American Accounting Association - 9844 Words

THE ACCOUNTING REVIEW Vol. 86, No. 3 2011 pp. 747–767 American Accounting Association DOI: 10.2308/accr.00000045 Principles-Based versus Rules-Based Accounting Standards: The Inï ¬â€šuence of Standard Precision and Audit Committee Strength on Financial Reporting Decisions Christopher P. Agoglia University of Massachusetts Amherst Timothy S. Doupnik University of South Carolina George T. Tsakumis Drexel University ABSTRACT: Recent accounting scandals have resulted in regulatory initiatives designed to strengthen audit committee oversight of corporate ï ¬ nancial reporting and have led to a concern that U.S. GAAP has become too rules-based. We examine issues related to these initiatives using two experiments. CFOs in our experiments exhibit†¦show more content†¦standard-setting and asked interested parties to comment FASB 2002 . Many who responded were supportive of a principles-based model, believing that such an approach would lead to higher quality ï ¬ nancial reporting with less opportunity to â€Å"exploit the gaps in GAAP† CalPERS or use â€Å"ï ¬ nancial accounting engineering† to get around detailed, rulesbased standards PricewaterhouseCoopers .3 Conversely, some argued that less speciï ¬ city in accounting standards would result in an increase in manipulation of ï ¬ nancial results e.g., Intel and former FASB member David Mosso . On the separate issue o f inter-ï ¬ rm comparability, a number of letter-writers expressed concern that, with an increased reliance on judgment, implementation of principles-based standards could result in a decrease in comparability across ï ¬ rms e.g., IBM, Pï ¬ zer, Goldman Sachs, BDO Seidman . The ongoing debate over whether and when to move toward more principles-based accounting standards reï ¬â€šects the uncertainty of both the anticipated desirable and undesirable effects of such a paradigm shift. Although these are empirical questions that can be addressed experimentally to inform policy makers prior to making a move to principles-based standards, the academic literature is limited with respect to research regarding these uncertainties Maines et al. 2003 . As noted, the possible adoption of principles-based ï ¬ nancial reporting standards is only one ofShow MoreRelatedAccounting Practices And The Field Of Accounting1393 Words   |  6 PagesIntroduction to the authoritative resources in the field of Accounting In the era of technological advances, access to information of any subject is abundant. With this vast array of information to tap into, the credibility of the material presented becomes questionable. 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