Scandals to reckon with

Financial Accounting - Advanced Financial Accounting - Financial Accounting and Reporting - Company Accounts
April 30, 2004

With more than 250,000 professionally qualified accountants, Britain has an insatiable demand for accountants and accounting books. This is further fuelled by 10 to 20 per cent of all graduates seeking a career in accountancy. These books cover the standard material in accounting for undergraduate and professional courses.

Anne Britton and Chris Waterson tackle the basic accounting and nuts and bolts of preparing standard financial statements. Now in its third edition, their book is good on the technical side but makes no mention of social or organisational contexts of accounting. Perhaps there is an expectation that these aspects are covered in advanced books.

The weighty tomes by Richard Lewis and David Pendrill and by Barry Elliott and Jamie Elliott are advanced books, in their seventh and eighth editions respectively, aimed at second and third-year undergraduates, MBA and professional students. Both books cover a lot of ground, including complex financial statements, price-level accounting, legal requirements, UK and European accounting standards and a conceptual framework for accounting.

There are plenty of examples methodically worked to guide students and teachers. Interested number crunchers can also use questions at the end of each chapter to test their knowledge. However, both books offer little in terms of additional reading and what there is is confined to technical material. Scholarly accounting journals contain a wealth of material, but scholarly research gets scant mention.

Both books explain the latest accounting standards but are silent on why rule changes were introduced and the politics of rule-making. Accounting is portrayed as neutral, objective and unbiased, rather than the outcome of negotiations, bargaining and class conflict and power positions. There is no mention of social or organisational contexts.

Accounting practices are implicated in numerous scandals resulting in loss of jobs, homes, savings, investments and pensions. Yet they do not form the basis of case studies or analysis. It is as though accounting students are expected to be greyhounds in techniques and ignoramuses in social analysis and human welfare.

The blame for this may be placed squarely on the shoulders of the professional accountancy bodies that encourage technicists, but it also indicates a crisis in the teaching of the subject, where the world of accounting reported in newspapers, magazines, TV and radio does not form any part of advanced books. Do students really have to live a schizophrenic existence? How will they become thinking managers?

Maurice Pendlebury and Roger Groves have set out to guide undergraduate and MBA students through published company accounts. There are chapters on the profit-and-loss account, balance sheet, audit report, directors' report and analysis. Appendices contain the accounts of a major quoted company so students can see what the beast looks like.

The authors show how to calculate key accounting ratios and make sense of complex accounting data, though there is little on the history of these ratios or why accountants are fixated with certain numbers. Perhaps the book is the modern equivalent of an oracle speaking to the converted.

Now in its sixth edition, it contains recommendations for further reading, but these are mainly from the positivist traditions, with emphasis on models for predicting bankruptcy and accounting ratios. Hardly anything from interdisciplinary journals gets a mention. Maybe accounting scandals provide an opportunity for attesting the validity of various models, but scandals are barely mentioned or analysed.

All four books see accounting as a narrow discipline bereft of any links with politics, management, sociology, philosophy, psychology, law and social sciences. With such narrow emphasis, one fears for the future of accounting teaching and research.

Prem Sikka is professor of accounting, Essex University.

Financial Accounting

Author - Anne Britton and Chris Waterston
Publisher - Financial Times/Prentice Hall
Pages - 3
Price - £32.99
ISBN - 0 3 65859 X

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