FREE-MARKET APPROACH AND REGULATORY APPROACH TO STANDARD SETTING IN Assignment

FREE-MARKET APPROACH AND REGULATORY APPROACH TO STANDARD SETTING IN ACCOUNTING - Assignment Example The researcher analyzed the free market approach to standard setting and provided a case study analysis to this approach. Within the free-market approach, the study revealed some theories including the positive accounting theory and agency theory, which recommends that entities should have incentives to make publicly accounting information munificently. The study also examined the regulatory approach, which aims to protect the interests of the public in the marketplace. The study further examined some of the frameworks within the regulatory approaches including the public interest theory and capture theory. Lastly, the researcher provided the case studies for both free-market and regulatory approaches in relation to standard setting in accounting. Lastly, the conclusion was provided that summed up everything that was discussed under the research topic. Assessment of the Free-Market Approach and Regulatory Approach to Standard Setting In Accounting Introduction The increased competiti ve which result due to increased technology contributing to a global village have encouraged financial analysts, regulators and lobbying groups to take significant interest in the market system. The accounting standards has created an ongoing debate as to whether accountants should regulate or set accounting standards or not. ... The policymakers believe that the government should regulate standards in order to protect investors against market risks. However, there exist non-regulatory approaches known as the free-market approaches, which determine the accounting information and regulation in order to meet the interest of the public. Thus, the study attempts to examine varied approaches to standard setting in accounting including the free market approach, regulator, as well, as illustrates the applications for such approaches. Literature Review Varied literatures have attempted to provide systematic and clear understandings of accounting standard setting in regard to financial accounting standard setting. There is an ongoing debate that market should work freely, but the government should intervene and create regulatory standards to protect investors from encountering risk in the market. Therefore, this part offers an analysis on the way the previous scholars have attempted to argue about by developing varied approaches to standard setting in accounting including the free market and regulatory approaches. However, there have been a considerable debate over the accounting standards and some issues have been raised including the politicization of accounting standard setting for the concerned parties involved (Horngren 2006, 51). The debate on the advantages and disadvantages of accounting regulation standards settings is a realism of accounting setting. Thus, Britton and Waterston (2006, p.71) proposed varied limitations and benefits of accounting standard settings whether regulatory or non-regulatory, hence these can be based on the restructuring the accounting standard setting process. The literature offers critical assessment of varied approaches by