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Auditor liability and the impact of the ASB's statement of principles: an examination of lobbying

Research output: Working paper

Published
Publication date1999
Place of PublicationLancaster University
PublisherThe Department of Accounting and Finance
<mark>Original language</mark>English

Publication series

NameAccounting and Finance Working Paper Series

Abstract

This paper examines lobbying during the production of the Accounting Standards Board's (ASB) conceptual framework for financial reporting, its Statement of Principles (SoP). It thus differs from most research in this area, which is concerned with lobbying based on expected impacts of proposed accounting standards. By examining lobbying on an issue within the SoP, the paper highlights the important step of issue identification rather than simply the examining the success of the lobbying actually conducted. The issue examined is an aspect of the "Objective of Financial Statements" chapter of the SoP. Specifically, the ASB is proposing to adopt a decision usefulness base rather than a stewardship (or accountability) base for the SoP. This may be perceived as broadening the role of financial reporting and thus likely to have major implications for the liability of auditors to third parties. Such implications are hypothesised to lead to lobbying on the issue by auditors, particularly larger (Big 6 and Group A) firms. Data derived from a survey of attitudes to conceptual matters and from submissions to the ASB on the two EDs (1991 and 1995) of the SoP are analysed in order to assess, firstly, whether or not the issue was identified by those most likely to be affected and, secondly, whether or not those predicted by theory to lobby actually did so. It is found that those hypothesised to lobby did so to a greater extent than other groups.