The Movie 'Inside Job' : Accounting in Context - Essay Example

? ACCOUNTING IN CONTEXT by Inside Job To begin with the movie Inside Job is one that has been well written and produced. The major reason that leads to this conclusion is the fact that there was enough background research that was done before the production of the movie. This research ensured that the content of the documentary was insightful, thought-out and succinct and this could be discerned from the presentation of the ideas about the crisis. The second reason is that unlike most other documentaries it did not simply focus on one specific aspect of the crisis, choosing to explore the world financial crisis from a broad point of view that gave credence to the actual content matter explained in the documentary. The presentation of the idea was also done in a way that made it easy to understand and follow. This is because the presentation of the issue allowed those who may not have been well versed with the financial crisis or financial matters gain a deeper understanding of the subject. My own personal opinion is that the documentary presented the viewer with a better understanding of the crisis. The focus on interviewing some of those who may be considered to have been at the epicenter of the crisis accords a great amount of credence to the ideas and theories proposed by the documentary. There is also the fact that the presentation is one that builds up on various points of concern as far as the crisis is concerned. Giving the viewer time to actually visualize how the crisis unfolded and how it affected everybody. This includes the domino effect that began on Wall Street and later spread to other parts of the world. Conceptual mind map In looking at the movie we can basically and broadly classify the players into three large groups, this is instead of looking at the individuals themselves. The idea behind this is because most of the players that have been discussed in the movie have been analyzed in accordance to their roles (read job descriptions) before, during and at the time of the crisis. The three major distinctions in this case will be the regulators, the financial players and the citizens. The citizens here refer to large percentage of the population that may or may not have made bets during the unfolding of events but were still greatly affected by it. The regulators To begin with are the regulators. Their role began with that of Greenspan in the deregulation of the markets. This deregulation was meant to make the markets perform under less strict governmental control. This was to allow for the growth of the industry and also to increase the number of citizens who would get served by the banks. Using the positive accounting theory the regulators main point was to reduce the political costs that are associated in the running of the financial markets (Bruns & Kaplan 1987 75). This would ensure that these companies reported numbers that would match as best as would be their true financial positions. This is by limiting the consideration that was given to the political costs associated with the running of financial companies. Financial players The financial players on the other hand later choose to change the accounting principles on the bonus plan hypothesis that is proposed by positive accounting theory (Bruns & Kaplan 1987 75). This is from the fact that at the turn of the century more and more banks choose to utilize bonuses as a way to pay their employee. This increased the incentive of the employees to actually produce results whether these results were short term or long term. This may have promoted the adoption of mark-to-market accounting that tends to improve the employee’s compensation in an environment where prices of assets are rising. Bank’s interest This may not be in the banks best interest as in the creation of these goals and the determination of the overall sustainability will rest with the financial institutions. This leads to the creation of an environment where they can at one point or the other change the system and promote their own needs. The definition of what is sustainable and how long does one need to determine sustainability is still vague. This gives the heads of the different institutions the leeway to determine the length of time. They will then adopt the accounting principles that will work to fit within these newly defined goals. The end result would be the creation of systems and accounting practices that favor their end compensation. Creating a similar situation as the one that was experienced during the world financial crisis. Educational considerations The institution is being funded by three main sources. The first one is the government. The institution is a public education institution and thereby the main source of funding steams from the governmental award that is in the education budget. The basic expectation of the government is that the institution is able to provide the student with the prerequisite tools to apply in the trade of the student’s choice, in this case in accounting. The next source of funding is by the students, who fund the institution through the fees that they pay the school that is meant to cater for their education. The student’s expectation is in line with that of the government. This is in that they wish to learn all that pertains to their field of choice. The other sources of funding may be classed under miscellaneous funding. These are mainly funds that are donated to the institution by various institutions, affiliates, alumni, grants among other monies. Under this category is where you may find funding that is from the different accounting and accrediting agencies. These other monies may be directed to specific activities within the institution that may or may not be related to the financing body’s activities. The main aim of accrediting agencies basically is to ensure that an accounting student learns the application of the given accounting methodology that these agencies call for. A good example is with the accreditation of the International Financial Reporting Standard (IFRS) body, the student is expected to learn and apply the various accounting principles that are outlined within this body’s books. This may vary from how other organizations call for the application of accounting principles. The other function of these accrediting agencies is to ensure that those who are accredited are held to a certain standard of practice. This is in regards to ensuring that the correct accounting procedures as stipulated in their various guide books are adhered to. There is no direct relation between the different accrediting bodies such as IFAC and IASB to the way that accountants are being educated. They merely act to provide standards by which once the students enter into the professional world they are able to apply in their day to day work related activities. This they do by providing the necessary standardization that limits the difference in the application of accounting guidelines by the different companies. Their aim may not be explained by the positive accounting theory. On the other hand it may be presented by the political capture theory by looking at the history of regulation. Political capture theory puts forward the idea that regulation agencies have a life cycle which is at one point affected by the economic interests of those they are regulating (Teubner 1987 30). In this case the capture that has occurred has majorly moved regulation from being under strictly governmental control to being controlled by ‘private’ institutions. These accounting regulating institutions, to an extent, play to the economic interests of the different large corporations that they are serving. This is by changing the regulations to suit the different company activities. Reference list Bruns, W. J., & Kaplan, R. S. (1987). Accounting & management: field study perspectives. Boston, Mass, Harvard Business School Press. Teubner, G. (1987). Juridification of social spheres: a comparative analysis in the areas of labor, corporate, antitrust, and social welfare law. Berlin, De Gruyter. Read More