Financial accounting theory

The objectives of this module are to provide you with an understanding of: modern thinking about the purpose and content of published financial statements; the process of the international harmonisation of accounting; issues in earnings management and the nature of auditor independence and its regulation.

Likely topics: 

  • conceptual framework for financial reporting. Accounting regulators' views on the purpose and content of financial reports, including issues of definition, valuation and presentation. Can a conceptual framework ever resolve all difficult accounting issues?

• reporting financial performance. Alternative approaches to presenting profit and loss information. Why we are moving towards a concept of comprehensive income and what this means for users of accounts.

• international accounting. Why international differences exist in the first place, why there are moves to eliminate these, and whether such moves can ever be entirely successful.

• efficient markets and financial reporting. Do managers believe markets to be efficient? do published financial reports provide information to the stock market? implications for standard setters and analysts.

• auditor independence. The factors that affect auditor independence. Ethical theories and auditor behaviour. The role of professional ethical guidelines. Alternative mechanisms for bolstering independence.