Law and public policy in financial reporting in Australia
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NO FULL TEXT AVAILABLE. This thesis contains 3rd party copyright material. ----- The diversity of information needs of different interest groups in a market economy inevitably result in divergent views of the objectives which are to be served by mandatory reporting requirements, presenting a challenge to formulate generally acceptable principles. Company financial statements are required to comply with the statutory accounting standards and to give 'a true and fair view' of the profit or loss for the period to which the accounts relate, and 'a true and fair view' of the company's state of affairs as at the end of that period. However, the statutes neither provide a definition of the phrase 'true and fair view', nor do they stipulate how compliance with accounting standards is to fulfil this requirement. As a result of extending the private sector accounting standards to the public sector in recent times, the issue has become more complex. Notwithstanding the diversity of legitimate interests financial reporting is to serve, mandatory policy objectives such as decision-usefulness and investor protection, are frequently found to be associated with both private and public sector financial reporting. This research attempts to test whether such policy objectives are defensible, and whether they can continue to form a tenable basis of financial reporting for corporate entities in Australia. To delineate the evolution of the many objectives of fmancial reporting, a historical study of relevant statutes and standards has been undertaken. To determine the enforceability of specific policies, cases of purported negligent misstatements involving auditors in Australia, the United Kingdom and the United States, are analysed, revealing a reluctance by courts to impose a general duty of care on auditors to the public. Other objectives such as public accountability have been found wanting at a time when the public sector is turning away from its previous responsibility for societal welfare, exposing society to the vagaries of the market economy which is dominated by corporate entities, making transparency of financial reporting imperative as a substitute safeguard for the public. However, current accounting standards do not guarantee transparency of information provided, which raises serious concern as to the decision-usefulness of the information made available by the current regulatory regime. If one supports the notion of a free market economy, a fully transparent disclosure regime must be guaranteed enhancing the function of enlightenment, which is the only defensible public policy objective of financial reporting.
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