Professionalism, accounting rules and the function of accounting

… in no other established professional field is a stultifying, rigid book of rules the boss.

(Paton 1971:43)

The issue addressed in the study

The recent history of accounting - encompassing the last three decades in particular - has been marked by the rapid and continuing promulgation of accounting standards and other technical regulatory statements. There is a widespread belief that these accounting rules are necessary to improve the quality of accounting information and have been effective in achieving that end. In contrast, the central theme of this study is that this preoccupation with accounting rule-making and rule-compliance has distracted attention from the essential criterion of ‘quality’ in financial reporting. Compliance with rules per se is not what determines the reliability and usefulness of accounting information. The essential criterion of quality in accounting abides in the very meaning of the word itself. To provide an account of an event or circumstance is to describe that event or circumstance. A reliable and objectively useful account will be characterized by a correspondence between the description and the event or circumstance it purports to describe. Correspondence with commercial phenomena is the determinant of the serviceability of financial reports. Compliance with accounting rules is only functional to the extent that it enables such correspondence. To elevate rule-compliance to the apex of accounting - as is now common in accounting practice, discourse and education - is to elevate the means over the end they purport to serve; to privilege process over purpose.

Specifications of the function of accounting reflect this distinction. Rather than emphasizing compliance with prescribed procedures, the function of financial accounting is said to subsist in ascertaining the dated, monetary magnitudes of the elements of financial position and performance of firms and communicating them to interested parties for the purpose of informing resource allocation decisions and accountability evaluations. In this way . . .