PLAGIARISM FREE WRITING SERVICE
We accept
MONEY BACK GUARANTEE
100%
QUALITY

How culture has affected accounting

Many studies have showed that culture diversity had affected accounting practice within nationwide and international edges. Accounting can therefore be said to have been influenced by its environment, which includes the culture of the united states in which it is being run (Nobes & Parker, 2008)

Mueller et al. (1994), cited in Alexander. et al, also stipulate that each accounting system is a product of its specific culture and environment, and that different habits of accounting are associated with a range of cultural factors such as societal ideals, religion, politics systems and historical prices. It is however no thought that those countries with same or similar cultural values or history are doing accounting in the same way.

The purpose of this paper is to critically study the scope to which these ethnic values effect the practice of accounting and how the understanding of the role of culture in accounting can help us understand international accounting specifications. The work of Hofstede's cultural value variations and Gray's accounting ideals will be the major center point of this newspaper. The relationship that is available between cultural beliefs, accounting values and financial reporting will be reviewed as well.

DIFFERENCES IN CULTURAL VALUES

Culture is a way of life of a group of people, which include the behaviours, beliefs, values, and icons that they agree to, generally without considering them, and that are approved along by communication and imitation in one generation to another. The position that the ideas, meanings, values and prices people learn as participants of modern culture determine human mother nature.

To support this definition, Hofstede, one of the biggest researchers of culture dissimilarities, defined culture as the collective encoding of your brain which distinguishes members of one human group from another, ( cited in Nobes & parker 2008. p 25)

For the goal of comparability, this paper will base its analysis on Hofstede's work on cultural value difference and gray's focus on accounting values to see their effect on accounting practice and confirming. (Hofstede, 1984 p. 83, 84) defined and summarized four Cultural dimensions as, individualism and Collectivism, Large versus small ability distance, Strong versus weakened doubt avoidance, masculinity versus femininity. He also stipulates that there are present specific marriage in these ethnic dimensions.

Individualism versus collectivism is how in a modern culture one group will like a much closed family system while the other group favor belonging to an expanded family system. This ethnical dimension looks at how society handles interdependence among individuals.

The second social aspect, large versus small power distance looks for to divide a world between those few powerful organizations of folks who prefer capacity to be sent out unequally through corporations and organizations and the ones who feel that ability should be sent out equally. This sizing addressed what sort of society grips inequalities amongst a people when they occur.

The third ethnic aspect by Hofstede, is the strong versus poor doubt avoidance which is, the scope to which customers of a modern culture feel uneasy with uncertainty and ambiguity. This emotions leads those to believing in promising certainty and maintain institutions protecting conformity. He explained that a population with strong doubt avoidance maintained rigid codes of notion and behaviour and are intolerant of deviant people and ideas. The poor uncertainty maintain a far more relaxed atmosphere in which practice matters more than ideas and deviance is more tolerated.

Masculinity and femininity, which is the previous but not the least of the four cultural dimensions, describes masculinity as the preference, in a World for achievements, heroism, assertiveness, and material success. Femininity on the other palm was thought to represent a contemporary society where inclination for human relationships, modesty, looking after the weak and the grade of life is high.

ACCOUNTING Ideals AND CULTURAL VALUES

It is dependant on these Hofstede's classification of ethnic dimensional dissimilarities that Grey (1988) also proposed a link between those cultural measurements and accounting principles by specifically figuring out four accounting prices which includes; professionalism(implies self-regulation by the accounting vocation itself) versus statutory (indicates control by the federal government), uniformity (adherence to steadiness and detailed regulations) versus flexibility (implies able to amend or change to suite a predicament), conservatism (suggests the tendency to under state profit and belongings) versus optimism and secrecy (signifies a preference for confidentiality) versus transparency ( indicates disclosure of true situation). The first two relates to authority and enforcement of accounting practice at a country level as the second two relates to the way of measuring and disclosure of accounting information at a country level as (cited in Nobes and Parker, 2008).

Gray's accounting beliefs and Hofstede's ethnic difference can be group into two categories. This newspaper should to make reference to these two organizations as ''the collectivism category'' and ''the individualism category''. The individualism category is made up of Professionalism, versatility, transparency, optimism, individualism, small power distance, weak uncertainty avoidance and femininity. This category has the attribute of self-reliance or self-interest and for that reason in a contemporary society where individualism, small electric power distance, weak uncertainty and femininity dominate, accounting practice and financial reporting may very well be professional, flexible, transparent and optimistic. Secondly the individual's search for information to make decision on assets to meet his/her personal needs will choose detailed report of an financial record. This paper should to affiliate this category to that of an capitalist society where the accounting regulations aren't area of the common law but rather are in the hands of professional organisations of the private sector as stipulated in Alexander et al. (2009 p. 28). For instance in the united kingdom, accounting laws and regulations are control by professional systems including the ACCA, CA, CIMA, and IASB. It can again be said that countries that practice the normal rules are also more likely to practice accounting the same manner. They are believed to be capitalism countries since they raises money from the administrative centre. They include, UK, Ireland Canada, Australia and america of America

The second category of Hofstede ethnical value difference and this of gray's accounting prices ''The collectivism category'' is made up of collectivism, large vitality distance, strong doubt avoidance masculinity and gray's accounting principles of statutory control, uniformity, conservatism and secrecy. This category has the characteristics to be control from a common source or being centrally prepared. Countries or societies found to be dominant with these ethnical and accounting ideals will practice accounting in the same way. The practice of accounting in this world or country is control by statutory corporations with detailed rules and regulations. The practice of accounting and confirming in these societies or countries will be geared towards the dictates of these in power or in charge. No specific accounting is required and secrecy and conservatism dominates in the financial reporting (Kosmala-Maclullich, 2003). Here again this paper will associate this category of a contemporary society or a country to that of the socialist country where accounting regulations are enshrine in the coded regulations of the united states. Governments in these countries use financial records for their own purpose.

The Democratic Republic of Germany adopted the Soviet Union's socialist ideologies after the Second World Warfare. This version included a methodological instruction in developing accounting information systems (Berry, 1982: 1890). Bailey (1990) also stipulates that the Marxism Theoreticians view the western-style accounting as an instrument for the exploitation of personnel by the capitalists, accounting and financial reporting was therefore intended for the dictates of these in expert. Young and David (1999) argued that Accounting activities at the organization level were concentrated specifically on the planning of reviews required by the planning bureaucracy, and during this time period, accounting was only seen as a primary way to obtain information for the provision of financial reports for the use in the prep of budget; it was therefore a set of quantities instead of beliefs. Accounting was more or less reduced to a clerical job; there was no professionalism in the practice. Judgement of reviews (true and fair) had not been interested; standardisation was non-existence therefore was the idea of profit, in short accounting standards and procedures weren't in existence.

Accounting in China

Another country value considering is china which has a long record of social value which is characterise with collectivism, high in vitality distance, strong uncertainty avoidance and femininity. The Chinese language will not brain reducing himself for the nice collectivism or country (Yao F. 2007).

The practice of accounting and reporting is control by the state under the auspices of the ministry of funding and the aim of this control is to gear the practice towards the overall benefit of the planned economy. An individual of accounting information is principally the federal government, because most corporations in china are owed by the state. The few individual who make an effort to do some investment funds have no idea much about accounting and financing. (Yao F. 2007). But the state got accounting criteria for BUSINESSES, they were just mere basic rules which were released in conjunction with basic criteria, as argued by Lin et al. (2001). There where however restrictions on some important accounting guidelines such as making provision for bad debts and obsolete inventories, recognition of impairments of property, disclosure of financial information and so many more. Secrecy and conservatism was prominent in financial reporting. Professionalism, transparency and flexibility were non-existence. Accounting profession was reduced to an extremely low status.

The dynamics of social values brought about a change in financial reporting by these countries with strong social values. As a result of the globe becoming a tiny town and the growing of Multinational companies around the world, there is the necessity for comparability of financial Information since its goal is to help traders make prepared and sound decisions. Predicated on the actual fact that the entire world is becoming a little place and countries need each other for their survival, almost all of the socialists' countries like the East Germany, Portugal, Poland, Italy, and France have all adopted the capitalism system of financial reporting. The Chinese language government, likewise have realise the necessity for implementing the international financial reporting standard (IFRS) which has been champ by the International Accounting Standard Table (IASB), but yet it only discussed the convergence of the accounting standard rather than a totally approval. (Yao F. 2001)

Conclusion

It is quite clear that cultural prices have influenced the practice and reporting of accounting and countries with similar ethnic values exercising accounting similarly. Together with the world learning to be a global town and the fast cultural changes around the world, the need for harmonization and convergence of accounting criteria was given a serious account by centrally organized countries, but a country like China, although have made efforts to embrace international financial reporting system, continues to be holding on to some of its ethnic accounting practices. This is a sign that as far as cultural values remain different, accounting practice will be damaged and the only way out is the harmonization and convergence of accounting expectations.

More than 7 000 students trust us to do their work
90% of customers place more than 5 orders with us
Special price $5 /page
PLACE AN ORDER
Check the price
for your assignment
FREE