Chapter 6: Watchdogs Beyond Control? The Accountability of Accounting Standards Organizations
* Dieter Kerwer INTRODUCTION In recent years, accounting standards have become a controversial issue the world over. The failure of accounting standards organizations to detect accounting frauds in companies such as Enron and WorldCom has given rise to widespread debates on the proper role of accountants as ﬁnancial sector watchdogs. Furthermore, there is considerable disagreement among various states on how to harmonize their national accounting regimes so as to foster the global integration of ﬁnancial markets. These conﬂicts are aggravated by the question of how to reconcile harmonization within trade blocs such as the EU with global harmonization. The organization of accounting standard setting and enforcement has apparently become an open question. Accounting standards are rules that specify what and how companies must report on their ﬁnancial condition (Flower, 2002), and it is surprising that such a mundane subject should become as controversial as this one has. Because the dominant view has usually been that this is a technical issue best resolved by experts, accounting standard setting has been and continues to be heavily dominated by professional accountants. This traditional view of accounting as part of the plumbing of ﬁnancial markets is challenged by perpetual conﬂicts about accounting standards. Such conﬂicts have given rise to a political economy perspective, according to which accounting standard setting and enforcement is driven not by the professional ethos of accountants, but by the self-interest of the actors involved (Hopwood and Miller, 1994; Mattli and Büthe, 2005). This image is at the...
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