Accounting - Truth, Lies, or 'Bullshit?': A Philosophical Investigation

Abstract:     
This paper offers a commentary on Lee's [2006] critique from Searle's [1995, 1998] philosophical, social constructivist perspective of the FASB's recent principles versus rules initiative. Lee argues that standard setters ignore [or are ignorant of] the philosophical issues underpinning this issue and that until they come to grips with this the initiative, their efforts will remain only a "cunning plan" to legitimate the profession's standard setting activities to the public. This paper, contra Lee, speculates that philosophically the issue goes well beyond a brute reality versus a socially constructed reality. The paper draws on several strands of linguistically oriented philosophy, including Frankfurt's [2005] insightful book, On Bullshit, to analyze the accountant's agency in preparing financial statements. The paper concludes that if economic income and capital do not exist as brute realties independently of their representation, then accountants can be justified in ignoring [or being indifferent towards] the truth or falseness of these accounts. If there is no "bottom line", no "final truth", existing prior to the accounting for them, then philosophically it makes no sense to accuse the accountant of violating the representational faithfulness conceptual framework axiom. The paper gestures towards the bigger issue of how the global capital market relies on such ungrounded accounting reports.

Number of Pages in PDF File: 15

Keywords: accounting, income and capital, standard setting, rules versus principles, linguistic philosophical considerations, accountants' agency, truth, lies, humbug and bullshit, social constructionism

JEL Classification: M40, M41, M49

working papers series