Minding Our Manners: Accounting as Social Norms

Author: Shyam Sunder

Summary:
Everyday social norms reflect in our daily life and in corporate life accounting
standards have great influence. Here in this paper Mr. Shyam Sunder mainly focus
on these two topics that only social norms or only accounting do not reflect in
everyday of corporate life. But the shifting of rules with behavior norms can help
both corporate governance and accounting to create balance. Only reliance on
standard based reporting system can be hampered in understanding and for that
accounting can lead towards to narrow objectivity of individuals and fairness will
be questioned. Balancing between rules and social norms is most acceptable not
only in corporate life but also in every aspect of life. Emphasis on shifting
standards towards norms can create sustainable balance between accounting and
corporate governance maintaining.

Objective of the paper:

To establish an alternative and a better way of recording financial activities rather
based on social and behavioral norms than strict regulations and principles. As
heavily relying on standardized and regulated financial reporting principles causing
misunderstanding of fundamental function and creating narrower point of view
rather than focusing on the bigger picture. A well balanced function between
standardized and regulated rules and social norms and values will give a better
accounting and financial reporting. And to argue that punishing the individual who
doesnt obey the structured rules is not as good as to raise social awareness and
values.
Methodology/Sampling:
This paper based on qualitative methodology system. Actually it maintains
qualitative method and answered various question which related with this paper
and we know qualitative methodology is descriptive process which is described
and create decisions based on it. By replacing social norms with written rules and
standards, how it is going to be imposed on financial reporting is discussed here.
Mr. Shyam Sunder raise various questions based on standards based financial and
corporate governance. How, why and what are the sequential.

Scopes and limitations:

As Bangladesh is a developing country we do not have our own financial reporting
standards and have to follow the standards set by others it's high time we focus on
developing our own standards based on the balance between standards, rules and
our customs, norms and values. On the other hand if any country decides to go
with their norms rather than the standards there is always a chance of not being
comparable to others, but there is a chance of that in following in standards as well.

Finding and Analysis:

Shyam Sunder tries to implement a relationship between social norms and
accounting principles which are being abused in corporate sectors. He discussed
about the abuses of accounting in various sectors of state, relationship and their
differences, standard of norms, limits of norms etc.
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 internal 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.

Conclusion:
Social norms vary from society to society. History of that society also helps them
to be distinguishable from another society. As most of the accounting standards are
based on US and UK the language makes it even harder to implement these rules.
So Shyam Sunder recommended a balanced procedure to harmonize the financial
reporting.

Group Comment:
In a society social norms play vital roles because the culture from the previous
already adopt by the society, though without norms financial reporting is possible
but proper evaluation can be in gap. Without norms and standards, financial
reporting will find difficulties to measure.