Securities regulation - Essay Example

Principles-based Regulations versus Rules-based Security Regulations There has been a critical debate as to whether accountants should adopt principle-based regulation or the rules-based regulations, owing to their requirement to prepare their financial statements based on the above regulations. However, accountants may opt for either of them, based on their merits and demerits. For instance, in the rules-based regulations, accountant ought to follow the laid down procedures (detailed rules) in the preparation of the financial documents.

Most accountants have been perceived to opt for this security regulation because, in the event of discrepancies, they may be able to defend themselves in the events of lawsuits. As such, it reduces the events of unwarranted lawsuits. Additionally, the regulation is perceivably accurate, owing to its elimination of unjustifiable errors. However, there may be events of complexity in the preparation of financial statements emanating from this procedure. Besides, the principles-based regulations usually employ the commonly conventional accounting principles as their accounting foundations.

Set objectives aid in the creation of accurate financial records. There is usually an example that serves as a guideline in the preparation of such financial statements. A significant merit in this principle is the fact that it may be applicable in the effortless creation of financial records in numerous accounting circumstances as opposed to its rules-based counterpart. However, its key setback may emanate from its lack of uniformed guidelines, thereby producing inconsistent information, thereby making it difficult in the comparison of dissimilar organizations.

Besides, in cases of litigation, the accountants may compel themselves into unwarranted legal challenges.