Financial accounting Essay Example | Topics and Well Written Essays - 1750 words - 2

Financial accounting - Essay Example There has been continued political as well as public pressure to have better regulation standards to ensure that there is economic growth. Scholars affirm that regulation of financial reports should start with solid corporate governance, making sure that the spirit of novelty is not negatively affected (Gibson 2012). Therefore, this paper seeks to offer a rational critical evaluation on financial reporting regulation and whether or not it should be reduced. Research shows that regulation of financial reports can be either right or wrong, depending on the nature of the firm and the extent to which such disclosures are regulated. However, it is evident that there are numerous drawbacks that come with having excessive guidelines; hence, they should be reduced to promote innovation, healthy competition, guarantee fiscal growth, and stability. Regulation is defined as a principle that governs a particular practice or behaviour. Various firms such as Enron have gone bankrupt and have reported failures in accounting because of unethical practices. As a result, most nations have focused on heavily regulating the financial reports and accounts to avoid failures such as those that happened in renowned firms like Lehman Brothers and Parmalat among others. Although regulation of financial reports is important and might appear sound, it should not be excessive as it damages the nation’s spirit of competitive innovation (Unerman &O’Dwyer 2004). Excessive regulation constrains innovation and business practices; hence, regulation of financial reporting should be minimised. It is important to understand that for a nation to be positively impacted by such standards, then, rules ought to start with solid corporate governance. It is the duty of the shareholders as well as the members of the board to examine carefully and e nsure that their firms are led in the right path to realise their goals (Whittington 2006). Encouraging accountability,