Abstract
The accounting court proposed by Spacek (Account Rev 33(3):368, 1958) was a potent and controversial idea. The court would provide a venue to which auditing firms and clients could bring disputes over the application of accounting principles and over time would build a database of casework illustrating the court’s decisions on proper application and interpretation of accounting principles. In this paper, we contribute to the literature on the accounting court and on standard setting by analyzing group value orientations and motivations that should promote the likelihood of an accounting court appearing in these times. We base our analysis in value group theory (Shakun 1988 Evolutionary systems design: policymaking under complexity and group group decision support systems. Holden-Day, Oakland, CA.), an analysis rooted in an examination of operational and terminal values of key participants. The analysis brings to light a contradiction between the terminal values of the key players and the actions of those players. We argue that common conditions of existence came between the operational goals and terminal values in the accounting domain and key actors willingness to seek the specified values. This analysis provides a flexible but powerful tool for analyzing motivations that may influence behavior of key organizations in the accounting domain.
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Notes
It has been argued recently that accounting standards do not to produce decision useful information either at the individual or macro level.Williams and Ravenscroft (2015) state that there is incoherence in the standard setting process and that accountability and economic facts, not decision usefulness, should be the objective of accounting standards.
Note that Spacek maintained the need for an accounting court for the remainder of his life (see, for example, Spacek 1969, 1973). His description of the court and the reasons for creation of such an entity changed over time. The institutions that Spacek fought against (e.g., see Zeff 2001) have changed over the years. Thus, they do not serve as motivation for an accounting court now, so we ignore them.
Zeff (2001) described the history behind Spacek’s original proposal for an accounting court. He notes that it arose from Spacek’s anger toward the Committee on Accounting Procedure, with the speech also emerging during a period of angry confrontation between Spacek and Arthur Andersen on the one hand and the AICPA on the other, with Spacek threatening to withdraw Arthur Andersen from the AICPA. Given that the nub of the conflict was over the quality of accounting standard setting at the time, it is not surprising that the AICPA preferred another solution—the creation of the Accounting Principles Board—rather than to buy into Spacek’s Accounting Court.
We conducted an extensive search of the professional and academic literatures, including searches of Google books using Google’s https://books.google.com/ngrams/info book search facility, searching for mentions of Spacek’s (1958) accounting court proposal. We found next to none in the practitioner literature. There was a good bit more in the academic literature, with the key articles cited here.
The development of such a richer understanding should, of course, be useful to later scholars of accounting institutions, seeking to understand in even greater depth how various actors within the accounting world are motivated and behave.
We relied on the values groupings of Kleinman and Palmon (2000) rather than Kleinman and Hossain (2009) because Kleinman and Palmon’s value groupings were more compact and to the point. Kleinman and Hossain (2009), however, do provide valuable information as to how to derive values for value groupings in the accounting domain. The theory behind the value groupings, of course, is rooted in Shakun (1988).
The devil, of course, may lie in the details as to how the members of such an accounting court are selected!
Issues as to the consistency of professional judgments across time or across experts are beyond the scope of this paper. Studies of expert judgment both within accounting and out have demonstrated that even the judgments of identified experts reviewing identical stimuli differ markedly (for a literature review, see Kleinman et al. 2010). Conflicting court decisions in 2013 as to the legality of key components of the Affordable Care Act (a.k.a., Obamacare) are an instance of this.
Assuming, to the extent possible, controls for time period or other relevant factors.
Spacek was later to say of this board that “...The accounting profession should be establishing appropriate standards to give true purpose and meaning to the much used term ‘generally accepted accounting principles.’ Instead, we continue to receive a flood of unrelated and unsupported directives from the APB which further pollute fair financial reporting to the public. ...the system is so involved in trivia that it can’t identify simple, basic, and honest principles”.
Escalation of commitment is defined as the tendency to pursue a failed course of action despite evidence of such failure (e.g., Bazerman et al. 1984).
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Kleinman, G., Strickland, P. & Anandarajan, A. The Accounting Court: Some Speculations on Why Not?. Group Decis Negot 25, 845–871 (2016). https://doi.org/10.1007/s10726-015-9456-4
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DOI: https://doi.org/10.1007/s10726-015-9456-4