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Perspectives on the Problems of Truth and Ethics in Accounting
Mohamed Bayou,
University of Michigan - Dearborn
Alan Reinstein, Wayne State University
Paul F Williams, North Carolina State University
ABSTRACT. Such major scandals as the savings and loan failures in the late 1980s and 1990s, the Enron, Global Crossing, WorldCom and Tyco corporate scandals and Arthur Andersen’s demise have again raised the question, What is truth in accounting, or perhaps more aptly, what does it mean for accounting to be “true”? Accounting standard setters have dodged the issue by agreeing that “usefulness,” not truth, is financial reporting’s ultimate objective. Concurrently they have entertained multiple theories of truth, including both the correspondence and coherence theories. The result has been a serious conflict between financial accounting and auditing standards. We suggest that standard setting boards should recognize the contradictions and move toward a set of concepts of truth in accounting that supports accountants’ total responsibility to society, thereby granting them an exclusive right to perform specific tasks.
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