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In the recent old ages, the function and utilizations of accounting have been controversial and problematic issues which caused favorable but besides negative remarks by many bookmans ( Bryer 2006 ) .

While accounting discourses emphasise the importance of accounting, “ modern bookmans ” although admiting its significance, province that accounting bears a considerable figure of jobs and failings ( Bryer 2006:552 ) . Harmonizing to McSweeney ( 1997:691 ) , the ability of accounting to bring forth “ unambiguous representations ” has been disputed. This possible inability raised farther inquiries sing its objectiveness and equity in stand foring the universe.

This paper will cover with the issue whether the manner accounting represents the universe can ease control within the administration. The get downing point in nearing the above issue is the account of the significance of representation. Furthermore, the three features of representation, remote control, supplanting and abbreviation are explained severally.

Second, the paper emphasises the significance and chief utilizations of accounting within the concern universe. Furthermore, it analyses the function of comptrollers as communicators and the significance of their work in stand foring the operations of the administration.

Next, the paper highlights the function and the critical necessity of control in order for administrations to last and prospect. Besides, the assorted ways by which accounting helps command to be exercised are described. The paper emphasises that control is used to extenuate the bureau job both between higher-ups and subsidiaries, and between proprietors and directors.

Afterwards, the disadvantages of accounting are analysed in order to show that accounting as a pattern and the manner it represents the concern universe may hold some of import and intolerable defects.

Last, the paper concludes that although the unfavorable judgment against accounting is based on sensible evidences, accounting was, is and will go on to be the best control system presently available.


A simple illustration to exemplify the significance of representation is Rene Magritte ‘s celebrated picture. The picture is picturing a pipe and under it states that “ Ceci n’est pas une pipe ” – ” This is non a pipe ” . The painter wanted to show that the picture is an image, a representation of a pipe and non a pipe as it seemed and frequently stated by people.

Harmonizing to MacKay ( 1969:161 ) , representation may be understood as “ any construction ( pattern, image, theoretical account ) whether abstract or concrete, of which the characteristics purport to typify or match in some sense with those of another construction ” . Furthermore, Foucault ( cited in Lord 2006:5 ) suggests that representation is the spread between the existent “ things ” and how we understand them. “ In modernness, the spread between words and things can non be closed, but can be bridged ” ( Lord 2006:5 ) .

Harmonizing to Lilley et Al ( 2004:24 ) , administrations are seen as “ engineerings ” that procedure information. The most important intent of engineerings is the support of control since they win to “ do transparent what is opaque, to do present what is distant, and to pull strings what is immune ” ( Cooper 1992:255 ) . This is farther supported by Lilley et Al ( 2004:24 ) , who view administrations as mechanisms for “ intercession in the universe ” and one of their cardinal grounds for being is the enabling of control.

However, representation is ever a “ permutation ” for an event and will ever be a partial presentation of that event and “ ne’er the event itself ” ( Cooper 1992:257 ) .

Features of Representation

Harmonizing to Cooper ( 1992:257 ) , “ remote control, supplanting and abbreviation ” are the techniques by which representation conceives economic system. Furthermore, Zuboff ( cited in Lilley et al 2004:25 ) argues that these three characteristics can be used to understand how representation can run within administrations.

Remote Control

The first feature is distant control. Harmonizing to Lowe and Bryan ( 2007:953 ) remote control merely means to “ command at a distance ” . Cooper ( 1992:257 ) argues that remote control substitutes the “ direct engagement of human organic structure and its senses ” .

As Cooper ( 1992:257 ) explains, direction plants on representations of the organizational environment such as “ theoretical accounts, maps, Numberss and expression ” . These representations enable directors to cover with multiple complicated issues and jobs at a distance and in an effectual manner ( Cooper 1992 ) . Such distant issues and jobs are brought near direction but at the same time are unbroken and dealt at a distance ( Cooper 1992 ) .


The 2nd feature is displacement. Representation rejects the construct of “ fixed location ” and topographic points accent on mobility ( Cooper 1992:257 ) . Through supplanting, the of import characteristics of an event can be substituted utilizing symbols ( Lilley et al 2004:26 ) . In this manner, symbols can be moved from one topographic point to another where they can be studied and appropriate actions can be decided.

For illustration, certain public presentation symbols ( profitableness ratios, turnover growing ) of each sub-unit of a big multidivisional company can be summarised on a tabular array. This tabular array can be presented to exceed direction who may be located to the central office of the company and assist them to do strategic determinations for each sub-unit ( Lilley et al 2004 ) .


Finally, the 3rd characteristic is abbreviation. Cooper ( 1992 ) believes that remote control and supplanting are non sensible without abbreviation.

Abbreviation makes something hard and complex to be presented as simpler and converts the “ large into little ” ( Lowe and Koh 2007:956 ) . The world is “ decreased ” into a representation and is “ condensed ” to as much and every bit small so as to be understood and to move upon it ( Lowe and Koh 2007:956 ) . Abbreviation enables representation to go “ compact, versatile and calculable ” ( Lowe and Koh 2007:956 ) .

Accounting and Accounting Representation

Lowe and Koh ( 2007:954 ) position accounting as a “ representational device ” .

Harmonizing to Daft and Wiginton ( cited in Roberts and Scapens 1985:448 ) accounting is viewed as a “ linguistic communication ” . Accountants are seen to be “ communicators ” of the accounting linguistic communication ( Elliott and Elliott 2011:3 ) . The most common mean of communicating is the accounting studies which are “ pass oning the consequences of corporate activities to interested parties ” ( Young 2006:582 ) .

Furthermore, the Financial Accounting Standards Board ( 1978:9 ) , states that the purposes of fiscal coverage are to “ supply information that is utile in doing concern and economic decisions-for devising sound picks among alternate utilizations of scarce resources in the behavior of concern and economic activities ” .

“ Management, recognition grantors, shareholders, authorities bureaus, and the general populace ” have high involvement in the fiscal statements since “ they provide a footing for the preparation of many concern determinations ” ( Finney and Millers 1951:134 ) .

Accounting representation provides utile and relevant information to the administration ‘s interested users which helps them to “ do sense of what happened, expect the hereafter, and program and assess action ” ( Roberts and Scapens 1985:448 ) .

Harmonizing to Lowe and Koh ( 2007:955 ) comptrollers ‘ work includes chiefly the building and Reconstruction of letterings and the proviso of “ representations ” of the activities of their administrations.

In the accounting linguistic communication, letterings relate to the written representations, such as tabular arraies, lists and histories that make up the fiscal studies ( Robson 1992:685 ) . Latour ( 1994:45 ) provinces that “ letterings are nomadic, level reproducible, still and of changing graduated tables, they can be reshuffled and recombined ” . Inscriptions on paper are used to “ abridge and stand for or interpret ” the production procedure of an administration ( Lowe and Koh ( 2007:957 ) .

By stand foring the operations of an administration into simpler symbols and representations direction can compare the public presentation of each division, sub-unit and employee and take appropriate action ( Lilley et al 2004:25 ) . By analyzing this simpler representation of the operations of the administration direction can do determinations sing the most efficient and effectual allotment of resources.

Contemporary Administrations and the importance of Control

Harmonizing to Otley ( 1995 ) , administrations are considered to be complex entities that are engaged in many different activities. Furthermore, administrations have assorted groups of stakeholders such as employees, stockholders, clients, providers and finance suppliers that have different outlooks from the company.

In order for an administration to last and prospect in its environment and meet stakeholders ‘ outlooks, direction has to present “ control mechanisms ” ( Otley 1995:46 ) . This will guarantee direction that the resources of the administration are used in an efficient and effectual manner for run intoing the aims of the administration ( Anthony 1965 ) .

Large administrations employ a high figure of staff. Harmonizing to the grade of power and control of each staff, administrations are structured in assorted coverage degrees of authorization. Management ‘s purpose is to do certain that employees act in conformity with the instructions given, that they abide to the codification of behavior of the administration and that they are working in the most efficient manner possible. But this is a really complicated and hard undertaking to accomplish.

Bryer ( 2006:556 ) provinces that the “ superior director ” ( the “ chief ” ) demands an history from the “ low-level director ” ( the “ agent ” ) to do certain that the agent is moving in the best involvement of the principal.

If the agent is moving in its opportunism, so there is an bureau job. In order to understate and forestall such job, rules use direction control tools to keep agents accountable by inquiring them to supply an history, to explicate, clear up and ground their actions and determinations ( Bryer 2006 ) .

Cammann ( 1976:301 ) provinces that “ budgets, fiscal studies and other feedback-based control systems ” are illustrations of cardinal direction control tools which are used to direct the behavior of subsidiaries. Furthermore, Miller and O’Leary ( 1987:241 ) added that “ standard costing and budgeting ” are tools that enable the visibleness of employees ‘ “ inefficiencies ” . Besides, these tools express in fiscal footings the “ part ” of each employee to the entire “ efficiency ” of the whole administration ( Miller and O’Leary 1987:243 ) .

As suggested by Cammann ( 1972 ) four ways of accounting control systems can be used by principals, or direction, to act upon the behavior of agents, or subsidiaries. Control systems can be used for “ end scene ” , “ rating ” , “ contingent wages allotment ” and for “ job resolution ” Cammann ( 1976:302 ) .

First, the future degree of public presentation expected from employees can be communicated by utilizing “ control system steps ” ( Cammann 1976:302 ) . Furthermore, Cammann argues that every bit long as the ends set by direction are actuating to employees, their future behavior can be influenced in a positive manner.

Second, control systems can be used as an rating tool for employees ‘ public presentation ( Cammann 1976 ) . By and large, employees want to accomplish high public presentation degrees and have good feedback by their higher-ups ( Cammann 1976 ) . As a consequence, the public presentation appraisal will be an of import influencing factor of their behavior ( Cammann 1976 ) .

Furthermore, control systems can be used as a tool for honoring employees based on their rating consequences ( Cammann 1976 ) . However, in order for employees to seek for a better public presentation, they must be convinced that the wages allotment is a just and indifferent procedure and must value the wagess ( Cammann 1976:302 )

Last, the information sought by the “ control system ” can be used to supply employees with constructive “ work-based feedback ” which can assist and actuate them for better public presentation degrees ( Cammann 1976:302 ) .

The bureau relationship and job described above between higher-ups and subsidiaries besides exists between proprietors and directors of an administration.

The increased size of most modern-day administrations has led to the separation of ownership and control. In other words, the group of people that own a company ( “ the rules ” ) has appointed a different group ( “ the agents ” ) to command and pull off the resources of the company on behalf of the rules ( Arnold 2004:753 ) .

The bureau jobs begin when directors pursue their ain “ self-interest ” aims in the loss of the best involvement of stockholders ( Arnold 2004:753 ) . Directors ( agents ) are working on a day-to-day footing on the operations of the administration and hold entree to all relevant information ( Arnold 2004 ) . On the other manus, stockholders do non hold entree to the same degree of information, as their agents, since they are non involved to the daily activities of their company.

To react to this “ information dissymmetry ” and the “ possible struggle ” of involvements between rules and agents, stockholders use fiscal coverage information to command direction ‘s actions and determinations ( Arnold 2004:753 ) .

In both versions of the bureau relationship, ( between direction and subsidiary and between stockholders and direction ) principals use accounting steps to command their agents. The future actions and behavior of the agents are defined by the fact that the principal will measure their public presentation and consequently set “ penalties ” or “ wagess ” ( Bryer 2006: 557 ) . In this manner, the principals control their agents and are able to keep them accountable for their actions ( Bryer 2006: 557 ) .

Criticism of Accounting

As analysed above, accounting is doubtless a cardinal mechanism of control ( Otley 1995:46 ) . However, modern bookmans believe that “ its function and position are debatable ” ( Bryer 2006:551 ) .

Otley ( 1995:46 ) argues that even though accounting has a cardinal function in the control construction of administrations, it should be combined with other agencies of control. This statement seems sensible since there are activities that can non be step exactly and in quantitative accounting footings ( Otley 1995:48 ) .

For illustration, “ market portion and competitory place, employee committedness and morale, and the advancement of research and development work ” are really of import issues of the administration but can non be represented in Numberss ( Otley 1995:48 ) .

Harmonizing to Bryer ( 2006:554 ) , “ critical comptrollers ” argued that accounting has no “ proficient ” significance and that it does non cover with “ an nonsubjective world ” . Harmonizing to Roberts and Scapens ( 1985:448 ) , accounting methods used by direction to sort disbursals, income, net income and to calculate fiscal ratios may include an component of ambiguity.

Another illustration showing that control may non be achieved by accounting systems is the budgeting procedure. Budgets can be a dominant and utile motivation tool if low-level directors and employees participate in the scene of the accounting aims. Harmonizing to Lyne ( 1995:250 ) , greater grade of engagement leads to increased credence of the budget and as a consequence, employees will be more motivated to accomplish the budget.

On the other manus, subsidiaries may be motivated to pull strings budgets and even worse, to pull strings the consequences presented to directors. Furthermore, if budgets are seen as impossible to accomplish by subsidiaries, so this will deter employees ( Bryer 2006 ) .

Harmonizing to McSweeney ( 1997 ) , accounting does non supply a faithful and complete representation of administrations ‘ activities and consequences. Accounting information is uncomplete as certain facets are non included because they are non “ material ” plenty or because it is “ excessively dearly-won ” to included them ( McSweeney 1997: 696 ) .

As FASB states “ fiscal coverage ” includes “ estimates ” , “ estimations ” and “ opinions ” ( cited in McSweeney 1997:696 ) . This is another illustration of how accounting fails to dependably stand for administrations. However, as FASB states an “ estimation ” may be considered to be plenty when the exact measuring is non material and relevant for the accounting study ( cited in McSweeney 1997:696 ) .

Chwastiak and Young ( 2003:533 ) in their paper, analyze how administrations “ silence ” in their one-year studies the negative effects of their actions and operations on the environment, consumers, workers and the society at big. As Loft ( 1995:35 ) provinces, accounting is a “ disciplinary engineering ” which facilitates the prioritisation and accent of “ fiscal ” at the disbursal of all other issues. In other words, “ in doing certain things seeable, other things become unseeable ” ( Loft 1995:35 ) .

Another illustration, which demonstrates that accounting failed to stand for the world of an administration and therefore failed to enable control, is the widely known accounting dirt of Enron ( Dyson 2004:263 ) . Enron was an American company which managed to go one of the biggest “ energy trading ” corporations of the universe ( Dyson 2004:263 ) . “ Not many companies come bigger than Enron, and none bigger has of all time filed for bankruptcy as Enron did ” ( Sloman 2008:238 ) .

The accounting regulations that Enron used enabled the company to pull strings the accounting study and fell from the market the enormous losingss and the highly high wages of the executives ( Dyson 2004:263 ) . Fraud and “ questionable accounting patterns ” used by Enron have led it to its prostration ( Dyson 2004:263 ) .

The Enron dirt highlights the jobs of the bureau theory. The directors of Enron decided to prosecute their ain involvements and aspirations which clearly were different from stockholders ‘ involvements. The struggle of involvements and the absence of end congruity made the bureau relationship fail. Principals had limited and false fiscal information available which led to stockholders ‘ inability to put equal controls upon direction ( Arnold and De Lange 2004:752 ) .

The Enron instance was described as a “ market calamity ” by Arnold and De Lange ( 2004:763 ) . It caused major jobs to the US economic system and badly damaged the credibleness of the accounting profession and the dependability of “ fiscal coverage ” ( Arnold and De Lange 2004:752 ) .


The statement that the manner accounting represents the universe enables command within an administration, can non be wholly accepted nor rejected. It does non hold an absolute yes or no reply.

As analysed above, accounting ‘s chief map is to supply utile fiscal information to the administration ‘s internal and external stakeholders. Accounting is seen as a “ representational device ” and is used for pass oning the activities and consequences of the administration to its users ( Lowe and Koh 2007:954 ) .

Accounting represents the operations of the administration and provides “ nonsubjective ” and relevant fiscal and non-financial information to stockholders and direction ( Bryer 2006:552 ) . In this position, “ accounting is the most of import control system ” which directors and investors have ( Bryer 2006:552 ) .

At the same clip, there are a batch of illustrations and dirts that unluckily have brought into visible radiation that accounting bears important disadvantages. These have harmed its sensed quality and credibleness. The most of import and memorable illustration is the Enron dirt which badly harmed the credibleness of the accounting profession and accounting ‘s quality.

Harmonizing to Ezzamel and Hart ( 1987:107 ) , “ the function of accounting in organizational control is small understood ” . If the function of accounting is non communicated, understood and valued throughout the members of the administration, so it becomes really hard, even impossible, to be achieved.

Besides another barrier in utilizing accounting as a control map is the fact that many higher-ups do non understand what their subsidiaries are making ( Armstrong 2002:285 ) . Therefore, higher-ups are non in the place to command their subsidiaries ‘ procedures since they do non cognize what they are reexamining ( Armstrong 2002:285 ) .

Accounting has of import advantages but at the same clip bears disadvantages. It has been accused that the manner it represents the universe is non complete and nonsubjective. It must be noted nevertheless, that any representation of an event will ever be “ partial ” as it is merely a permutation and ne’er the existent event itself ( Cooper 1992:257 ) . So, possibly accounting as a map, does represents the universe at the best possible manner, capable to the restraints attached to the representation procedure.

Loft ( 1995:35 ) argues that “ the accounting system “ re-creates ” the activity of the administration in fiscal footings, enabling its control ” . There is “ no other fiscal rule ” than accounting that “ better serves ” and objectively assists direction ( Sloan 1964:140 ) . Accounting is, possibly, the best option we have at the minute.

Possibly accounting is misinterpreted by users that do non hold the basic fiscal accounting cognition. A possible suggestion would be to inform and “ warn ” users of accounting ‘s defects and heighten their cognition, so as to right construe fiscal studies and non to be misled.

Possibly alternatively of impeaching and underscoring the jobs and negative effects of accounting, a better solution would be to believe and implement ways to better its quality, and heighten its credibleness and equity in users ‘ heads.

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