Cultural Influences on Accounting and Its Practice Essays

Cultural Influences on Accounting and Its Practices Recent research in comparative accounting has led to a number of interesting theories and models that have attempted to analyse the causal factors behind the evolution of dissimilar accounting and financial systems in different countries. These diverse ways of accounting are in the process of being harmonised because of global business imperatives, and international accounting bodies are trying to bring about convergence between the accounting systems of different countries. HYPERLINK https://www.ukessays.com/essays/accounting/cultural-influences-accounting-4833.php \l _ftn1 [1] The work of Geert Hofstede HYPERLINK https://www.ukessays.com/essays/accounting/cultural-influences-accounting-4833.php \l _ftn2 [2] on cultural effects on accounting development, expanded and elaborated by Gray HYPERLINK https://www.ukessays.com/essays/accounting/cultural-influences-accounting-4833.php \l _ftn3 [ 3] later in his theory of cultural relevance in the formation of accounting systems is one of the more discussed models of comparative accounting. It is the purpose of this assignment to elaborate on this model and use it to analyse the differences in the development of accounting in China and Japan in the late nineteenth century. 2. The Hofstede-Gray Framework The broad framework for this model was created by Hofstede, but later adapted by Gray to explain the influence of culture on accounting systems. While, the normal practice is to treat these two models separately, a joint reference makes it much simpler to explain and use. The Hofstede-Gray model fist lays down the argument and then goes on to elaborate the various premises that support the theory. It is essentially deductive in nature and logical in its approach. Hofstede, in 1980, developed a model of culture that distinguishes members of one human group from another and stated that culture ma nifests itself at four levels, symbols, heroes, rituals and values, all of which work towards " accounting systems to vary along national cultural lines" HYPERLINK https://www.ukessays.com/essays/accounting/cultural-influences-accounting-4833.php \l _ftn4 [4] His theory was further modified during the next ten years. In1984 he expounded the four very interesting dimensions of culture, which vary from one group to another and consist of Individualism V Collectivism, Large V Small Power Distance, Strong V Weak Power Avoidance and Masculinity V Femininity. These, he said are the most common societal preferences that distinguish one society from another. Societies which prefer individualism consist of people who live in small units and prefer to look after their very own, whereas collectivism represents a social structure where relationships are interlinked and people expect their larger extended clan of relatives to look after them in exchange of loyalty. Power dis tance represents the extent to which its members accept the inequality in distribution of power. Large power distance societies are thus essentially unquestioningly hierarchical in nature. Uncertainty avoidance represents the degree to which members of society are ready to accept uncertainty and vagueness. The lesser the acceptance of uncertainty the stronger is the rigidity of thought and belief in a particular society and its resistance to change. Masculinity, in a society, stands for its dominant preference for achievement, heroism and similar symbols while femininity is associated with qualities like compassion, care for the weak and quality of life. In 1991, HYPERLINK https://www.ukessays.com/essays/accounting/cultural-influences-accounting-4833.php \l _ftn5 [5] Hofstede added another dimension that dealt with Short Term V Long Term Orientation. Short term orientation stood for values like speedy achievement of social status, overspending and a concern for quick r esults whereas long term orientation looked at gradual achievement of results, a thrifty approach towards savings and an adaptation of tradition to meet modern needs. In 1998, Gray took up Hofstede's cultural hypotheses and linked them to the development of accounting systems in a meaningful way, stating that cultural or societal values permeated through organisational and occupational subcultures, and vice versa, though obviously the degree of integration differed from place to place. "Accounting systems and practices can influence and reinforce societal values". HYPERLINK https://www.ukessays.com/essays/accounting/cultural-influences-accounting-4833.php \l _ftn6 [6] These basic premises were succeeded by the formulation of four hypotheses on the relationship between specifically identified cultural characteristics and the development of accounting systems. a) Professionalism versus statutory control: This cultural value denotes an inclination for the ex ercise of individual professional judgment and self-regulation as opposed to observance of authoritarian lawful needs and legislative writ. As such, the higher a country ranks in terms of individualism and the lower it ranks in