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REGULATORY APPROACH OF AN ACCOUNTING THEORY - Coggle Diagram
REGULATORY APPROACH OF AN ACCOUNTING THEORY
Theoretical perspectives
Theory of Efficient Market
can be seen as an information industry
There is a demand for accounting information
cannot be considered as other goods because it is a public good
AGENCY THEORY
The regulation of financial accounting:
The pro-regulation perspective
Public interest theory
based on the assumption that economic market
3 assumptions
There are agents (entrepreneurial politician and public interest group) who will seek regulation on behalf of public interest
The government has no independent role to play in the development of regulations
The interest of consumers is translated into legislative action through the operation of internal marketplace
The free-market perspective
Capture theory
Assumes that
All members of society are economically rational
each individual will pursue his/her self interest
Government has no independent role
4 situations
Succeed in coordinating the regulatory body’s activities with their activities so that their private interest is satisfied
Manage to neutralize or insure nonperformance by regulating body
Control the regulation and the regulatory agency
succeed in cooping the regulators in a mutually shared perspective thus giving them the regulation they sought