Social Norms Versus Standards of Accounting
25 Pages Posted: 19 May 2005
There are 2 versions of this paper
Social Norms Versus Standards of Accounting
Social Norms Versus Standards of Accounting
Date Written: May 2005
Abstract
Historically, norms of accounting played an important role in corporate financial reporting. Starting with the federal regulation of securities, accounting norms have been progressively replaced by written standards. While social norms are maintained through an informal process of social as well as international sanctions, standards require more formal enforcement mechanisms, often supported by implicit or explicit power of the state to impose punishment. The spate of accounting and auditing failures of the recent years raise questions about the wisdom of this transition from norms to standards. Many aspects of family, local, professional, social, national and international behaviors continue to be governed by mechanisms in which norms play an important role. It is possible that the pendulum of standardization in accounting may have swung too far, and it may be time to allow for a greater role for social norms in the practice of corporate financial reporting.
JEL Classification: M49
Suggested Citation: Suggested Citation
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