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The Accounting Profession’s Engagement with Accounting Standards: Conceptualizing Accounting Complexity through Big 4 Comment Letters

Baudot, L., Demek, K. and Huang, Z. (2017). The Accounting Profession’s Engagement with Accounting Standards: Conceptualizing Accounting Complexity through Big 4 Comment Letters. Auditing: A Journal of Practice and Theory, doi: 10.2308/ajpt-51898

Abstract

Regulators, standard setters, and the accounting profession maintain that complexity in accounting standards is a significant issue. However, it is unclear what complexity means in the context of accounting standards. This study examines, via comment letter submissions, the accounting profession’s engagement with complexity in accounting standards. We analyze comment letters submitted to the Financial Accounting Standards Board over a 12-year period and find the profession characterizes complexity through three dimensions – multiplicity, diversity, and interrelatedness. We examine the Big 4’s discourse on these dimensions and observe consistency between audit firms in their discourse on several features. For instance, we find that firms primarily oppose proposed FASB changes when firms perceive those changes to increase rather than decrease complexity. Additionally, firms perceive proposed changes to affect financial statement preparers more often than other stakeholders. However, the Big 4 do not hold universal opinions as to the root causes of complexity. At the cross-firm level, we find inconsistencies that imply heterogeneity in the Big 4’s discourse on root causes. Such inconsistency may, in and of itself, construct accounting complexity. Ultimately, we maintain that the Big 4’s engagement with accounting standards has consequences for how complexity is thought and acted upon in accounting standards.

Publication Type: Article
Additional Information: Published as: Baudot, L., Huang, Z. & Demek, K. (2017). The Accounting Profession’s Engagement with Accounting Standards: Conceptualizing Accounting Complexity through Big 4 Comment Letters. Auditing: A Journal of Practice and Theory.
Publisher Keywords: accounting profession, discursive engagement, comment letters, accounting complexity, content analysis
Subjects: H Social Sciences > HG Finance
Departments: Cass Business School > Finance
URI: http://openaccess.city.ac.uk/id/eprint/17950
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