Group Ass AFA Essay

1795 WordsMar 24, 20158 Pages
There are essentially two views regarding the regulation of accounting information: The ‘free-market’ perspective and the ‘pro-regulation’ perspective. Discuss each of These viewpoints, providing at least three points of argument for each standpoint. Why is there a need for the regulation of accounting information? Accounting Information is the pearl of any organization. It is how a business provides its investors as well as other stakeholder parties’ direction towards a healthy economic decision in favor of the business. Regulation of these information and standardizing the process would lead to that organization solving the problem of ‘information asymmetry’. (Watts & Zimmerman, 1978) The Free-Market perspective The free market…show more content…
With strict regulations intact, monopolies would not occur and production would stay at desired levels. Creates a level playing field Pro-regulation provides information to all user groups free of charge, hence would have to prepare these in one understandable language standard. This grants all the users’ access to the same information on one platform. This also increases the trust and confidence in capital markets cum investors for a better investment in the company. It is in the Public Interest Accounting Information is made public in view of protecting those vulnerable to have to pay to get information are directed towards the public interest of the community as a whole. Regulations improve the position of the users of information to take a positive and healthy economic decision. (Cotter, 2002) When pro-regulation perspective is discussed, the ‘invisible hand’ theory put forward by Adam Smith cannot be missed. Although the invisible hand theory supports free market perspective, Adam Smith wrote of the importance of government intervention in the form of regulations to avoid the corporations misusing information and manipulating them. Various regulations are needed for the protection of different stakeholder groups. Strict regulations should have been set in the light of the recent economic crisis as

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