Culture goes beyond what is commonly known as far as influence on society is concerned. Geert Hofestede conducted a comprehensive study in the early 1980s. Several studies have been performed by researchers as a result of the conclusion they drew from him. They began to explore how culture has influenced accounting. Hofestede’s study was mainly about culture should be understood. He refers to culture as the mind system of a group that differentiates between the single group memberships/society from other groups (Pacheco Paredes and Wheatley 2017).
The culture of a certain group makes it unique and separates them from others. Culture spells out the norms and values of interactions within social systems and determines how an individual perceives things as right or wrong. Hofestede’s (1984) argues that culture begins in the mind hence it is difficult to describe. It is of great importance when culture is researched and evaluated so as to help us understand the relationship between different functions and aspects of society as well as accounting (Wang, Liu and Hwang 2017).
According to Gray (1988), accountants are expected to be well equipped with ideas concerning professionalism and statutory control as their work requires an independent legal and ethical decision making strategies. Individualistic and weak uncertainty avoidant societies always employ professional judgment concept (Pacheco Paredes and Wheatley 2017). Professional judgment has been proven to work best in cultures with small power distance because it is associated with less authority’s reprimands. An accountant’s development of professional judgment can be limited by statutory control requires the law to be followed precisely even though they are important (Gray 1988).
The concept of uniformity versus flexibility shows the need for unchanging and reliable practices of accounting amongst firms instead of embracing those considered essential in specific circumstances. Consistency is valued today since it contributes heavily in the move towards international convergence. However, it is advisable that it should be flexible enough to adjust to varying cultural dimensions. High power distance societies prefer uniformity because its codes and rules are easily acceptable to the general public (Tieskens et al. 2017).
Furthermore, the concept of conservatism versus optimism suggests that it is more profitable to be cautious in measurements related to unpredictable future instead of banking on optimism and risky reasoning processes (Pacheco Paredes and Wheatley 2017). Conservatism in accounting is clearly evident in many principles applying concepts of objectivity, verifiability and reliability. In most scenarios, the accountant mind employs conservatism while others, such as entrepreneurs, choose to associate themselves with risks. Conservatism mainly recommends that uncertainty should be avoided so as to be more cautious in coping with the unknown (Thomson 2017).
The concept of secrecy versus transparency analyzes privacy and limiting info regarding the corporate to the people that are connected closely vis-à-vis being increasingly open as well as answerable to community. This is quite challenging since a business may want to shake off competitors but at the same time wish to display accountability and transparency to the public (Tallaki and Bracci 2017).
The secrecy or transparency of a company can only be determined by the content of information they choose to reveal to what extent and what their supplementary statements read. High power distance uses the secret culture to restrict information so as to ensure that powers remains unequal. Transparent cultures tend to put into consideration the need to be open with people thus they are considered to be more feministic in their approach (Pacheco Paredes and Wheatley 2017).
Influence of Culture Practices of Accounting
Many practices like financial statement preparation and disclosure are always thought to be similar world-wide due to the nature of set standards. Differences arise as a consequence of complying with IFRS or GAAP but this need not give room for additional variables in such practices among firms (Dauth, Pronobis and Schmid 2017)..
Culture influences to a greater extent, the disclosures included in various financial statements where their prepared preparation takes place. Culture operating under robust avoidance of uncertainty principle always supply the public with less information but give more details to non-public bodies like banks alongside financing corporations whereby that offer security of their relationships (Dauth, Pronobis and Schmid 2017). Avoidant of weak uncertainty culture often broadcast their respective position financially since they don’t prioritize maintaining stable relationships in the same way as their counterpart. In collectivist societies, less information is disclosed to the public since companies endeavor to conduct their projects inwardly and in secrecy. Individualistic companies often supply the public with lots of information (Dauth, Pronobis and Schmid 2017).
Organizational Culture and Accounting
The organizational culture describes the beliefs trends alongside prospects the organizations’ memberships share thereby creating norms and mightily shape the organization’s behavior in term of group and individuals (Dauth, Pronobis and Schmid 2017). The organizational culture of a company may not be clearly defined, but it is always established in such a way that is recognized by all employees and employers. As a result, organizational culture influences every aspect of an entity thus making it more significant in its operations. Performance, motivation and general employees’ behavior as well as the organization’s structure is influenced by culture (Dauth, Pronobis and Schmid 2017).
Ethics, Culture and Accounting
Professional boards advocates for appropriate ethical conduct in accountancy. Ethics describes systematic investigation into the behavior anchored principles morally, thoughtful choices, as well as standards of wrong/right behavior (Dauth, Pronobis and Schmid 2017). The way an individual perceives the world in relation to their internal system of belief, is what summarizes ethics. Therefore, proper ethical behavior is a collection of cultural actions and beliefs.
The difference between Islamic and Western accounting is important yet each cultural feature, from cultural proportions of Hofestede to ethics, shall experience compression in respect of global convergence pushed by the both FASB and IASB (Dauth, Pronobis and Schmid 2017). Due to the fact that the cultural differences begin in the, minds, hearts as well as individuals’ value systems, the differences cannot be easily reformed by a new set of standards (Tallaki and Bracci 2017).
Proponents of the idea of international harmonization argue that creating a universal series of standards globally would advance the indispensable consistency alongside comparability in accounting (Dauth, Pronobis and Schmid 2017). It will narrow down to a state where foreign investors would find it easy to understanding and study statements in a reliable way, make healthier decisions alongside facilitate the flourishing of the overall world economy (Zaidi, Henderson and Gupta 2017).
It is not necessarily true that adopting comparable standards of accounting around the world would be enough to achieve full success. Rather, it is a just a stepping stone towards that goal. Culture influences an individual’s view of the world as well as the standards they conform to (Belias et al. 2017). The variances that arise from this manifestation is understated or thoughtful. This is a scenario that will occur where accountants from diverse cultural backgrounds understand and employ the congregated standards as they become commissioned (Dauth, Pronobis and Schmid 2017).
Accounting must be flexible enough to act upon to the constant changing needs of society and show the social, political legal and condition economically within which its operations are based (Belias et al. 2017). Most nations have gone ahead to form their economic market and financial wants using such standards derived from their respective cultural context. It is therefore clear that using a specific standard of accounting may not bear fruits in this world of multiple cultural differences (Belias et al. 2017).
The effects associated with cultural influence on accounting can easily be noticed. Accounting is structured by religion, organizational culture as well as cultural values. These aspects of the society cannot be brought together by creating a specific standard of accounting for the whole world to conform to. Culture begins internally which makes it nearly impossible for the basic values of a society to be changed by a certain system. Therefore, those in charge of setting standards must consider various cultural influences if they want accounting to continue growing in the near future.
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