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Since the 1980s, various studies on the effectiveness of lobbying on accounting in establishing necessary standards have been conducted. The research study will examine how lobbying affects accounting standards in an organization and what factors contribute to such effects. There are many businesses that have included this element into their operations; the research will focus on a few of these businesses that have seen the greatest impact of lobbying on accounting. Research has revealed some of the factors that influence lobbying and its consequences in the oil industry, such as that conducted by the International Accounting Standards Board (IASB) to examine its effectiveness. Basing the research on the International Financial Reporting Standards 6 (IFRS 6), the complexity of the oil companies since its structural and organization development has shown a need for lobbying on accounting. Consequently, the research paper will exclusively conclude on the summary of the research, the findings, and recommendation on the information from the reading of the study sources.
Regarding the field on accountancy and accounting department of several organizations, there has been a debate on the development of accounting models. Lobbying as an effective method for capturing the economic transactions accounting field in every organization is a crucial adventure of the institution especially in business companies like the oil companies (Paulo, 2014). Some of the government organizations involved in a standard setting like the International Standard Board which is currently known as the International Accounting Standards Committee and the Financial Accounting Standards Board (FASB) explore the interest of investors and corporations in political lobbying (Ahmad, 2015). However, the exploration of political lobbying has not been univocally realized and identified in most companies. Nevertheless, the government has enhanced standards setters to counter the ineffectiveness of the political lobbying. Most of the accounting standards setters have abandoned most the principles in accounting. The research will aim at exploring the significance of dominance of lobbying on accounting, majorly, political lobbying on accounting sector. Besides the general exploration of the lobbying on accounting as an international interest, the study will basically explore and analyze the arguments of the IASB and the FASB on the determinants of the decision to lobby and the reason for lobbying on accounting. The comparison of the research from different arguments can be analyzed to come up with the effective reason behind lobbying on accounting.
The determinant of accounting lobbying can be explained from different approaches, such include the economic perspective, managerial perspective, cost consideration and urgency and reliability within the organization. Before making a decision in any organization, the management of such institution should identify their objectives and the services they offer. According to this research paper which explores accounting lobbying in oil companies, the company serves a number of clients globally thus it should consider the effects of lobbying ion accounting field. Accounting is critically a sensitive department of Oil Company sector thus any decision made regarding the accounting regulation should be reexamined before deciding on its effectiveness within the organization.
The observation from the reading of articles about lobbying on accounting of the oil company shows that the decision of the oil company in implementing political lobbying was based on different channels. The authors literary performed cross-examining of the oil industry basing their research on the factors the enterprise considered before making such decision. The decision lies on the arguments from different personnel within and around the company. Such includes the stakeholders of the company, the investors, the workers and the customers which are globally spread. Every factor basing in the arguments could either support the decision or deliberately resist the changes in accounting regulations. The implementation of this policy into the oil company was based on the factors determining the practice of higher standards of accounting practice of the oil company. The harmonization of the political lobbying on accounting was based on the following factors in regard to the research on Oil Company in United States.
The agency and reliability theory as a major factor which was conclusively considered by the oil company states that every company aims at implementing policies which are reliable and can result to agent changes within the enterprise. These Factors basically are based on the regulation of the standards of accounting within the enterprise. This means that before choosing political lobbying as a regulatory control of accounting procedures, an enterprise should consider the conflict of interest in regulation. This conflict is observed from the relationship of the major stakeholders of the company including customers, the potential suppliers and the general employees of the company. According to the Oil Company, the organization of the company realized that the practice of political lobbying on accounting could empirically raise the interest of relationship between these stockholders. Nevertheless, the reliability of the standards of accounting within the organization was also identified as the fruit of lobbying on accounting. The FASB organization, therefore, found it easy to initiate this factor into the company.
Further research analysis shows that the response to political lobbying behavior in response to accounting theory of the company was based on the cost of maintaining a top standard accounting practice. The IASB and the FASB convinced the company that with the implementation of political lobbying on accounting, the company could spend little on managing auditioning and regulation of accounting practice within the company. In regard to this argument, lobbying as an accounting practice is based on the decision of cost which is a major factor of most companies (Hill et al., 2013). Consequently, analysis of various articles shows that most of the companies would rather consider the cost of any activity than focusing on its quality. The cost of expense within the company is a determinate of the profit margin thus the oil company took the cost factor at a greater consideration.
The effect on managerial effect was also a major determinant of lobbying on accounting. The oil company cross-examined the interest of managerial stakeholders on the practice of lobbying on accounting activity of the industry. The potential managers within the most enterprise are motivated by activities which favor their management practice within the company. The company focused on the interest of their managers on the effectiveness of political lobbying on accounting practice. Consequently, the interest of the general employees can significantly influence the decision of the company on lobbying practice. For example, before the oil company could implement this practice, there was a greater fight between the decision makers and the employees. The company only eventually implemented this policy after consulting all employees and ascertained that they supported the policy.
The practice of political lobbying on accounting significantly influences various factors within companies. The research on the political lobbying on the oil company has shown that the lobbying on accounting practice results to both positive and negative impacts. The oil company has associated the lobbying practice with the economic well-being of the company. The analysis of the research shows that the political lobbying on accounting theory has enhanced the regulation and policy implementation within the company. This has resulted in the favorable economic system of the oil company. From this perspective, the increased profit margin of the oil company reflects on the economic importance of political lobbying on accounting. The lobbying practice increases the standards of accounting regulation hence effective resource management of the company (Hagerman, 1979). Proper regulation of the resources results to the maximization of the profit while minimizing the cost of production using the available technology and resources.
According to the research on exploration of the auditing and financial practice of the oil company, lobbying on accounting results to better fund management. Through analysis of the financial standard of the enterprise which has lobbied their accounting practice, the practice is associated with profits and adjustment on the financial status of the company. Since the implementation of the accounting lobbying practice into the oil company, there has been an adjustment on the balance sheet of the company. This shows that there is increased production within the oil company. Other financial statements of the oil company have also been marked by captured improvement. Consequently, the analysis of the improvement in financial statements of the oil company has demonstrated improved finance relocation (Puro, 1984). A company with lobbied accounting practice can identify diverse factors of production required for proper production. In addition, the company can motivate their employees which result in increased output.
In conclusion, the paper investigated on the determinants and significance of lobbying on accounting. The research study was based on the company which has lobbied their accounting practice like the oil company in the United States. The company's decision was based on different factors which are supported by different research articles. Significantly, the practice of accounting lobbying practice can impact on organization's success to a greater level as supported by success of the oil company. The research of the lobbying practice confirmed that the accounting standards can be enhanced by lobbying practice on accounting. The theory enables the enterprises to enhance their financial level and improve the relationship between the stakeholders of the company. Furthermore, companies can regulate their accounting practices at a lower cost as it minimizes the cost while maximizing the profit.
Ahmad, A. (2015). Lobbying in Accounting Standards Setting. Global Journal of Management and Business Research: D Accounting and Auditing, 15(3).
Paulo, S. (2014). Lobbying on Accounting Regulation: Evidence from the Oil Industry1. Revista Contabilidade & Finanças, 25(65).
Hill, M., Kelly, G., Lockhart, G. and Van Ness, R. (2013). Determinants and Effects of Corporate Lobbying. Financial Management, 42(4), pp.931-957.
Puro, M. (1984). Audit Firm Lobbying Before the Financial Accounting Standards Board: An Empirical Study. Journal of Accounting Research, 22(2), p.624.
Hagerman, R.L. and Zmijewski, M.E., 1979. Some economic determinants of accounting policy choice. Journal of Accounting and Economics, 1(2), pp.141-161.
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