency and equity are explicitly incorporated. Regulation is advanced as an important instrument to promote such accountability. The model offered in this paper is derived from theories of accountability and regulation. An initial framework for operationalising the model is also given. The model calls for the provision of a greater amount of data than is now provided in corporate reports. As advocated in the proposed model, wider board representation by stakeholders (including producers) is likely to increase the acceptability of accounting rules. This structural change along with legal backing of accounting standards in all probability would increase the level of compliance. The combination of these elements will create a more equitable and efficient environment for the reporting of corporate information congruent with the precepts of public accountability.