I am looking for preparers / users of financial statements especially accountants and auditors to help with my dissertation research by completing the questionnaire by following the link. Any help would be gratefully appreciated. Many thanks
https://goo.gl/forms/sHcFp68R8kuG8FK03
Hi Steven
I will give you a couple of examples that may help illustrate the point. The UK has long taken the view that a principles based approach to legislation would be preferable, whereas, in the US, they have long favoured the rule based approach to legislation. The principles based approach is relatively straightforward to implement, and to police. However, the rules based approach has required the writing of some very specific rules, which then need to be enforced. This has spawned a huge industry in top level accounting and law firms to find ways of being compliant with the rules, while pushing the envelope at the same time. This necessitates a continuing change in the rules to circumvent the continuous probing around the edges by the large corporates (since few of the smaller firms have the financial muscle to pay the high fees needed to engage the top accounting and law firms to explore these areas). This, in turn, leads to ever more rules accumulating year on year, leading to further complication for corporates and a massive build up of red tape.
In the UK, the principles based approach is also the approach taken with Corporate Governance, where the only requirement is to "Comply or Explain" through disclosure in the Annual Report. The first report on Corporate Governance was the Cadbury Report of 1992, and this very much set the standard for corporate behaviour in the boardroom. OPEC followed this in 1999 with their own recommendadtion for corporate behaviour. It was not until 2002, following a number of US corporate scandals, that the US brought out the Sarbanes-Oxley Act of 2002, and again, this takes the rules based approach.
Thus it is likely that taking a principles based approach to accounting standards is likely to be far more effective than a rules based approach.
I hope this helps.
Regards
Bob
Hi Bob,
Thank you for taking the time for that very in depth answer, it's a great help, much appreciated,
Regards,
Steve
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