‘Why Financial Reports Can Never Really Be Considered Neutral (Free from Bias) or Objective. Essay

Words: 2931
Pages: 12
Open Document
REPORT

‘Why Financial Reports can never really be considered neutral (free from bias) or objective.’

Word Count: 2536

Introduction

The Framework for the preparation and presentation of financial statements specifies that information generated should “represent faithfully” and “be neutral… free from bias” (AASB Framework, para. 33; 36). Information that is not neutral can “influence the making of a decision or judgement in order to achieve a predetermined result or outcome” (AASB Framework, para. 36). Many scholars have discussed the theory that financial reporting is biased and subjective, using numerous examples as evidence to support their theories. This report will highlight just a few of the arguments to support the theory …show more content…
To demonstrate the principles of PAT, take for example the use of bonus schemes to motivate managers to achieve a set target as is a common practice in most companies. Deegan (2009) notes that when implementing incentives based on accounting output: “…there is a possibility that rewarding managers on the basis of account ting profits may induce them to manipulate the related accounting numbers to improve their apparent performance and, importantly, their related rewards. That is accounting profits may not always provide an unbiased measure of firm performance or value” (p. 281).

The Agency theory is just one derivative of PAT. This theory bases its hypothesis on the relationship between one or more principles (e.g. business owner or shareholders) and their agents (managers/subordinates for which they delegate some responsibility for the running of the business). The agency model suggests that agencies will always be driven by self-interest, and as a result the principle will lack reasons to trust their agents (Institute of Chartered Accountants, 2005). The underlying cause of this issue is the differing interests and motivations of the principle and their agents. Principles will therefore question the reliability of financial reporting, assuming that bias has been imposed on the reporting process in order for the agent to achieve his or her own goals, such as wealth maximisation. When making
Show More

Related Documents: ‘Why Financial Reports Can Never Really Be Considered Neutral (Free from Bias) or Objective. Essay

Human Rights and Young People Essay

youth work how it’s promoted or protects or restricts young people’s rights. Also, I will be looking at how accreditation plays vital part in generic settings. Do these activities really promote positive for young people or do these accreditations meet Government objectives or are they methods of control? Aims and Objectives of youth clubs I am employed with the Redbridge Youth Services my role is based in a generic setting at Hainault youth centre. According to Redbridge’s mission statement,…

Words 3050 - Pages 13

spain ww2 Essay

divided into three sections: military, economy, covert operations and different interpretation. Finally a conclusion to the investigation is approached and described. The conclusions of this investigation is that the Spanish intervention cannot be considered to be solely decisive for the outcome of the war, rather only decisive for certain factors and for certain people, like for example the French which had their capital liberated by Spanish soldiers. 3 Introduction World war two has been…

Words 5118 - Pages 21

Differences Between Submissions, Proposals And Tenders

Reports and proposals After reading this chapter you should be able to: • Explain the differences and similarities between formats, types or sub-genres of reports • Explain the differences and similarities between reports and essays • Explain why documents need to contain an appropriate balance of information and persuasion • Demonstrate competence in writing a longer, analytical research report • Explain the differences between reports and submissions, proposals and tenders So you’ve got to…

Words 18548 - Pages 75

Project Report On Employee Performance

PROJECT REPORT - A STUDY ON ENHANCED EMPLOYEE PERFORMANCE THROUGH SOFT SKILLS AT DZINE-HUB CREATIONS PVT.LTD. TABLE OF CONTENTS S.no TITLE Page No 1. Acknowledgement 10 2. Executive Summary 11-12 3. List of Tables 13-14 4. List of Figures 15-16 Chapters 1. Introduction 17-48 1.1 Definition of Soft Skills 17 1.2 Hard Facts About Soft Skills 19 1.3 Top 60 Soft Skills 21 1.4 Soft Skills Gap – Do You Have One? 23 1.5 Distinction Between Hard Skills & Soft Skills 25…

Words 20716 - Pages 83

Coffee and Dutch Bros. Essay example

campus, it is common to see students walking around with cups of coffee or waiting in line for a drink at one of the nearby cafés. The local coffee retail industry is booming, and many players are well-represented on a daily basis. Students can be seen carrying cups from many different cafés, including Dutch Bros. However, Dutch Bros. seems to be much less common around campus than its competitors, despite having a stellar reputation. We conducted this research to provide recommendations for Dutch Bros…

Words 8673 - Pages 35

Putting Your Company S Whole Brain To W Essay

“Right-brain” thinkers rely more on nonlinear, intuitive approaches. 1. Do your own profile first. Become familiar with the ways in which your preferences shape your leadership and patterns of communication. If you’re not paying attention, your own style can stifle the very creativity you’re looking to foster among team members. • Some people prefer to work together to solve a problem; others like to gather and process information by themselves. COPYRIGHT © 2000 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION…

Words 6989 - Pages 28

Essay on Shared Service Center

influence people in the striving towards organizational goals Authors: Emma Carlsson Ann Schurmann Avdelning, Institution Division, Department Ekonomiska institutionen 581 83 LINKÖPING Språk Language Svenska/Swedish X Engelska/English Rapporttyp Report category Licentiatavhandling Examensarbete C-uppsats X D-uppsats Övrig rapport ____ URL för elektronisk version http://www.ep.liu.se/exjobb/eki/2004/iep/015/ Titel Title Författare Author ISBN Datum Date 2004-01-22 ISRN Internationella ekonomprogrammet…

Words 42241 - Pages 169

Gp Essay Mainpoints

Arts have a future in Singapore? b. Why pursue Arts? c. Arts and technology d. Uniquely Singapore: Culture 4. Environment a. Developed vs.…

Words 24667 - Pages 99

Research Paper On GMO

(GM) seed manufacturers envisioned their product being used by producers, thus they focused on innovations those farmers, and more generally the food industry, would accept and appreciate (WHO, 2012, para. 3). WHO states that (2012), the initial objective for developing plants based on GM organisms was to improve crop protection. The GM crops currently on the market are mainly aimed at an increased level of crop protection through the introduction of resistance against plant diseases caused by insects…

Words 14588 - Pages 59

Sources of Ethics Essay

conduct. • Second, company operating policies often contain an ethical dimension. Express policies as to gifts, customer complaints, hiring, and other decisions serve as a guide to conduct and as a shield by which the employee can protect against unethical advances from those outside the firm. • Third, may professional and industry associations have developed codes of ethics, such as the Affirmative Ethical Principles of the American Institute of Certified Public Accountants. In sum, codes…

Words 20200 - Pages 81