Regulation of Financial Accounting and Reporting: the Pro-Regulation Perspective

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Regulation is defined as a set of rules that is designed to control and govern conduct by authority (Deegan 2009, p.59). On the basis of this definition, Deegan (2009, p.59) has defined regulations relating to financial accounting as rules that are developed by independent authoritative body to govern the preparation of financial statements which are accounting standards. Since decades ago, there have been arguments for and against the existence of accounting regulations. With a stance of pro-regulation, this essay is going to examine the reasons that financial accounting and reporting should be regulated and the merits of accounting regulations.

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Moreover, accounting regulations can enhance the uniformity of accounting information because accounting information will be presented by using the available uniform alternatives. It will then increase the comparability of accounting information which reduce research costs of users and simplify users’ process of comparing companies. Moreover, according to Hendriksen and Breda (1992, p.248), availability of many alternatives permits firms to manipulate the accounting figures to produce a biased view of the performance of company. Thus, with regulations to restrict the alternatives, the credibility of financial reports can be improved. Furthermore

참고자료

· Deegan, C 2009, Financial Accounting Theory, 3rd edition, McGraw Hill, Australia.
· Godfrey, J, Hodgson, A, Holmes, S & Tarca, A 2006, Accounting theory, 6th edn, John Wiley & Sons Australia, Milton, Queensland.
· Healy, PM & Palepu, KG 2001, ‘Information asymmetry, corporate disclosure, and the capital markets: A review of the empirical disclosure literature’, Journal of Accounting and Economics, vol.31, nos.1-3, pp.405-440, viewed 13 August 2009, .
· Hendriksen, ES & Breda, MFV 1992, Accounting theory, 5th edn, McGraw-Hill, United States of America.
· Lee, C, Rosenthal, L & Gleason, K 2004, ‘Effect of regulation FD on asymmetric information’, Financial Analysts Journal, Vol.60, No.3, pp.79-89, viewed 12 August 2009,