American Accounting Association 2006 Midwest Region Meeting March 30 – April 1 Chicago, Illinois

Friday, March 31, 4:00 p.m. to 5:40 p.m.
Concurrent session 4F - Teaching and Thinking about Ethics (Teaching and Curriculum, Public Interest)

Title: Recognizing the Dilemma of Truth in Accounting

Mohamed E. Bayou University of Michigan-Dearborn

Alan Reinstein Wayne 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 fiascos; and Arthur Andersen’s demise have again raised the question, What is truth in accounting? Accounting standard setters have evaded the issue by agreeing that “usefulness,” not truth, is financial reporting’s ultimate objective—while concurrently entertaining, sub rosa two conflicting theories of truth: the correspondence theory and the coherence theory. The result has been a serious conflict between financial accounting standards and auditing standards. We suggest that the standard setting boards should recognize the contradictions and move toward a single concept of truth in accounting.

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