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    Mid Test Revision Revision Lecture: AF301 Theories of Regulation 1

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    Shivneel Naidu
    The document provides information about an upcoming mid-term test revision lecture on August 24th. It outlines the format for short answer and essay questions on the test, including the structure and length required for each. It also lists some cancelled lecture times. Theories of regulation are discussed, including the free market approach versus the regulatory approach. Key theories covered include public interest theory, regulatory capture theory, and private interest theory. Measurement and conceptual frameworks as well as accounting theory are referenced for additional tutorial questions.

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    Mid Test Revision Revision Lecture: AF301 Theories of Regulation 1

    Uploaded by

    Shivneel Naidu
    141 views5 pages
    The document provides information about an upcoming mid-term test revision lecture on August 24th. It outlines the format for short answer and essay questions on the test, including the structure and length required for each. It also lists some cancelled lecture times. Theories of regulation are discussed, including the free market approach versus the regulatory approach. Key theories covered include public interest theory, regulatory capture theory, and private interest theory. Measurement and conceptual frameworks as well as accounting theory are referenced for additional tutorial questions.

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    Revision_Lecture MST

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    The document provides information about an upcoming mid-term test revision lecture on August 24th. It outlines the format for short answer and essay questions on the test, including the structure and length required for each. It also lists some cancelled lecture times. Theories of regulation are discussed, including the free market approach versus the regulatory approach. Key theories covered include public interest theory, regulatory capture theory, and private interest theory. Measurement and conceptual frameworks as well as accounting theory are referenced for additional tutorial questions.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    141 views5 pages

    Mid Test Revision Revision Lecture: AF301 Theories of Regulation 1

    Uploaded by

    Shivneel Naidu
    The document provides information about an upcoming mid-term test revision lecture on August 24th. It outlines the format for short answer and essay questions on the test, including the structure and length required for each. It also lists some cancelled lecture times. Theories of regulation are discussed, including the free market approach versus the regulatory approach. Key theories covered include public interest theory, regulatory capture theory, and private interest theory. Measurement and conceptual frameworks as well as accounting theory are referenced for additional tutorial questions.

    Copyright:

    © All Rights Reserved
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    of 5

    MID TEST REVISION

    • FRIDAY 24/8 2 - 4PM Revision Lecture


    • VENUE: KHASTRIYA HALL
    • FORMAT – as posted on moodle

    • Wed 6-7pm Lecture Cancelled this week

    Answering Short Answer Answering Essay Questions


    Questions • 2 essays @ 20 marks each
    • Essay length 1 – 2 pages
    • 3 - 4 short answer questions for 20 marks • 5 paragraphs
    • 1 sentence per 1 mark • Use SEE approach per paragraph – State
    • Use SEE approach – State, Elaborate, argument, Elaborate on that argument, relevant
    Example Example
    • Length of answer dependent on mark • 1st para – Introduction (brief overview &
    arguments you will discuss) 2.5 marks
    allocation
    • 2nd, 3rd, 4th paragraphs – your arguments
    using SEE approach 5 marks each
    • 5th para – Conclusion (summary & your over
    aching argument or recommendation) 2.5 marks

    2 PERSPECTIVES ON REGULATION:
    Theories of Regulation
    - FREE MARKET APPROACH
    - REGULATORY APPROACH

    AF301 Theories of Regulation 1


    a. Summary - FMA
    Supporters of de-regulation argue that
    market forces can determine

    1. What type of accounting information to


    Regulatory Approach: Refer to
    Table 3.1 (pg. 77)
    provide
    2. Necessary standards to underlie
    PUBLIC INTEREST THEORY
    disclosure

    Based on Agency Theory


     Stewardship role of accounting
     Contracts between Principal & Agents

    a. Public Interest Theory b. Critique


    Accounting is a public good Public Interest theory does not explain
    voluntary disclosure
     Free-riders cannot be excluded or charged
    for information
     Firms have minimal incentive to produce it  Firms often disclose information over and
    above that required by regulations
     Firms have monopoly status
     e.g. Product Quality, Environmental
     Results in under-disclosure of information
    Policies, Social Responsibility, Human
    Resource Development
    Regulation ensures that firms produce  Disclosure must be motivated by other
    information to meet users’ needs factors
     for decision-making (social benefits exceeds social costs)

    a. Background
    The purpose of regulation is to protect the
    public interest
    REGULATORY CAPTURE
    THEORY BUT …………………

     This is not achieved because the


    regulated entity (regulatee) comes to
    control the regulator

    AF301 Theories of Regulation 2


    a. Background
    Government has coercive power to
     selectively help or hurt businesses

    PRIVATE INTEREST THEORY Politicians are rationally self-interested


     They will sell their right to coerce others,
    by supplying regulation & legislation in
    exchange for votes

    2011 REGULATION
    MST 2011
    QUESTION
    • Outline 2 reasons why only “a few • The dominant stakeholders exert power
    dominant stakeholders” are able to through financial resources i.e. they are
    influence accounting regulation. able to lobby effectively.
    • They also have more to gain or lose
    through regulation, which increases their
    motivation to lobby
    • They are able to infiltrate decision-making
    bodies in their professional capacity e.g.
    big 4 accounting firms

    2011 REGULATION
    MST 2011
    QUESTION • Government does not have the expertise
    • If convergence is not in the public to regulate standard setting.
    interest, suggest 2 reasons why • The same dominant groups would quickly
    government does not intervene in
    capture the regulation process as in
    standard setting. Australia
    • The voting public is not providing sufficient
    signals to influence decision makers to
    intervene.
    • Government is receiving ‘pay-offs’ from
    the dominant groups.

    AF301 Theories of Regulation 3


    Measurement & Conceptual
    Accounting Theory
    Framework
    Refer to your tutorial questions Refer to your tutorial questions

    Question 3:
    Solutions
    Theory construction by induction depends on establishing
    general truths by observations. Conclusions drawn from
    • Explain the difference between developing observation are subject to Popper’s principle of
    a theory in social science by induction and falsification. In social science 5 % contrary observations
    by deduction. disproves the theory.
    • For example,
    • Identify possible shortcoming present in 0.1: The debit balance account ‘Land and buildings’
    each approach. Construct a means of represents a non current asset.
    developing theories that overcomes these 0.2: The debit balance account ‘Plant and machinery’
    shortcomings. represents a non current asset.
    0.3: The debit balance account ‘Motor vehicles’ represents
    non current asset.
    C: Debit balance accounts represent non current
    assets.

    Cont’d
    • Theory construction by deduction depends on
    establishing general theories purely by syntactics without
    any reference to the real world. Impeccable abstract
    logic can be demonstrated to have no semantic
    relationship, i.e. reference to the real world. Consider for
    example,
    • P1: Only non current assets have debit balances
    • P2: The salaries and wages account has a debit balance
    • C: The salaries and wages account is a non current
    asset account.
    • Clearly salaries and wages do not have the attributes of
    assets, i.e. the theory can be refuted by observation.
    By combining the inductive and deductive approaches
    the weakness identified can be eliminated.

    AF301 Theories of Regulation 4


    Question 4 Solution
    • Compare and contrast the scientific Refer to your text book page 32
    and naturalistic approaches to social Table 2.2
    science research.

    Best Regards for your Mid


    Test!

    AF301 Theories of Regulation 5

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