Conceptual Framework Projects - Case Study Example

"A number have questioned why, despite their apparent technical failure CF [conceptual framework] projects continue to be undertaken. A brief study of the countries and circumstances of CF projects suggested that the major rationale for undertaking CFs was not functional or technical, but was a strategic maneuver for providing legitimacy to standard-setting boards and the accounting profession during periods of competition or threatened government intervention." Introduction The determination of conceptual framework projects' success parameters is necessarily based on the fact that they depend on a set of prior defined variables. Since variables are subject to change over the total duration of the project it's possible that CF projects would still be continued without abatement despite their above average failure rate, in some instances almost amounting to 92%. Apart from the public versus private project distinction there is very little to differentiate between them. Current accounting and auditing practices are basically centered on the primary and immediate concerns of the practitioners, i.e. accountants and auditors presume the importance of rule-based accounting practices to be the ultimate aim so that failures can be disregarded as technical variances. In other words compliance with accounting and auditing rules is of primary and immediate concern to the practitioner. The significance of this outcome is essentially seen in the modern compliance-centric accounting environments where hierarchically organized structures exert an extraordinary amount of pressure on the average accountant/auditor to comply with norms that have very little if any to do with such broader and more important concepts like corporate governance, quality of accounting and auditing practices, audit judgment, auditor behavior, business forensics concerning auditing and the corporate pricing policy of audits. Thus the inevitable outcome is that CF projects fail and despite these failures they are being undertaken purely in conformance with standard setting behavioral tendencies of boards and other governing bodies. The Board should decide often whether a piece of data should be recognized in the financial statements, when such an item should be recognized, and at what amount it should be recognized. The Board has depended on the conceptual framework of other standards setters and analogous examples from practice or previous standards to make such decisions in the past. This technique of decision making tends to give rise to certain inconsistencies in financial reporting standards and could bring about too much dependence being placed on accounting concepts which were not developed for a governmental environment (Taylor, & Dezoort, 2003). Analysis Therefore, the project on recognition and measurement attributes is necessary to give the GASB with conceptual guidance as to when elements of financial statements should be reported in particular financial statements and at what amount. This will bring about developing recognition criteria and will be inclusive of a discussion of when elements of financial statements are recognized using different measurement focuses. For the GASB to make consistent financial reporting decisions, it is needed to have (1) definitions of the elements of financial statements, (2) a method of finding out when elements of financial statements should be realized in the financial statements, and (3) a method for determining which measurement attribute (for example, historical cost or fair value) is suitable for reporting the elements. The GASB in recent times issued a Concepts Statement on the definitions for the elements of financial statements, and a conceptual framework project on recognition and measurement attributes is needed to complete the conceptual basis for reporting items in traditional financial statements. I. Deficiencies in Financial reporting practices What messages are financial statements conceptually trying to put forward (That is, what is the story that the financial statements try to put forward, or what questions should be answered by reading various financial statements and financial statements prepared using various measurement focuses Such as for example, the statement of cash flows answers the question, "What happened to cash during the year" What is the relationship in the midst of aims of financial reporting (user needs), financial statements, measurement focuses, and measurement attributes at the conceptual level How does when an element is realized it impacts on the meaning that is to be expressed by a particular financial statement Norm-based accounting practices presuppose the existence of a rather obvious relationship between concepts. What is the basic recognition category needed to report an element in a financial statement What measurement quality(s) best gets across the message(s) proposed for financial statements What is the job of historical cost and fair value data in getting across these messages Can the same measurement factor be applied in all measurement focuses Should the application of fair value be different for the statement of net assets and the statement of activities In which way does fair value narrate to the cost of service model of the statement of activities Additional Current Financial Resources recognition input was done through long interviews with financial statement users who were assumed to be experts in the field. The questions concentrated on comparative financial statements made on the cash basis, on a conceptual payment cycle basis, on the present model of current financial resources, and on the economic resources basis. The questions concentrated on the informational value of including or not including different types of balances, such as pre-paids, deferred revenues, long-term receivables, and so forth, in a conceptually based current financial resources model. Utilizing the outcome of this research, the staff is following up with various preparer and auditor groups before bringing the feedback to the Board. What is the scope for the construction of a theoretical and conceptual contingency model on accounting and auditing practices in compliance centric conventional accounting and auditing environments What is the extent of prevalence of accounting and auditing practices, if any, in the compliance-centric rule based organizational environments right now What is the scope of potential adoption and acceptance of auditing and accounting practices in the future against the backdrop of an evolving conflict between proponents and contradictors How far the potential auditing and accounting organizational environments are able to adjust to the changing circumstances of the new auditing and accounting practices Finally why and how business organizations should adopt new accounting and auditing methods to obviate the shortcomings in the existing practices especially project failure prone strategic accounting and auditing initiatives that lack supervisory oversight (Hines, 1989). II. Corporate Auditing and Accounting environment This research paper would establish positive and negative correlations between and among the theoretical and conceptual parameters of a contingency model on accounting and auditing practices. To identify and determine the current prevalence rate of auditing and accounting practices that converge on a probable reference framework of analysis. To establish positive and negative correlations and regressions between and among endogenous and exogenous variables of accounting and auditing practices and those of conventional accounting and auditing practicesMagda Abou-Seada (Author)> Visit Amazon's Magda Abou-Seada PageFind all the books, read about the author, and moreSee search results for this authorAre you an author Learn about Author Central . Finally to build a theoretical and conceptual framework for future analytical reference on the convergence parameters of a new auditing and accounting environment free of conventional constraints. Corporate auditing and accounting environments have been changing fast in their regulatory and functional spheres. As a result the strategic accounting and auditing practices also have undergone some rapid changes, including in the conventional accounting and auditing practices. Thus the new accounting and auditing practices have emerged from the transient organizational culture of work practices (David, 1986). This research effort will focus on the correlations and regressions between and among these old and new variables directly and indirectly related to the theoretical and conceptual evolutionary model. It will also focus on the related outcomes such as the degree of convergence between and among the different factors affecting such auditing and accounting environments. Finally the research effort would identify and address the primacy and the immediacy of accounting and auditing practices in the context of an evolving paradigmatic dichotomy between the conventional practice and the modern pressures for change. Despite the technical failure of CF projects, accountants continued to be undertaken those projects in order to achieve significant professionalization of their profession. Auditing can be defined as an assessment of an individual, organization, system, process, enterprise, project or product or an examination of records or financial accounts to determine accuracy and compliance. However modern accounting and auditing corporate environments demand not simple compliance with rules and accuracy of figures but also a greater degree of auditors' involvement in determining the overall outcomes and preventing negative management. In other words they are not just number jugglers but active players in the process of detecting errors in advance. Thus this whole process can be regarded as an internal mechanism that controls and assesses the validity and the reliability of the presented financial records. The recent international developments and also the current economic recession have forced businesses to adopt far reaching changes that the need of a proper accounting and auditing standards at least to survive in the business environment. The World Bank's Accounting and Auditing Report on the Observance of Standards and Codes (ROSC) concerning accounting and auditing assessments is the most comprehensive international compendium of standards to date though such other international bodies as International Accounting Standards Board (IASB) and International Accounting Standards Council (IASC) have been in existence for a number of years. ROSC compliance agreements have exerted some substantial pressure on the auditors internationally to comply with not only standards but also to adopt corporate governance principles into accounting and auditing practices in ongoing CF projects (Macve, 1981). The existing literature does not, however, adequately deal with the recent spate of accounting and auditing scandals that have plagued Europe and North America. Therefore it's essential to focus on far more revolutionary accounting and auditing standards to bring about a real change in the current practices at the organizational level. Thus accounting and auditing practices need to be developed by using both national and international standards such those in the International Financial Reporting Standards (IFRS) and ROSC. III. Accounting practices and CF projects failure The existence of Certified Accountants (CAs) ensures that accountants need not be bothered about detection of frauds within the company. But if managers or stakeholders were more concerned about the financial frauds and discrepancies they would need more than accountants i.e. certified forensic accountants (CrFAs) who specialize in forensic accounting. Forensic accounting practices refer to a special practice area of accountancy that focuses on such things as outcomes from actual or anticipated disputes. Forensic accounting can be considered as 'a legally accurate and acceptable accounting' technique. Forensic accountants engaged in forensic accounting can be called forensic or investigative auditors. Some forensic accountants sometimes function as Certified Fraud Examiners (CFE), Certified Public Accountants (CPA), or Chartered Accountants (CA). Forensic accountants' functions include understanding the business information; financial reporting systems and gathering evidence of probable inaccuracies and fraud; adopting investigative techniques and unconventional accounting practices; and sticking to auditing standards and procedures. And also they are acting as advisers to audit committees, assisting in investment analyst research to perform their as risk reduction practices. Rather than find the financial frauds/discrepancies, they will find out who, what, where, why, when and how from the accounting financial investigation (Peasnell, 1982). Basically forensic accounting procedure includes the identification, interpretation and presentation based on certain economic transactions and the forecast future conditions based on past economic transactions. IV. Strategic Imperatives in CF Accounting Environment According to most authors, a body of accounting knowledge is the decisive characteristics of accounting professions and it is the existence of this knowledge which legitimizes claims to expertise, professional powers, autonomy, monopoly over work, commitment to a code of ethics and control over work. Thus the body of accounting knowledge around which the financial accounting professionalization project has taken place and it is shown that professionalization of accountants has been taken place with a variety of individual qualities and characteristics, such as honesty, independence and respectability, though skills not specific to accountants, such as penmanship, arithmetic, work and knowledge, which at the time were contestable as being the domain of the legal profession. The combination of conventional accounting with financial and economic ideas and issues is evident in the conceptual framework (CF) project where there is reference to economic benefits and costs in making economic decisions for the allocation of resources. This results in a misconception of the function of these distinct types of information. An unraveling of particular issues will require a Statement of Accounting Concepts (SAC) of the CF. It is suggested that not unlike other professions, the accounting knowledge of the accounting profession are problematic and so in order to reproduce and advance the accounting profession, members must counteract threats to its legitimacy stemming from its underlying knowledge foundations. It is also suggested that the frequently repeated search for a CF projects represents a means of counteracting this threat to the social legitimacy of the accounting profession, and that CF projects are used as a political resource in the professionalization struggle during times of possible intervention by the state and at times of competition from other including accounting groups (Robert, 1982). The paper would focus on the probable conclusions related to the presently compliance-based environments of auditing and accountings and then make an attempt to delineate the probable parameters of a more unconventional contingency model of accounting and auditing to identify the existing shortcomings of the current practices and rectify them accordingly. Thus it is just a tentative one right now and it would include such possibilities of adopting good accounting and auditing practices at the organizational level in accordance with some international standards. The theoretical and conceptual framework or model of analysis is developed from this CF project perspectives being adopted at accountant professions. In order to understand the real implications of such CF project efforts, the system-wide impact arising from governments' regulatory mechanisms too must be superimposed on the model. Conclusion The frequency of CF project failures has not been paid attention adequately by the professional accountant because it's imperative for the professional to hold office as against bring far reaching changes to the office when changes are more likely to threaten his or her continuous professional practice. Thus CF projects in the eyes of the professional accountant are a valid paradigm because the positive correlations and regressions can be established in advance to show stakeholders of these projects including governments that they are going to be a success. Effectively variances and co-variances are ignored in order to focus attention on a purported stream of benefits over a period of time. Above all the professional accountability of the accountant remains shrouded in mystery or rather mysterious terms like forensic accounting and auditing concepts. CF projects acquire a set of hypothetical value propositions for their perpetuation at the expense of tight budgets being expanded to accommodate what could be termed as normative professional ethics. The rationale for such accommodation is based on a symbiotic relationship between contingency and preservation of interests. Thus government intervention is effectively precluded by professional accountants and social responsibility for failure becomes more or less a conceptual liability that carries little weight if at all. Concept failures aren't strictly defined and they tend to be treated as collateral damage that would have conventional remedies like insurance to cushion against failure but no proper measures to account for social costs. Then the question arises why such CF projects are being promoted despite the failures. The answer again is many-sided including such far influential standard setting efforts of professional bodies such as those of accountants. What is so obvious but often ignored is the fact that professionalism isn't an a priori probability related concept but an absolute concept of success. REFERENCES 1. David, S 1986, Making Accounting Policy: the Quest for Credibility in Financial Reporting, Oxford University Press, New York. 2. Hines, RD 1989, 'Financial Accounting Knowledge, Conceptual Framework Projects and the Social Construction of the Accounting Profession', Accounting, Auditing and Accountability Journal, vol.2, no.2, pp.72-92. 3. Macve, R 1981, A conceptual framework for financial accounting and reporting: The possibilities for an agreed structure, ICAEW, London. 4. Peasnell, KV1982, ' The function of a conceptual framework for corporate financial Reporting,' Accounting and Business Research, pp.243-256. 5. Robert, RS 1982,'The Conceptual Framework: an Assessment,' Journal of Accountancy, pp.103-108. 6. Taylor, MH & Dezoort, FT 2003, 'A Proposed Framework Emphasizing Auditor Reliability over Auditor Independence', Journal article by Accounting Horizons, vol.17, Read More