Chapter 2 enrironmental influence on accounting development



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Political systems can determine one country’s economic system and hence determine its accounting patterns:

It seems almost self-evident that an accounting system that is useful to a centrally controlled economy must be different from an accounting system that is optimal for a market-oriented economy. In the former, the state owns all fixed assets and land; there is very little or no private ownership of business equities; “outside” auditors are simply government employees from another government agency; and the concept of periodic profit determination makes no sense.



Political systems also export and import accounting standards and practices. For instance, British accounting, as it existed at the turn of the twentieth century, was exported in large measure to other Commonwealth countries. Dutch did the same with the Philippines and the French with their possessions in Africa and Asia. The Germans used political sympathy to influence accounting in Japan and Sweden, among others. Modern-day political systems have even larger impacts upon accounting (Choi and Muller, 1984, 1978).

The political freedom of a country is important to the development of accounting, reporting, and


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