 Financial
reporting, social theories of
Accountability can be defined as the requirement for one
party (an agent) to give an 'account' to another (a principal). The principal requires, or
is entitled to require, that the agent acts in particular ways and accounts for his
actions, thereby providing evidence of the discharge of his duties. Where the relationship
is one of financial accountability then the agent will provide financial accounts.
However, accountability relations need not always be financial in form; different
societies at different times support different forms of corporate and personal
accountability. Perhaps the most commonly understood relation of accountability is
established by explicit legal contract between two parties. In this case, financial
accounting may provide a basis for monitoring compliance with the contract. Alternatively,
ideas about accountability may be informed by moral and political frameworks. For example,
if society is concerned with accountability for the welfare of future generations then
this might require a form of accounting very different from the financial reporting
practices which exist currently. The general point is that an accountability structure
describes social relations and expresses social values and choices which are either
presumed to exist or presumed to be desirable. Social theories of financial accounting are
concerned with two aspects of this structure: the identity of principals and agents and
the nature of the information flows between them.
Michael Power
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