Chapter 2

CHAPTER 2                               ENRIRONMENTAL INFLUENCE ON ACCOUNTING DEVELOPMENT

1 2.1 Introduction

  In international accounting research, environmental influence is the key to understanding one country’s accounting system. "To a large extent, accounting is a product of its environment. That is, it is shaped by, reflects, and reinforces particular characteristics unique to its national environment" (Radebaugh and Gray 1997).
  From the late 1960s, researchers in international accounting have tried to categorize countries according to a series of criteria, which have been developed on a deductive or conductive basis. These criteria tried to explain the reasons for accounting differences between countries; they aimed to describe and compare different systems with each other in an efficient way. There are several advantages to categorize and analyze the differences among countries: First, it promotes improved understanding of the complex realities of accounting practices, as well as the factors that shape a country’s accounting regulations; Second, it provides useful information for solving some of the important accounting problems that exist in the world. For example, it can help policymakers assess the prospects and problems of international harmonization; Third, it can assist in the training of accountants and auditors who operate internationally; And finally, it can enable a developing country to better understand the available and appropriate types of financial reporting by seeing other countries’ use of particular systems. By looking at other countries in its group it is possible to predict the problems that it is about to face, and the solutions that might work.
  When classifying international accounting systems, two main forms have been employed: one is the deductive approach, in which the approaches to accounting development are identified. By linking these to economic or business factors, the influential environmental factors are... [continues]

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