Essay Example with Summary of Relevant Facts on Cultural Conservatism Theory

Notably, providing a summary of the impacts of cultural conservatism theory by Professor Sydney Gray in accounting raises some facts about the theory. The professionalism and statutory control is a fact that explains the professional judgment and self-regulation of accountants in different cultural setup. This fact is opposed to the compliance with legal requirements about accounting systems. In reference to Grossberg, at el (2014), the theory by Gray touches mostly on the fact that cultural dimensions influence a lot in accounting in different countries. The peoples culture explains much on how the accountants will use the system for accounting. It has influences on accounting values of a country.

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Additionally, there exists uniformity in accounting where all accountants use the same accounting practices rather than changing with the change in the culture of a country. This allows for uniformity in system management where all accountants follow the same cultural practices of the system. We need not have one system with the same requirements giving different results in different countries (Van, at el. 2004). There is also the fact about conservatism classification where there is the caution to be taken to avoid risks of future events rather than a risk-taking approach which allows one to take a risk in accounts to try and achieve something.

Lastly, there is also secrecy classification where information is released more carefully to avoid the risk of financial misinformation. The financial information is cautiously released in such a manner that people are not able to get the right information at the right time to avoid being. They avoid using a transparent way of releasing information because of fear of the misappropriation of funds. This was very much explained by Gray in his cultural conservatism theory that shows the influence of culture on the accounting system. All accounting systems in respect to different cultures of different countries must work the same way.

Part I

Focusing on the framework created by Professor Sidney Gray model in 1988 much has been explained on the development of a countrys accounting system, this is through theorizing how culture plays a major role when it comes a countrys accounting system. Majorly, this will involve a summary on the implications for the global convergence of financial reporting standards raised by Grays model; basically, if any case cultural values is able to affect the development of a financial reporting rules, this is able to indicate that countries experience difference when I comes to cultural values and financial reporting rules. Additionally, financial reporting rules experience a strong influence on culture and cultural values since they dont experience a gradual change. The implication is that even if all the counties work hard and tries to have an agreement on sing the same financial reporting standards, basically the application will still involve the judgment that the cultural differences are able to result in differences when it comes to the application of the standards. Through examples, other areas in which culture is able to bring great difference is in the application of financial reporting rules when it comes to the estimation and judgment ,according to the model, this may include bad debt expenses, warranty expenses revenue recognition, obsolete inventories and asset impairment (Doupnik, at el.2006).

Part II

Although Grays model is playing the role of relating cultural values to accounting values of conservatism as embodied in a countrys financial reporting rules, an argument can be raised that the model is equally applicable to the manner in which a countries accountant is able to apply the rules. The implication that this argument has for the compatibility of financial statement across countries is great. Some of the areas in which difference in cultural dimension across countries could lead to differences in the application of financial reporting rules, notably they include judgment, social cultural differences, application of rules that require recognition of contingent loss and judgment based on bad debt expenses and revenue recognition(Van at el.2004).

Part III

Technically, based on the Canadian based company with its subsidiaries located in Brazil, Korea, and Sweden; Grays model has a great implication when it comes to responsibility performance of internal auditors of Cancan Enterprise. The cancans internal auditors should have the awareness that accountant from different countries might have a great difference when it comes to the cultural differences and differences can be experienced in separate countries when it comes to the application of financial reporting standards. This should be considered and great measures should be taken when handling accounting from different cultures. Conservatism is a problem that most affects the worlds accounting diversity. Where there is a tendency to defer assets and gain more net profits (Gray, at al.1988).Therefore the cancan auditor has a major role to play when handling accountants from different cultures.

Conclusion and Recommendation

The impact of cultural practices on conservatism affects a lot in the accounting systems in different countries. The factors given by Gray are really solid ideas that contribute to the use of same accounting system in different countries but give different results which should not be the case. There is a reason to how we can come up with measurement and policies to help us use the same accounting system and produce the same financial reports. Therefore culture should be a major consideration when it comes to managing the difference in the application of financial reporting rule and for the Cancan Enterprise to be successful, culture should be understood in different countries.

Reference

Doupnik, T. S., & Riccio, E. L. (2006). The influence of conservatism and secrecy on the interpretation of verbal probability expressions in the Anglo and Latin cultural areas.The International Journal of Accounting, 41(3), 237-261.

Grossberg, L. (2014). We gotta get out of this place: Popular conservatism and postmodern culture. Routledge.Gray, S. J. (1988). Towards a theory of cultural influence on the development of accounting systems internationally. Abacus, 24(1), 1-15.

Van Hiel, A., Pandelaere, M., & Duriez, B. (2004). The impact of need for closure on conservative beliefs and racism: Differential mediation by authoritarian submission and authoritarian dominance. Personality and Social Psychology Bulletin, 30(7)824837.