Chapter 2 enrironmental influence on accounting development



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Authors

Political

Legal

Economic

Culture

Education

Profession

International

Others

Choi and Mueller

Political system

Legal system; Degree

of legislative business inference;

Presence

Of specific accounting legislation



Nature of busi-

ness ownership; Different size and Complexity of business firms; Level of sophisti-

cation of busi-

ness; Speed of business innova-

tions; Stage of economic deve-

lopment; Growth pattern of an economy.



Social climate

Status of profe-

ssional education



Status of professional organization







Nobes




Legal system;

Taxation


Providers of finance; Inflation;

Culture




The profession; Theory.




Accid-

ents


AAA’s

Political system

Source of, or auth-

Economic system; Stage of economic




Education, training

Licensing







Factors

Authors

Political

Legal

Economic

Culture

Education

Profession

International

Others

report




ority for, accounting standards; Enforce-

ment of Ethics & Standards



development; Objectives of financial reporting; Client
















Rade-gaugh and Gray

The nature of political system

The nature of taxation system; The nature of legal system; The nature of accounting regulation

The nature of enterprise owner-ship; the business activities of the enterprise;

Source of finance and the stage of development of capital market; The stage of eco-nomic growth and development; The rate of inflation



The social climate;The Culture factors

The state of accounting education

The state of accounting research;

International factors




Belkaoui

Political and civil relati-vism

Legal and tax relativism

Economic and demographic relativism

Culture relati-

vism; linguis-

tic rela-

tivism














Gray




Legal system

Corporate ownership; Capital markets; Economic; Trade; Investment.

Societal values

Education

Professional associations


Economic/

Political inter-

dependence;

Foreign direct investment; Multinational corporate Stra-

tegy; Interna-

tional financial markets; inter-national regulatory organization; business and finance services.



Reli-

gional; Geogra-phic; Demo-graphic; Histori-

cal; Techno-logical; Urbanis-ation; Con-quest. Genetic/

hygienic

  • 2.3 Evaluations on the Environmental Influencing Factors


    The influence of environmental factors on accounting found, mainly, in the literature can be summarized as follows:
          1. 2.3.1 Political Factors


    Certain political factors can influence accounting systems and practices. Gastil (1978) defined political rights as the right to play a part in determining the laws and the government of a community. And he developed seven levels of political rights index:

    Level 1 states that almost everybody has both rights and opportunities to participate in the political process, to compete for political office, and to join freely formed political parties;

    Level 2 states that the effectiveness of the open electoral processes is reduced by factors such as extreme poverty, a feudal social structure, violence, or agreements to limit opposition;

    Level 3 states that the effectiveness of the open electoral processes is reduced by non-democratic procedures, such as coups;

    Level 4 states that there is either a constitutional block to the full democratic significance of election or the power distribution is not affected by the elections;

    Level 5 states that either elections are closely controlled or limited or the results have very little significance;

    Level 6 states that either there is no operational electoral system, or opposition candidates are not allowed to compete;

    Level 7 states that some factors may be characterized as tyrannies with little legitimacy either in a national tradition or a modern ideology.

    The political-structure index suggested by Gastil ranks countries into five types: (1) multiple-party systems, (2) dominant-party systems, (3) one-party systems, (4) military dictatorships, and (5) traditional monarchies. The higher the level of political freedom, the lower the rank of a country.

    Another useful and sophisticated classification of political systems is provided by Edward Shils (1966). He presented five different types of political systems: political democracy, tutelary democracy, modernizing oligarchy, totalitarian oligarchy, and traditional oligarchy. The characteristics of these different types of political systems can be summarized in table 2-2.


              1. Table 2-2: A Classification of political systems

    Systems

    Properties

    Political

    Democracy

    Tutelary

    Democracy

    Modernizing

    Oligarchy

    Totalitarian

    Oligarchy

    Traditional Oligarchy

    Legislature

    Representative, elected. ”Parliament” is centre of partisan decision-making.

    “Rubber-stamp” parliament or

    none at all. But there is the

    appearance of

    representation.



    Is advisory or

    serves in

    ratification mode.


    Acclamatory &

    ceremonial functions.



    Not needed, function performed as needed by executive

    (“monarch”).



    Systems

    Properties

    Political

    Democracy

    Tutelary

    Democracy

    Modernizing

    Oligarchy

    Totalitarian

    Oligarchy

    Traditional Oligarchy

    Executive

    Shares power with the legislature.

    Actions are

    modified by party ideology, opposition & electorate.


    Personality-oriented. Greater preponderance of the executive.

    Centralized powers, strong

    control by power elite.



    Strong, Limited

    sharing of power

    and autocratic.


    Supreme power,

    divine right to rule.



    Judiciary

    Constitutional and

    independent.



    Constitutional & generally independent but subject to corruption by the executive.

    Controlled by the executive.

    No independent Judiciary. Supports & enforces executive

    decrees


    No independent

    judiciary, in-stead there is usually a

    handpicked retinue of advisers.


    Power Elite

    Exist in diverse

    fields, e.g,

    industrial, political,

    professional are not coalesced.



    Coalesced, stable, competent & politically

    active.


    Well-organized, cohesive, closed military-civilian clique.



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