Critical Perspectives on Accounting

2-1
Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd
PPTs to accompany Deegan, Financial Accounting Theory 4e
FINANCIAL ACCOUNTING THEORY
Craig Deegan
Slides written by Craig Deegan
Critical perspectives of
accounting
CHAPTER 12

12-2
Learning objectives
12.1 Gain an insight into particular perspectives that challenge
conventional opinions about the role of accounting within
society.
12.2 Have a broad understanding of what ‘critical theory’ and
‘critical analysis’ means.
12.3 Understand the basis of arguments that suggest that
financial accounting and social and environmental
accounting tend to support the positions of individuals who
hold power, wealth and social status, while undermining the
positions of others.
12.4 Understand that the disclosure (or non-disclosure) of
information can be construed to be an important strategy to
promote and legitimise particular social orders, and maintain
the power and wealth of certain ‘elites’.
continued

12-3
Learning objectives (cont.)
12.5 Understand the reasons behind why some researchers
embrace a view that governments frequently act to support
powerful stakeholders (such as shareholders) rather than the
interests of less powerful stakeholders (such as workers).
12.6 Understand arguments that suggest that accounting
research will not only be influenced by current practice and
dominant ideologies, but also has the potential to influence
dominant ideologies and practice.
12.7 Be able to question whether critical accounting researchers
are actually embracing strategies that could realistically
encourage social and structural change, or whether many
‘critical’ researchers are simply partaking in various
intellectual debates with little real attempt to create positive
change.

12-4
Critical perspective defined
• Refers to accounting research that goes beyond
questioning whether particular methods of
accounting should be employed
• Instead, it questions prevailing social arrangements
and how accounting practices actually contribute to
inequities
• Focuses on the role of accounting in sustaining the
privileged positions of those in control of resources
(capital) while undermining or restraining the voice of
those without capital
continued

12-5
Critical perspective defined (cont.)
• Critical accounting theorists seek to highlight,
through critical analysis, the key role of accounting
in society
• Challenges the view that accounting can be
construed as objective or neutral (as conceptual
frameworks of accounting claim)
• Rejects a ‘pluralist view of society’ wherein many
stakeholders have power to influence government,
corporations, and so forth
– rather, power resides in the hands of a ‘small elite’
continued

12-6
• Accounting seen as a means of constructing or
legitimising particular social structures for the
benefits of those who currently have wealth
• Critical theorists do not seek to appear objective,
rather, they embrace a highly partisan perspective
• They seek to highlight the role of accounting in
maintaining social structures that they perceive as
unjust
continued

12-7
• They believe that development of particular theories
can bring about social changes in social structures
and practices, that is, the promotion of a particular
theory becomes a social actuality
• View that, if theorists have well developed theories
which question the objectivity of financial accounting,
and if they are able to generate sufficient support for
the theory then ultimately this could create the
necessary impetus for changes in the way financial
accounting is practiced and how society is organised

12-8
Critical research as part of an
‘emancipatory’ process
• The ‘emancipatory role’ of critical accounting research is
something that is often referred to by critical theorists
• An emancipatory process is a process that, somewhat
obviously, promotes ‘emancipation’
• Emancipation relates to efforts aimed at removing oppression
of some groups or procuring political rights or equality for
particular disenfranchised groups. As Roslender (2006, p. 252)
states:
– A critical social science approach seeks to provide the knowledge
required for the democratic communication and interaction required
to promote emancipation and the construction of a new set of
social arrangements that will serve the interests of the majority of
people.

12-9
Contrasting critical accounting
researchers with other accounting
researchers
• Critical theorists explore how accounting potentially contributes
to elements of society which are not equitable for some
stakeholders, such as employees or particular communities,
and ideally, such researchers also provide possible solutions to
such concerns
• This can be contrasted with most accounting researchers who,
whilst often testing for particular relationships between chosen
variables, frequently do not question any inequities associated
with the processes or systems that they are investigating. As
Gaffikin (2010, p. 35) states:
– Generally speaking, accountants have avoided meaningful self
reflection. By far the majority of accounting researchers proceed
without questioning the very essential features and assumptions of
their discipline.

12-10
Philosophical basis of critical
accounting research
• Much of the critical research is informed by the
works of Karl Marx
– Capitalism is regarded as being fundamentally structurally
flawed and is unstable
• However, some critical research adopts a ‘deep
ecologist’ philosophy
– questions the trade-off between economic performance and
ecological damage
continued

12-11
Philosophical basis of critical
accounting research (cont.)
• Other critical accounting research adopts a radical feminist
perspective
– believe that accounting maintains and reinforces masculine traits
such as ongoing quests for success, conflict and so forth without
any consideration to cooperation, respect, loyalty, caring and so
forth
– According to Reiter (1995, p. 40):
Economic theories tend to value the characteristics associated with
masculine stereotypes such as abstraction, mind, efficiency,
equilibrium, rationality, pursuit of self-interest, and autonomy. The
opposite characteristics of concretism, body, randomness, humanity,
mutuality and connectedness, which are associated with feminine
stereotypes, are missing from economic theory.
• Some researchers, such as Molisa (2011) have also suggested
that issues of ‘spirituality’ should be used to inform the practice
of accounting, and accounting research. Spirituality would
incorporate notions of love, care, and respect and it is argued
that ‘corporate accountability’ should incorporate such notions

12-12
Critical theory is a very broad
term
• Critical theory is an ‘umbrella term’ for a wide
variety of theoretical approaches perhaps more
united in what they oppose than what they agree
upon (Hopper et al.1995)

12-13
Criticism of capitalist system
• As already emphasised. critical theorists tend to
oppose aspects of the capitalist system and
accounting
• Emphasise that systems of accounting are built
around the prevailing social order—and support the
social order
• Given the practice of accounting is in the hands of
large corporations and accounting regulation in the
hands of government, accounting information will
never do anything but support the current system

12-14
Origins of critical perspective
• Grounded in Political Economy Theory
• ‘Political economy’ is the social, political and
economic framework within which human life takes
place (Gray, Owen & Adams 1996)
• Based on ‘Classical’ branch—challenges the existing
nature and structure of society

12-15
Classical political economy
perspective
• As already indicated, much critical accounting
research is related to the works of philosophers such
as Marx
• Explicitly considers structural conflict, inequity and
the role of the State at the heart of the analysis
• Highlights issues which may not otherwise be
addressed
– social welfare

12-16
Disclosure of social
responsibility information
• Critical theorists argue that disclosure of social
responsibility information is wasted unless
accompanied by fundamental changes in how
society is structured
• Corporate social accounting simply acts to legitimise,
not challenge, those providing the information
• Need social reform, and not more ‘accounting’

12-17
Views on social and
environmental accounting
• As accounting deemed to sustain particular social
structures, introduction of new forms of accounting
only help to sustain that social system
• Considered wasted effort to use more accounting to
solve ongoing social and environmental problems
• One is using the very process that caused the
problem to try to solve the problem

12-18
Role of the State (government)
• The State is seen as a vehicle of support for holders
of capital and for the capitalist system as a whole
– securities acts throughout the world were designed to
maintain the ideological, social, and economic status quo
while restoring confidence in the existing system and its
institutions (Neimark 1982, p.49)
• Government will take action to enhance the
legitimacy of the (unjust) social system
• Social disclosures seen as a means of pacifying
challenges against the capitalist system where
corporations given many rights and powers
continued

12-19
Role of the State (cont.)
• Restricting the flow of information, or availability of
specific types of information, seen as a means of
maintaining particular organisations and social
structures
• Government does not operate in the ‘public interest’, but
in the interests of ‘well off’ groups
– contrast with ‘public interest theory’ considered in previous
lectures
• Corporations typically lobby against regulation that could
increase their accountability to society – and
government often support such lobbying efforts

12-20
Role of accounting research
• ‘Mainstream’ accounting researchers are seen as
providing research results and perspectives that help
to legitimise and maintain certain political ideologies
– e.g. anti-regulation stance and EMH during the late 1970s
and 1980s matched the views of government at the time
– rise of PAT consistent with political views at the time
 The story of PAT can be told in such terms. Its rise was not
just due to its addressal of academic threats and concerns at
the time of its inception but it was also in tandem with and
connected to the right wing political ideologies dominant in the
1980s (Hopper et al.1995, p.518)
continued

12-21
Role of accounting research (cont.)
– rise of ‘economic consequences’ research (which is
discussed in Chapter 7) seems to have been motivated by
the desire of large corporations to counter attempts to
change reporting systems and levels of disclosure
– results supported corporations’ call for reduction in
regulation – regulation introduces inefficiencies and it is
better for markets to be able to operate freely
 but critical theorists would argue that markets only work in the
interests of those parties with wealth
– research efforts into inflation accounting were seen as
being motivated by a desire to alleviate shifts in real wealth
from owners to higher wages, not by higher rates of
inflation per se

12-22
Role of accounting practice
• Critical theorists see conceptual frameworks of
accounting as legitimising the accounting profession
and the financial reports produced by reporting
entities
• Accountants seen as imposing their own views
about which performance characteristics are
important or not important
• Attention is directed to particular measures (e.g.
profits) through accounting
continued

12-23
Role of accounting practice (cont.)
• In communicating reality, accountants
simultaneously construct reality
• Political economy perspective emphasises the role
of accounting reports in maintaining social
arrangements
– any accounting report will tend to present selective and
biased information in a manner designed to lead to the
construction of a single view of the underlying reality, with
this view being the one that most favours management
and providers of capital
• See corporate social reporting as harmful as it
gives the impression of concern and change
without any real change occurring

12-24
Criticism of critical perspective
• Critical theorists often marginalised to a greater
extent than others
• Often do not provide solutions to perceived problems
– inconsistent with normal training of accountants which is to
provide solutions if problems are evident
• Critical of accountants in general – so tend to be
marginalised

12-25
A critical reflection on the role of
critical accounting researchers in
creating change
• But are critical accounting researchers actually creating the
positive social change they argue is necessary?
• The accepted role of critical analysis is to identify problems
inherent within existing structures and processes (such as
accounting) with the ultimate aim of providing a fairer society
which does not undermine the interests of particular groups,
such as employees.
• To create change would seem to require constructive
engagement with a broad cross section of people to not only
highlight problems, but to suggest pathways for change and
improvement. As Roslender (2006, p. 264) states:
– Simply interpreting and understanding what we choose to study is
not enough. The purpose of the exercise is to turn this learning to
the promotion of society, that is, the promotion of a better society.

12-26
The contribution of critical accounting
scholars to actual social change (cont.)
• However concerns have been raised by some critical theorists
that their colleagues are failing to engage the broader
community
• For example, the leading critical theorist, Christine Cooper has
in the past been particularly critical of the (convoluted)
language used by many critical theorists, and by the apparent
neglect of efforts to usefully engage with practice
academics, even those who think of themselves as political
radicals, write for each other using an idiom which renders their
work unintelligible to those outside
academics write theoretical pieces, which hardly anyone reads,
mainly for each other using impenetrable language
• Of course such criticism can be made of much research, not
just critical accounting research – but other researchers are not
aiming at necessarily creating an environment of change
continued

12-27
• It does seem somewhat odd that critical theorists who
argue passionately against the exclusion of certain
members from society will write in a manner that is very
difficult to understand and which therefore is also
potentially open to the criticism of being exclusionary in
nature – other than for those well versed in reading the
specific literature
• Cooper emphasises the need for critical theorists to leave
the confines of comfortable offices and to take their
concerns and insights to the broader community –
something that evidence suggests is not happening
continued

12-28
• Partaking in debates at various international conferences,
and amongst a group of like minded academics, does not
appear sufficient to create social change
It becomes difficult to think of many examples of how critical accounting
research has been directly successful in changing policy or practices.
• Critical theorists often claim that the purpose of their work
is to expose the structural and social problems with
existing social systems
• They rightly express concern about the welfare of different
groups and how different groups are excluded from having
a ‘voice’, often because the ‘system’ does not allow them
to have a ‘voice’ continued

12-29
• Therefore, to be consistent, such researchers should not
write in a manner which is unintelligible other than to
those who are privileged enough to have education in, or
knowledge of, particular philosophies. It would also seem
that, to be consistent with their discipline, they should
engage with the community – with practice
• Hence, it is an interesting exercise to critically evaluate
the actions of critical accounting researchers and to
consider whether they are meaningfully addressing the
problems that are at the core of their research – a failure
to actually engage with society could be construed as
hypocritical

12-30
A need for ‘self-reflection’
• Reflecting on the role and contribution of research,
and researchers, can raise many issues and
opinions – many of which might not be popular to
some individuals or groups
• But hopefully such criticism can be the catalyst for
self-reflection
• Indeed, for researchers (who are often publicly
funded to undertake research) it perhaps is important
to reflect on the central role that they are assuming
and whether they are indeed fulfilling the role that
might be expected of researchers within their
particular discipline

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