The Theory Of Accounting Governance

The development of the modern accounting shows that accounting has changed into the multi-benefit subject and a public affair with social attributes from simple private affairs with the development of the market economy. With the accounting attributes changing, the society has changed its attitude from free connivance to supervision implementation. Moreover, this change is not the natural product and it has undergone a bitter process from the disorder to governance. The accounting governance has taken one century journey and made world-interest achievements. However, in this new century, accounting comes to a crossroad to make a decision with the exposure of the accounting cheating cases such as in the European and American capital markets and a series of such financial scandals as in China. It has posed an issue of whether accounting has advanced or it has to take another route.When reviewing the development history of European and American accounting, it is easy to see that the modern accounting has experienced a process from free connivance to the government's supervision. Just as liberalism prevailed, the accounting before 1993 was connivance, which was proved by historians proved to be one of the reasons which led to the economy recession. From then on, accounting was supervised by governments and has reached the extent of present detailed-regulation supervision. But this detailed-regulation couldn't fundamentally solve the problems of the financial accounting statement made by the corporate owner deviating from the practical situation under the deviation of two rights. Reviewing the development history of accounting, both the connivance relying on the market regulation and the government supervision through the government regulation cannot stop the accounting cheating, which caused economic disaster. According to it, this paper, titled the theory of the accounting governance, tries to pose the comprehensive governance notion of accounting with reference to the research results of the modern governance theory in order to construct a systematic and scientific theory system of financial accounting governance which combines macro and micro approaches.This whole paper consists of 7 chapters besides introduction. It has analyzed and demonstrated the theoretical and practical problems of the accounting governance from different prospective. The detail follows below:I .The theory of the accounting governanceTo study the basic theory of the accounting governance, it is essential to obtain the clear definition of accounting governance. It is the basis of this paper's argument.At first, get the basic implication of governance. The broad and narrow concepts of the accounting governance are raised. Broadly, the accounting governance refers to the convergence of supervising, controlling, regulating and coordinating accounting activities, administration principles and system arranges.From the prospective of governance, it includes both macro governance and micro governance. From the prospective of the governance content, it involves about the based-on-law system accounting legation and the based-on-moral accounting governance. From the governance scope, there are market participants, administrators, service-grouped benefit-related corporate external accounting governance and the corporate internal accounting governance based on the agency-by-agreement of property system and two rights deviation. Narrowly, the accounting governance implies authentic, entire, objective and just system arrangement of accounting information provided by the corporate.Then, based on the definition of the accounting governance concept, this paper analyzed the modern theory base of modern corporate governance and drew a conclusion that the accounting governance is also based on the agency-by-agreement theory and benefit-related-person theory, etc. The financial accounting information is an important means to solve the problem of the non symmetric information of the client and the agent under the condition of two-right deviation. At the same time, it is the major source of generating non-symmetric information.As the operator of the clients, it plays the role of producing, releasing and transmitting accounting information after seizing the practical control of the corporate. Therefore, it is clear that there exists non-symmetric accounting information between the provider and users. It is necessary to solve the problem of the accounting governance and construct the mechanism of the accounting governance.The purpose to study the accounting governance is to construct a scientific and highly efficient accounting governance system. With reference to the September model principle, the accounting governance model has been constructed, which lays the basis for the further research.II .The theory of the accounting legationThe accounting legation means that the accounting affairs are governed and multi-benefit relation in the accounting activity is coordinated and balanced. The related theory and the based-on-law environment have been analyzed. The strategy to govern the country according to laws and the market economy are the theoretic research results, which provides the theory and practice for the implement the accounting legation and its effective operation. Specifically, the accounting legation is the specific application of governing the country according to laws in the accounting field. The implementation of the accounting legation implies that market economy is the specification of legation economy.Then the premise condition of the accounting legation has also been analyzed. The relative sound law system is the premise of governing the country according to laws; a certain level law awareness and legation concepts are formed in the whole society, which is the base for implementing the strategies of governing the country according to laws. So constructing and perfecting the accounting legation system is the premise to realize the accounting legation; Enhancing the legal awareness and the legation concept of participants (mainly accountants) is the base of the accounting legation.The construction of the accounting legation underwent 3 stages: (1) the accounting law issued in 1985 was the mark of the initial construction of the accounting legation; (2) the corporate accounting principles issued in 1992 and the accounting law, the first modification issued in 1993 marked that formation of the accounting legation adapting to the socialist market economy; (3)The accounting law, the second modification, issued in 1999 marked the perfection of the accounting legation adapting the market economy. Because of three-stage development, the legal system of the accounting legation has been basically formed. The key to the success of the accounting law is to improve the quality of accounting practitioners.Based on the previous theory analysis, this paper reflects on the present situation the attributes of the accounting legation. There exist clear era characteristics and defects in our present legation system: (1) the lag-behind economy development cannot promote the necessary legation construction with the characteristics of experience and practical application; (2) the structure theory of the law system is not uniform, standard; (3) the legation embodies too many multi-benefit agencies and clear law contradiction. The characteristics and defects in the present legation system obviously affect the accounting legation system.It is mainly shown in these aspects: (1) the accounting law and the accounting legation system under its control embody too many administrative regulations; (2) the investigation of the accounting law responsibility attaches great importance to the administrative penalty and penal penalty and neglect the civil responsibility compensation; (3) it cannot coordinate other related laws.The different levels of the accounting legation system have been analyzed rationally and a conclusion has been drawn that the accounting principles relate to general laws. On the one hand, the accounting principle has its own characteristics and it is not affiliated to related laws. On the other hand, it promotes the formulation and modification of the corporate law, the tax law, the stock deal law and related laws positively and significantly, which can prevent the expansion of the confirming, accounting, recording and reporting corporate law and related laws. Finally the counterproposals to improve the accounting legation have been put forward.III .The based-on-moral accounting governance theoryThe accounting governance works well with the help of moral power besides sound legal systems and based-on-law governance. We must start with the definition of the connotation of ethics governance and realization of its nature. Ethics governance is based on moral. Marks and Angles thought that moral was not the will of God and it did not belong to people, not created by subjective awareness. They also believed that all the morals were the product of the social economy. Moral is produced from people's lives and it is a special social awareness decided by the economic relation in the society.The based-on-moral accounting governance is one of the components of social ethics governance and it is the accounting moral governance compared to the accounting legation governance. To maintain the long-term and integral benefit to secure its position in the fierce competition, accounting, an important profession in the modern market economy system, must conform with the country laws, regulations and systems and it also needs the accounting moral obeyed by all the practitioners.The relation between the accounting profession and other social people is regulated by means of the accounting moral, which reveals the based-on-moral accounting governance. The based-on-moral accounting governance means that the accounting profession ethics, people's spirit power must play a part so that the participants in the accounting activities have to strengthen their moral quality consciously and regulate their behaviors according to the accounting ethics to clean the air and enhance the reputation of the accounting profession. The based-on-moral accounting governance at least involves two-level implications: one is that the accounting is governed by means of morals; the other is that morals are essential to the accounting governance.To understand the accounting professional morals correctly, this paper explains the accounting profession moral from ethics. The accounting ethics refers to the combination of the kind and evil concept, value orientation, value judge standard and feeling expression style, behavior regulation and behavior habit of the practitioners formed in the accounting activities.?The author believes that the accounting profession moral relation is determined by the practitioners' positions in the accounting activities. In the long history of the accounting profession development, there are several profession orientations: (1) the housekeeper in the natural economy era;(2) the accountant in the simple commodity economy era; (3) the professional accountant in the market economy era.In the western developed countries, accountants, doctors and lawyers are called three major professions in the market economy. Based on it, this paper has shown that a specific demand is required for the accountants (including accounting practitioners) because of 3 reasons: (1) accounting is the profession dealing with money, which requires that the accounting people can stand the temptation of money; (2) the specific position of accounting in the relation between the client and the agency demands that it should keep objective and just position; (3) the not determinants specifically demand that the practitioners should keep highly-moral professional promises.The based-on-moral accounting governance can be realized with the help of morals in nature. Compared to legation governance, it has the characteristics of strong idealism, self-discipline and the basis and broadness of legation governance. These characteristics play specific roles in the accounting governance: (1) the based-on-moral accounting governance is the regulator of keeping the accounting order; (2) the based-on-moral accounting governance is accelerator of deepening the accounting reform; (3) the based-on-moral accounting governance is the wheel of developing the accounting cause.This paper still explains that there must be a perfect accounting profession moral operation system to implement the based-on-moral accounting governance. Otherwise, ethic governance has no meaning. Therefore, based on the brief review on the accounting profession moral construction, a proposal to construct the operation mechanism of the based-on-moral accounting governance has been posed.IV.The government governance theory of accountingUnder the condition of the modern market economy, the government and the market are two indispensable means to regulate economy, both supplementing each other. There exists no society only with markets and government. To make up for the shortage of the market mechanism, this paper fully considers the government's functions in constructing the accounting governance mechanism. At first, the government plays a part in infrastructure by means of making accounting principles. The production and release of the modern corporate accounting information must be authorized and acknowledged so that it can reflect objectively the financial condition, operation results and case flow of the corporate. To make high-quality accounting principles is the base for realizing the accounting governance, which lays systematic basis for the accounting governance. Although there exist two different accounting principles models, one made by the government and the other by the civil accounting profession groups, Chinese government always makes the accounting principles in the past, at present and in the future. So the implementation of the accounting principles made by our government is one of the roles that our government plays in the accounting governance.The government relies on its administrative functions to manage accounting work in the accounting governance. The role of the government is administrating accounting directly, which is one of the main features in the government-led accounting governance model. In the long practice of accounting administration, a special accounting administration system is formed, which provides a powerful organization system for implementation of the accounting administration.The government uses the powerful means of the government audit in the accounting governance and supervises the related agencies which audit the corporate accounting according to laws. The effective accounting governance relies on the effective supervision mechanism implementation. The government audit is the major agency to implement the accounting governance. In the accounting supervision system regulated by the accounting law, there are the financial agency, the tax agency, People's banks, the security supervision agency and the supervision agency implement the accounting supervision respectively. In the present accounting legation system, on the one hand, the government supervision quality can directly decide whether the accounting governance is successful or not. On the other hand, it is crucial that the government's every supervision agency should play an important part in the accounting governance. V .The field governance theory of accountingThe accounting profession is indispensable in the accounting governance. In the market economy operation, the reason why the accounting profession exists is to meet the need of the common demands of the corporate and the investors' effectively utilizing the information resource and provide cited information, a very special professional service. Because there exists potential conflict between the corporate and the investors, that is, the corporate has intention to provide low-quality information while the investors lack sufficient ability to prove the information quality, it is necessary that the professional accountants, independent persons, provide audit services. From the perspective of the accounting governance, certificated accountants audit is both the mechanism and the result to coordinate the benefit-related persons.At first, this paper discussed the accounting field's functions mechanism in the accounting governance. The accounting field depends on the provided audit service quality to play its part in the accounting governance, which means that the certificated accountants provides high-quality service to supervise the accounting behaviors of the corporate operators and provide real and complete accounting information for the benefit-related persons. How to guarantee the audit quality of the certificated accountants is both a very important subject in the accounting governance and a perpetual topic on the self governance in the certificated accountant field. By theoretical analysis, a conclusion has been drawn that the quality guarantee mechanism of the superior certificated accountant involves the government supervision and the self discipline of the accountant field. There should be a balance of rights supervision and reasonable arrangement between two sides.This paper has also analyzed the base for the accounting field governance—the construction of the guarantee mechanism of the audit quality of the certificated accountants. With the development of the reform and the openness and the socialist market economy, the certificated accountants have grown. On the basis of reference to the foreign experience, the audit quality guarantee system consisting of the qualification confirmation, audit standard setting, audit responsibility limit, audit quality control and check has been formed, which guarantees the audit quality of the certificated accountants. It is a mechanic entirety, which ensures the whole process of the audit quality of the certificated accountants in the three stages, before, in and after audit.Based on the problems in the accounting field, a proposal has been put forward that the field management be improved and the accounting field play a part in the accounting governance. Since the reform and the openness, there has been great achievement for more than 20 years in the certificated accountant profession. But there exist many problems and contractions. There needs further improvement. Firstly, the certificated accountant field will face challenges of the service open to the outside after China's entry into WTO. Secondly, There exist such problems as the lag-behind leading mechanism and distribution system within the internal management of accountant agencies.Such proposals have been raised. The first proposal is about the countermeasure to perfect the accounting profession governance in front of opening the accounting service market. The measures include constructing sound regulation system, reforming the field association and enhance competition. The second proposal is about reforming the internal management of the accountant agency. It includes reforming the leading mechanism, which is the key to create the operation mechanism of the accountant agency, reforming the management mechanism, which is the key point of creating the operation mechanism of the accountant agency and constructing effective the accounting service mechanism, which is the goal to create the operation mechanism of the accountant agency.VI .The accounting governance theory within the corporateThe basic reason why the modern financial accounting started lies in the fact that the operator of the agency has the obligation to report its responsibility to the benefit-related clients. The main style of the report is editing the financial accounting statement reflecting the corporate financial situation, operation results and case flow. Therefore, the accounting governance must ensure that the corporate financial accounting statement to the outside must reveal the real situation of accounting information. It is necessary to strengthen the accounting governance within the corporate in order that the fake accounting information cannot flow easily out of the corporate.This paper analyzed the necessity of the accounting governance within the corporate from the prospective of the corporate governance, whose results show that the operator violates the existing accounting principles and releases fake information to make profit with the intention to impair the benefits of the related party. This motivation makes it necessary that the accounting governance be implemented in the corporate.Under the legal environment of the present corporate operation, the corporate accounting governance is rooted in the system of the corporate governance. Because different law traditions and cultural backgrounds, there are three different corporate governance models: (1) the external control corporate governance represented byBritain and the United States; (2) the internal control corporate governance model represented by Japan and Germany; (3) the family supervision model represented by East Asians. The different corporate governances form different the corporate governance system arrangements.Britain and the United States have single level corporate governance structure. The junior board in the board, especially the audition board led by the independent director exercises the corporate supervision functions. The daily supervision with total independence of the audition board, the external auditors, exercising the financial functions appointed by share holders, the application and dependence construct the basic model including the financial control, the production of financial accounting information and release the external supervision within the corporateThe Japanese and Germany corporate governance structure is two-level. The corporate consists of the share holder committee, the supervisor board and the board. The supervisor agency and the board are in the two-level state. The formed share holder committee elects the supervisor board, which appoints the member in the board. The supervision board deals with business and hold the share holder's conference, which is the governance model, handling holding the share holder's meeting, financial control and accounting information releasing. The board conducts the corporate business according to laws and regulations.Some problems in the corporate internal accounting governance have been analyzed in the internal accounting governance of the corporate. There are some problems in the corporate supervisor board set up according to the corporate law in China. There are such problems: (1) the defect of the supervision system; (2) the limit between the supervision agency and the staff; (3) the limit of the source of the supervisor; (4) the limit of the supervisor's position; (5) the limit of the supervisor's quality. The present legation influences the accounting governance system arrangement and there are contradictions.Although there are contradictions and conflicts between the supervision board set up according to the corporate law and the audit board after introductions of the independent directors in the aspect of responsibility and right limit. The responsibility of the supervision board overlaps that of the audit board. If not solved soon, there will be a big discount in the effect resulting from a series of the reform, which generates two results. One is that both the supervision board and the audit board do not take responsibility. The other is that both the supervision board and the audit board fight, which leads to loss. Such internal people as the operator take the control of finance and the decision right of the generation of the accounting information.Finally, the countermeasures have been made to perfect the corporate supervision board system, coordinate the relation between the supervisor board and the independent director, improve the relation between the supervisor board and the internal audit and perfect the investigation system of the director responsibility.VII.Analysis of the environment factor of the accounting governanceThe accounting governance is a new notion, which introduces the governance to the accounting field, to construct the accounting governance model which combines the internal macro management and external management of the corporate based on laws and morals. What will be the effect in improving the level of the accounting management, realizing the good order of accounting work, terminating accounting fake, reconstructing accounting honesty and playing a positive part of accounting in developing the socialist market economy. This paper has analyzed both the positive and negative factors which influence the socialist market economy during the transformation stage.There are many positive factors influencing the implementation of the accounting governance: (1) the modernization of the government management notion and the functions transformation provides favorable political environment for the accounting governance; (2) Our country's entry into WTO and the acceleration of the accounting internalization process provides favorable international environment for the implementation of the accounting governance; (3) the development of accounting and the accounting profession provides technological condition for the implementation of the accounting governance.There are also negative factors affecting the effective implementation of the accounting governance: (1) There still exists the notion of the plan market, which impairs greatly the promotion of the accounting governance; (2) The corporate bureaucratic system difficult to overcome sets back the implementation of the accounting governance within the corporate; (3) There is a big defect in the self construction of the accounting profession and the professional environment for the accounting governance has not been formed.Therefore, the accounting governance to be implemented today is Chinese style, which means that non-government public organizations and other benefit-related persons will be helped to play a part in the accounting governance in the one-level framework. To implement the accounting governance helps reduce the supervision cost and the supervision burden of the core supervision structure, expand the validity base and increase the supervision rationality in order to improve the governance performance in the accounting governance structure at a large scale. Meanwhile, it also helps form multitude subjects, improve the ability on governance and provide prepared conditions for governance in a typical significance.