Advanced Accounting Theory and Practice - Essay Example

Running Head: ADVANCED ACCOUNTING THEORY AND PRACTICE ADVANCED ACCOUNTING THEORY AND PRACTICE By University name City, State Date Advanced Accounting Theory and Practice Introduction Accounting theories can determine the core purposes of corporate reporting. Researcher Carol Adams proves this ability by researching current accounting theories and the roles they play in corporate social and environmental responsibility. In her 2002 article, Adams explains how a majority of accounting theories about social responsibility do not reference internal corporate factors. As a result, Adams deduces that all corporate reporting has a core motive that propagates in nearly all industries. The following paper discusses and analyzes Adams’ conclusions under the scope of several accounting theories. I agree with Adams that the key motivation for corporate social and environmental reporting is to enhance corporate image and credibility with stakeholders. In her article, Adams offers an incomplete reason for what truly affects voluntary corporate social and environmental responsibility reporting. By focusing on the procedure of reporting and corporate outlooks, Adams attempts to find out what influences voluntary corporate reporting. However, similar to most empirical works, the precise reasons or explanations for the studied matter is open to reader interpretation (Harrison, Newholm, & Shaw, 2005, p. 213). According to Adams, variables under the internal reporting procedure comprises of organization chairperson, corporate social responsibility commission, and corporate social reporting (Adams, 2002, p. 224). These factors correspond to the basics of the accounting theory of usefulness. The external factors of corporate social responsibility that Adams uses could likely affect reporting, its level, and value. The significance of every variable differs across organizations and Adams makes this observation in her article. Two aspects that can potentially affect overall trends in corporate reporting are the degree of compulsory disclosure requirements and adjustments in stakeholder outlooks and principles (Thorne, Mahoney, and Manetti, 2014, p. 699). Considering the apparent threat to a company’s legitimacy makes Adams’ assertion about the main motivation of corporate reporting viable (Adams, 2002, p. 244). The article repeatedly calls this threat an organization’s permission to operate. Adams proves that this factor does in fact influence corporate reporting although frequently on a temporary basis. Adams is right about many accounting theories involving SEA and not giving any references to internal corporate factors. The process that Adams explains as which organizations report and the “attitudes of the key players” is evident in European companies, particularly Germany and the UK (Adams, 2002, p. 236). While Adams extensively studies external variables like size and industry, she focuses on internal variables that have a potential to affect reporting of corporate social and environmental responsibility information. This information largely entailed administration structures and processes, shareholder participation, organization chairperson, and accountant contribution. Adams deduced that accountants seldom contribute to data collection for reports generated, especially for non-monetary information. This conclusion proves that organizations that record social and environmental responsibility and explain social and ecological effects might enjoy special benefits. Many studies have proven that the accounting theory of usefulness demonstrates Adams’ assertion about corporate responsibility. Revealing information on social and environmental problems allows organizations to diminish the risk of influential consumer boycotts (Harrison et al., 2005, p. 213). Adams proves that a significant gap between SER and its involvement with the settings of internal organizations exists in literature. Organizations began corporate social responsibility reporting for ecological purposes and later grew alongside the budding interest in sustainability matters. In the process, reporting organizations tended to ignore corporate administration matters. Adams theory supports this observation by former literature about corporate reporting. The reporting exercise of CSR information began in ecological reporting. Another accounting theory that supports Adams’ assertion is the legitimacy hypothesis. While many research works offer proof that supports the legitimacy hypothesis, it is hard to differentiate it from the accountability theory of accounting in practice. Without a real legitimacy crisis, it becomes hard to differentiate voluntary reporting, which is practical in an effort to hinder an imminent legitimacy disaster, and reporting for the aim of accountability. From Adams’ perspective, a legitimacy crisis may represent an organization’s image and credibility with shareholders (Adams, 2002, p. 244). The organization can further validate and justify this perspective by offering data about the vulnerability of the company’s financial status in relation to legitimate functionality. As a result, preventing a legitimate crisis becomes paramount for an organization when it comes to CSR reporting. Adams does not assume a reflective approach while analyzing CSR reporting in organizations while many former studies on the same matter assume this approach (Adams, 2002, p. 244). A reflective approach normally just tackles responsive legitimacy where organizations have dealt with legitimacy disasters in the past. This approach does not think of the respective organizations’ current efforts to report their CSR performance when there is no disaster. To explore the fundamental motivations for CSR reporting more thoroughly, Adams found it is essential to involve the organizations. An involvement-oriented research design reflects reviews and interviews that provide valuable understandings into the internal constructs and perspectives of reporters (Mahoney, Thorne, Cecil, and LaGore, 2013, p. 355). Adams employs this research design and determines the true motive of organizations’ CSR reporting. From the perspective of the accounting theory of accountability, Adams merely centers on the presence and lack of corporate social development by looking into the details of reporting and its planning. This way, the author is able to show how former literature just touched on the internal procedures of corporate, moral, social, and ecological reporting. Reporting systems is superficially applicable for showing the best practices currently. Concepts reflected in Adams’ article have to do with internal frameworks and the motivating influence for disclosures (Adams, 2002, p. 245). The utilization of other organizations’ reporting and the perceived advantages and expenses of reporting becomes important sources for motivation. This is also why Adams discovers a clear division between ecological and PR units, including their corresponding focus within reporting. There is evidence that influential forces have various influences over the reporting as Adams observes in her article through the varying devotion between reporters and non-reporters. A comparison between Adams’ findings and Chris van Staden’s observations from his 2012 study of CSR reporting on New Zealand companies vouches for the motivation of maintaining corporate images and credibility (Staden, 2012, p. 1). A relative analysis of both works reveals that organizations choose to report on issues they alone consider most important. Organizations barely consider the views of the public or governmental and nongovernmental institutions that are usually fond of environmental matters. Clearly, neglecting the advice or support of interested parties other than shareholders shows organizations’ self-interested motives. Staden’s research work further observed that organizations often choose to report on issues they consider most important and do not indicate that they had ranked them as most important in the report (Staden, 2012, p. 6). Organizations choose public concerns as most vital to their choice to report although public disclosures regularly rank well below other topics and practice degrees. This observation confirms organizations’ lack of adherence to the accounting theory of legitimacy. The separation between motive and reporting shows a lack of knowledge and concern for legitimate operations and practice within an organization. In Staden’s case, studied New Zealand Organizations showed their lack of knowledge on how to report on matters of public concern and implied that such entities report on what they “feel they should cover” (Staden, 2012, p. 245). The same organizations fail to indicate what they deem important in the reports themselves and instead reflect them as public concerns in their reports. For organizations that were motivated outside corporate image and self-interests, they still lacked in demonstrating it in their CSR report. Community reporting is possibly underdeveloped and less organized than corporate social and environmental reporting. Adams’ article supports this assertion by Staden by revealing how interviewees felt that moral instead of ecological reporting demand more guidance. Adams recorded particularly more demand for maturity within public disclosures. While focusing on German and English companies, Adams founds the degree to which a company has an external positioning (Adams, 2002, p. 245). This means that while there seems to be transparency in shareholder views and influence at first sight, there is no concrete basis under this transparency. Additionally, this is why it was not peculiar for sample organizations in researcher Staden’s work to refer to former literature like Adams’ study findings. If organizations did not prioritize corporate image and stakeholder credibility in their CSR reports, external positioning observed in Adams and Staden’s works would be against the kind of reporting shareholders usually request and get (Staden, 2012, p. 245). In conclusion, improving corporate imagery and stakeholder credibility remains a main concern for organizations while preparing CSR reports. Adams’ study findings showed organizations’ lack of the need to be liable, which contrasts the accounting theory of accountability. Former literature supports this observation in Adams’ article by proving that community pressure causes corporate reporting to begin with, which organizations continue to use as explanations for advancements and modifications in reporting culture. Many organizations find reporting bad news enhances their standing and image among interested parties, which is observable under the accounting theory of usefulness. Lastly, the accounting theory of legitimacy sheds light on Adams’ findings on community responses to disclosures that bring about a fear of unknown internal processes. The issue of corporate reporting based on internal processes reliant on social, ethical, and environmental factors still needs additional research and direction in spite of Adams’ article being slightly over a decade old. References Adams, C. 2002, “Internal organisational factors influencing corporate social and ethical reporting beyond theorising,” Accounting, Auditing, and Accountability Journal, Vol. 15 No. 2, pp. 223-250. Harrison, R, Newholm, T, & Shaw, D 2005, The Ethical Consumer, SAGE, Malden, MA. Mahoney, L S, Thorne, L., Cecil, L, and LaGore, W 2013, “A research note on standalone corporate social responsibility reports: Signaling or greenwashing?” Critical Perspectives on Accounting, Vol. 24 No. 4-5, pp. 350-359. Staden, C 2012, ‘Motivations for Corporate Social and Environmental Reporting: New Zealand Evidence,’ Department Of Accounting and Corporate Governance, University of Canterbury, Sydney, Australia, Pages 31. Thorne, L., Mahoney, L S and Manetti, G 2014, “Motivations for issuing standalone CSR reports: a survey of Canadian firms,” Accounting, Auditing, and Accountability Journal, Vol. 27 No. 4, pp. 686-714. Read More