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9 - Theoretical conditions for validity in accounting performance measurement

Published online by Cambridge University Press:  22 September 2009

By
Hanne Nørreklit ,
Lennart Nørreklit  and
Falconer Mitchell
Edited by
Andy Neely
Hanne Nørreklit
Affiliation:
Professor of Management Accounting and Control Aarhus School of Business, Denmark
Lennart Nørreklit
Affiliation:
Professor Danish Centre for Philosophy and Science Studies, Aalborg University, Denmark
Falconer Mitchell
Affiliation:
Professor of Management Accounting University of Edinburg, UK
Andy Neely
Affiliation:
Cranfield University, UK
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Summary

Introduction

The concept of truth is a foundation upon which the accounting profession has built its reputation. The need for truth in accounting is enshrined in ethical codes, accounting regulations, authoritative texts and, of course, the auditor's assignation of a “true and fair view”. MacNeal, in his classic critique of accounting, has emphasized the salient role of truth for the accountant:

Accounting is the language of finance. Members of the accounting profession are interpreters upon whom the vast majority of people must rely for information … If interpreters do not tell the truth, or tell truths intermixed with half truths, many people will be deceived to their hurt.

(MacNeal, 1970[1939], 1)

The absence of truth from accounting information, or, indeed, even doubts about its presence, can have profound effects upon the accounting profession, its operation and its regulation. For example, in the United Kingdom in the late 1960s and 1970s the criticism of the flexibility of accounting practice during the GEC/AEI merger and the Leasco Pergamon affair preceded and triggered the implementation of a national system of accounting standardization (Stamp and Marley, 1970; Leach and Stamp, 1981; Stamp 1985). More recently, in the United States, the Enron scandal, and subsequently the Worldcom scandal, destroyed a leading international firm of accountants – Arthur Andersen – and led to a marked strengthening of formal corporate governance regulations.

Truth is, therefore, a very practical and immediate issue for accountants.

Type
Chapter
Information
Business Performance Measurement
Unifying Theory and Integrating Practice
 , pp. 179 - 217
Publisher: Cambridge University Press
Print publication year: 2007

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