Accounting regulation as an instrument of public accountability : a case study of New Zealand : a thesis presented in partial fulfilment of the requirements for the degree of Doctor of Philosophy in Accountancy at Massey University
This thesis highlights the importance and privileges of corporations with the obligation to provide information to society about their activities. The primary reporting vehicle is seen to be the annual report with accounting regulation viewed as a significant quality control device. It is postulated that New Zealand accounting self-regulation has failed in delivering the latter protection. By way of providing a background to the discussion the Anglo-American accounting regulatory systems are critiqued and found inadequate. Special concerns are noted with the accounting standard setting due process procedures and enforcement mechanisms. Linkage of the New Zealand accounting system to the Anglo-American cluster is shown through various international classification studies. Financial accounting paradigms are analysed with a view to determining the end-purpose of corporate reporting. It is concluded that the accountability paradigm is most closely aligned with a broad societal view of accounting. A Public Accountability Model of Accounting Regulation is evolved. The Model is based on efficiency and equity criteria, and emphasises the responsibility of preparers to communicate adequate financial and non-financial information to stakeholders. The New Zealand accounting regulatory structures are empirically examined as a case study, with the New Zealand Society of Accountants, domestic and overseas systems compared. It is shown that the NZSA, overseas bodies (especially the British and International Accounting Standards Committee), and preparers exert the most influence, with non-accountant stakeholders shown to have the least impact. The regulatory mechanism under the Model incorporates the profession's expertise, stakeholder representation, and the coercive power of the state. New Zealand corporate reports are found to be: difficult to read, lacking sufficient disclosure data, and imparting very little non-financial information. It is shown that these inadequacies are due mainly to the absence of a capital market overseer, critical lack of stakeholder input, lack of explicit objectives and ineffective enforcement mechanisms. External crises such as the 1987 sharemarket crash, company failures and publicised lack of compliance/enforcement have generated abundant public pressure leading to several governmental reviews. These reviews are deemed incomplete and unlikely to meet societal expectations. The research provides insights into accounting regulation and its relationship with corporate reporting in New Zealand. It is recommended that more effective regulation be introduced to ensure greater disclosure, recognition of stakeholder needs, and a higher level of non-financial data. It is argued that the proposed Model would help increase stakeholder confidence in corporate reports as it is designed to address the issues of the under-production of accounting information and information asymmetry.