Main Theories That Explain the Politic Process of Accounting Standard Setting and Regulatory Process

Topics: Accountant, Regulation, Theory Pages: 2 (600 words) Published: September 12, 2013
Choose one of the 3 main theories that explain the politic process of accounting standard setting and regulatory process in Australia. Explain critically the main elements of this theory and illustrate with examples. How does this theory operates in the real world. Public interest theory holds that regulation is supplied in response to the demand of the public as a result of inefficient or inequitable market practices. Initially it is assumed to benefit society as a whole rather than particular vested interests. The regulatory body is considered to represent the interest of the society in which it operates rather than the private interests of the regulators and that the government is a neutral arbiter. Economic markets are imperfect, this is due to the lack of competition, barriers to entry, information gaps between buyers and sellers, as well as public good. This leads to a need for intervention to protect the general public and consumers. Regulations takes interest of the public through legislative actions; by passing laws and make sure everyone complies. Public interest theories of regulation is aware that its purpose of achieving certain publicly desired results would not be obtained, if left to the market. At the same time, regulation is provided in response to the demand from the public for what is happening in the inefficient and inequitable markets. As a result, regulation is pursued for public, as opposed to private, interest related objectives. This was the dominant view of regulation and still retains many adherents. It is generally felt that determining what is the public interest is a normative question and advocates of positive theorizing. It would, therefore object this approach on the basis that it is not possible to determine objective aims for regulation; there is no basis for objectively identifying the public interest. There are other charges that was issued regarding public interest approach. These include attention being directed to the...
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