Essays on Whether Accounting Report Is Subjective or Objective Literature review

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The paper "Whether Accounting Report Is Subjective or Objective" is a perfect example of a finance and accounting literature review.   Objective accounting report is an outcome of the decision made based on the facts of a certain situation and not influenced through personal feelings, ideas, preferences and tastes. On the other hand, subjective accounting report is linked to decisions made based on personal feelings, preferences, tastes and views. In this context, therefore, it is important to understand the existing difference between subjective and objective report based on the principle of respective judgements.

Objective judgment is perceived to be absolutely true, while the truth of subjective judgements largely depends on the person making the decision. Although some disclosures are objective in nature and require minimal professional judgment, it is surprising that other disclosures are subjective in the sense that an accountant is required to apply their experience and decisions to give the relevant and useful information (Charlie, 2012). Generally, the auditor’ s responsibility is to evaluate the fairness of accounting estimates provided by the management in regard to the financial statement taken from the entire accounting systems.

Since estimates are analyzed based on subjective and objective factors, this implies that ensuring controls over such information could be a difficult task for management. Despite the fact that competent personnel use appropriate and reliable data, there is a likelihood of bias particularly in the subjective aspect of the accounting report. Therefore, it is crucial for auditors to understand that while planning and implementing the procedures to evaluate accounting reports or estimates, they should consider the biases associated with the subjective and objective factors (AICPA 2015). Based on a critical analysis of various literature, this essay will discuss whether an accounting report is subjective or objective.

The emphasis is that a standard financial report has to be objective. Most contemporary companies give out their financial reports with a target of attracting investors. However, most of the reports are full of malice and are meant to convince the stakeholders that the company is running fine financially. That may not be the case anyway. The professional finance officers influence the auditing process, hence, making the financial report subjective. However, standard financial reports ought to be objective.

It is important to mention that subjective understandings are the source of the debates on the way the emergence of social reality occurs. The understanding, which is objectified via interaction, lie at the accounting research’ s interpretive management. Kakkuri-Knuuttila et al as cited in Ahrens (2008), continues to mention that the framework of Burrell and Morgan’ s (1979) as the crucial exodus of the debates. The distinctions they came up with about nominalism and realism, anti-positivism and positivism, voluntarism and determinism, ideographic and homothetic research influenced accounting researchers. The society assumptions as characterised by conflict or order also influenced the interpretative accounting researchers in coming up with strict distinctions between objective and subjective knowledge.

This clearly shows that engagement of objective and subjective accounting aspects is often brought on board by determining how the environment or the social passes via accounting. Accounting, conversely shapes, extends and ramifies the social (Clarke, 2005).

References

Ahrens, T. (2008).Overcoming the subjective–objective divide in interpretive management accounting research. Accounting, Organizations and Society, 33 (2008), 292–297.

Charlie, M. (2012). Digital Financial Reporting-Disclosures: Quantative, Qualitative, Objective, Subjective, Useful. Retrieved May 15, 2015 from,

Clarke, T. (2005). Accounting for Enron: shareholder value and stakeholder interests. Accounting for Enron. Blackwell Publishing Ltd. 13(5), 598-610.

Cappelli, P. (2008). Talent Management for the Twenty-First Century. Harvard Business Review.

Lo, K. (2007). Earnings management and earnings quality. Journal of Accounting and Economics, 45, 350-357.

Levisohn, A. (2002). Subjective Accounting or Fraud? Trend in Financial Management, April 2002, Strategic Finance. Institute of Management Accountants.

Firth, M. (2002).The Provision of Non-audit Services by Accounting Firms to their Audit Clients. Lingnan College.

Morgan, G., (1988). Accounting reality construction towards a new epistemology. Accounting Organizations and Society, 13(5), 477-485. Printed in Great Britain.

AICPA (2015). Auditing Accounting Estimates, SAS No. 57; SAS No. 113. Retrieved May 15, 2015 from,

Shyam, S. (2002). Regulatory competition for low cost-of-capital accounting rules. Journal of Accounting and Public Policy, 21 (2002), 147–149.

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