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Applying Theory To Accounting Regulation - Coggle Diagram
Applying Theory To Accounting Regulation
Agency Theory
Motivate the agent
Distribute risk efficiently
Theory of Efficient Markets
Theories of Regulation
Regulatory Capture Theory
Neutralise or ensure non performance
Control the regulation and the regulatory agency
Small number of clients
Private Interest Theory
Information costs
The costs of organisation
Public Interest Theory
Barriers to entry
Imperfect information gaps
Lack competition
Accounting Standards For The Public Sector
Functions
Actively participate in development of international standards
Provide interpretation of accounting standards
Produce accounting standards for the public and not-for-profit sectors
Provide technical support to Australian representatives
Produce accounting standards to be followed by reporting entities
Produce standards for private sector and not-for-profit entities
Application of Theory
Application of Private Interest Theory
Provides another approach to understanding behaviours of parties
Rahman sought to apply private interest theory of
Posner
Peltzman
Stigler
Limitation of theses theories is that they are not mutually exclusive
Application of Capture Theory
Walker believes capture theory is more applicable
Walker argues that the board was successfully captured by the accounting profession
Accounting profession needed to legitimise accounting standards
Application of Public Interest Theory
Example
ASRB in 1984
Government action is necessary for the greater goods
Government intervene in the regulation of financial reporting in response to market failure