Financial accounting is a heavily regulated area. There are numerous regulations, laws, disclosure requirements, standards, interpretations, and rules outstanding to regulate financial reporting practices in the capital markets. For example, the Australian Securities and Investments Commission (ASIC) requires the entities and industries adversely affected by the COVID-19 pandemic to focus on: asset values, provisions, solvency and going concern assessments, events occurring after year end and before completing the financial report, and disclosures in the financial report and operating and financial review (OFR) for financial reporting. More specifically, the ASIC announced that it would review the financial reports of about 200 larger listed entities and other public interest entities as at 30 June 2020 and require entities to apply more appropriate experience and expertise in the reporting and audit process, particularly in more difficult and complex areas, such as asset values and other estimates. Likewise, companies are controlled and monitored by many rules and regulations established by many different regulatory organisations.

Required:

As explained above, companies are required to follow the regulations such as disclosure requirements for financial reporting during the COVID-19 period. However, people have different perspectives on the need for regulation in financial reporting. Explain two representative perspectives regarding the need for regulations in financial reporting and list at least two main arguments of each perspective. (10 marks