Questions 1. How do conceptual frameworks of accounting attempt to create a theory of accounting? Describe the components of the IASB Framework and how it contributes to a theory of accounting. 2. Some people argue that there is no need for a general theory of accounting as established in a conceptual framework. They say there is no overall theory of physics. biology, botany or psychology, so there is no need for an overall theory of accounting. Furthermore, attempts to develop such a theory are futile and unnecessary, since accounting has not needed a conceptual framework so far. Debate this view. 3. What does the IASB Framework describe as the basic objective of accounting? What are its implications? 123 CHAPTER 4 A conceptual framework shareholders, how me why What type of information do you think is useful for sharehol creditors is this the type of information that is currently 5. The pressions truth'. Justice and a mess' have all be provided desirable characteristics of accounting information. What e d to in practice Are they included in the IASB Frumor rob o u 6. Explain the role of accounting in relation to (a) individuals (b) finns (c) the Australian economy 7. Cam Accounting ever provide an unbiased map of economi Some argue that the development of a conceptual framework is because accountants constantly deal with specific issues that will by an overall general conceptual framework. In particular, a con makes no allowance for differences in the social contexts where al applied. They also argue that it would be preferable to develop solutions to amunting issues, based on case study research, and h mind the social contexts of all accounting decisions. Discuss arguments for and against it. framework is inapprop that will not be es wyth es where accounts ferable to develop case-sped nch and bearings e, por an art or a science de dus statemen. ed to SAC 5 concerning been moving towards a particular 9. What is the difference between art and science is accounting an art Does it matter? Why or why not? 10. The dewelopment of a SME standard by the IASB will defeat the man International harmonisation.' Explain why you agree or disagree with 11. In Australia, the conceptual framework did not proceed to SAC 5 concer measurement. (a) Why do you think that was the case? (bDo you think that accounting standards have been moving towards measurement method? If so, what is that method? (c) How can standards lead the development of a formalised conceptual framework? 12. Give reasons for your answers to the following questions. (a) How important is it that standard setters agree on objectives, concepts and definitions before they develop a conceptual framework of accounting! (b) How important is it that the conceptual framework is generally accepted by the business community before it is applied to develop accounting standards (c) Why do the FASB and IASB require a common conceptual framework? 13. Explain the advantages and disadvantages of principles-based and rule-based standards. 14. Why has the FASB been directed to produce more objective-based standards? Do you consider this to be a realistic standard setting objective? 15. Discuss whether the IASB Framework is merely a policy document based on professional values and self-interest, without scientific foundation. In your discussion, state your opinion on whether the conceptual framework should serve as a policy document in this manner. 16. Assume that you have been contracted by the Australian Accounting Standards Board to develop a proposal regarding whether to issue an accounting standard accounting for the costs of environmental damage. Draft a proposal of low or less outlining why you think it is appropriate, or inappropriate, to develop accounting standard on this issue. Also outline the key issues that would nc be covered by the standard and how the conceptual framework can contro resolution of those issues. mage. Draft a proposal of 1500 words ART 2 Theory and accounting practice 17. Write a report of 1500 words or less to the chairperson Council and the Australian Accounting Standard us or less to the chairpersons of the Financial Reporting following argument: in Accounting Standards Board, commenting on the Attempts to bring about radical change through the introduction conceptual framework have failed. When it appeared as have failed. When it appeared as though SAC 4 would require firms to report their true liabilities, lobbying began in ea business ensured that any innovation was quashed. As such, can be hoped for from a conceptual framework is that it legitim practice, maintains existing social and economic status, and staves sector attempts to control accounting standard setting 18. What is business risk auditing? How does it diffe S business risk auditing? How does it differ froni traditional substantive auditing? Why do critics believe it is used to justify selling more consulung saan audit clients? How could business risk auditipgbe blamed for failures such lobbying began in earnest and ation was quashed. As such, the best that tual framework is that it legitimises current nd economic status, and staves off public og be blamed for failures such as Enron? Additional readings