Accounting theory 5 1 the regulation of financial accounting prepared by: dewan mahboob hossain assistant professor dept of accounting & information systems university of dhaka dhaka bangladesh financial accounting theory craig deegan ch 3. Private interest theory producer groups of regulation able to use the power of government for their own advantage: 1 organised interest group – seeking political protection other groups (more diffuse) have limited ability to bid effectively (due to organisation and information cost) 2. We use your linkedin profile and activity data to personalize ads and to show you more relevant ads you can change your ad preferences anytime. Regulation as accounting theory michael gaffikin theories of regulation are discussed and compared some important issues relating to regulation as a substitute for research in creating theory as discussed.
The theory suggests that regulations are set of policies driven by forces of supply and demand the government is placed on the supply side while the interest groups on the demand side the theory suggests that regulation is developed by the industry and that the objective of regulations is to create advantages to the industry concerned. Financial accounting theory introduction the aim of this paper is to consider three theories of regulation, the public interest theory, the capture theory and the economic interest theory these three theories attempt to explain why a particular phenomena in the regulation process occurs and as such they are positive theories.
Accounting theory and research accounting standards board university of phoenix accounting theory and research jun 13, 2009 accounting standards board to address the increasing challenges of legislating those governs our society today, “countries all over the world have begun to outsource rulemaking to bodies consisting of people familiar with the subject. Theories of regulation there are three theories of regulation: public interest theory regulatory capture theory private interest theory 7 8. Similarity of economic interest theory (private interest theory) with capture theory the two theories suggest that politicians aim at maximizing their utility the politicians aim at maintaining political power in their efforts to design regulations for the industries.
Economic interest theory and regulation regulation as an accounting theory, 2009, para15) the politicians are not predictable since they put regulations for their own advantage they may support the private sector for their own interests politicians can suppress some groups in the decision making process and this would discourage proper. The public interest theory assumes that the economic markets are very fragile and they have a tendency to operate inefficiently and in favor if individual’s concern while ignoring the importance of the society as a whole therefore to direct and monitor the economic markets government’s intervention is required.
Why private interest theory should be used to evaluate the adequacy of the their self interest this theory proposes that private interests rather than public 12 research in accounting regulation 3, 4 18 john carey, ‘the independence concept revisited’ (1985) ohio cpa journal 5.
Private interest theory is the main regulatory theory which emphasises the need for standard setters to intervene because of market inefficiencies and inability to self regulate private interest or (economic interest theory) is based on an assumption similar to pat that individuals seek to act in their own self interest.
Application of private interest theory the private interest theory could be applied to the establishment of the asrb the various theories of regulation are not mutually exclusive 17 18. Evidence (or lack) of such support of the government’s handling of the matter can be observed through voting power although the utility is not specified 33 sam peltzman above n 33 the private interest theory of regulation assumes that groups will form to protect particular economic interestshtm at 11 june 2010.
Private interest theory acknowledges that individuals form into groups to pursue their self interest this theory proposes that private interests rather than public 12 research in accounting regulation 3, 4 18 john carey, ‘the independence concept revisited’ (1985) ohio cpa journal 5. Stigler49 puro claims that the private interest theory of regulation is applicable when new disclosure rules have been required this implies that audit firms as a group can expect additional audit fees to be generated when new disclosures are required then there are intuitive reasons to suggest that changes in accounting rules might result in lost clients and/or reduced profits for some auditors. Public interest theory was developed by ac pigou (1932) the author believed that the regulations are prepared in the public interest when they are demanded by the public for correcting inefficient practices. Public interest theory is a part of welfare economics and emphasizes that regulation should maximize social welfare and that regulation is the result of a cost/benefit analysis done to determine if the cost to improve the operation of the market outweighs the amount of increased social welfare.