Introduction Important Concepts On Environmental And Social Reporting Accounting Essay
Environmental and social reporting is a report that provides a communication of environmental and social of organization by accountability environmental effort and provides useful information for interested parties to make decision. It also can be known as "Corporate Social Reporting (CSR)."
Environmental and social reporting consists of two important functions which are external function and internal function. External function refers to communication tools between the corporation and public users. There are three external functions which are report information based on social accountability, provide valuable information for potential investor to make decision and encourage environmental activities. As for the internal function, there are two important functions which are establish environmental policies, motivate employees and management contributes to the society.
There are four main principles in environmental reporting. The first principle is relevance, which refers to provide useful information to the user on proper time for them to make meaningful decision. The second principle is reliability, which refers to provide information that is accurate, true and fair from bias and errors. The third principle is clarity, which refers to provide information that is clear and straightforward especially for those users which have less or no accounting background. The last principle is comparability, which refers to provide information including the previous years, so that the potential investor can easily estimate the future growing of the organization.
Objectives and importance of environmental and social reporting
We can help you to write your essay!
Nowadays, environmental and social reporting is promoted globally by the commission even in the Islamic countries. Basically, it refers to the organizations' voluntary and contributions in integrate the social and environmental objectives into the activities of the enterprise. It benefits the organization in contributing into job creation, innovation and competitiveness. Environmental and social reporting defined how and what an organization does, taking account into the social, economic and environmental impacts in the way the organization operate the company. It maximizes the benefits and minimizes the disadvantages.
In this globalization environment, there are increasing of global competition and ageing population where the enterprise have to stimulate their production which respect to their corporate social reporting (CSR). Organization sees environmental and social reporting as voluntary actions that and organization able to take, above and over compliance with the minimum legal requirements, in order to address the organization's own competitive interest and society interest. Environmental and social reporting helps in contributing to the sustainability growth and employment. It helps the disadvantaged groups in the labor market, where community may show their cares over the disadvantaged groups. In addition, it also encourages improvements in the public health, where organizations may volunteer in labeling of the foodstuffs and the non-toxic chemicals. Moreover, environmental and social reporting also aids in contribution on the environment and social problems. It also discovered a more rational use of natural resources and reduced the levels of pollution in the environments.
On the other hands, environmental and social reporting is good for business and society. It provides better understanding of the advantages of social reporting for the organization's competitiveness and help to encourage the spread of environmental and social practice among nation economies. Environmental and social reporting may also help in promoting the company's images. This may increase the company's sales and profits. Organization with an ethical and accountable practice has competitive advantage in this modern marketplace. The implementation of effective environmental and social reporting practices is worth to invest and develop, where an organization's development is cost effective and legitimated.
In this globalization world, environmental and social reporting seems to become the supreme demand in all business undertaking the world over. Firms without concern for the broad spectrum of stakeholders to the long run, are increasingly shown that they are lack of sustainability while they are blindly pursue the profit motive. Hence, firms should able to understand the needs of the stakeholders and to how to satisfy their needs.
In this globalization world, markets become more accessible and forced companies to adopt environmental and social reporting in order to remain competitive locally and also in the internationally market which including the small and medium enterprise. The government in some countries has increased the regulations such as standard and laws set at a supranational level and the environmental and social issues have increased. During the past decade, communities and consumers have become relatively sensitive to business practices of companies exist in terms of their areas or from their services and goods. Communities are preferable and support companies which are having good image and actively serve in environmental and social activities.
Companies will have better advantages in convincing investors when the companies are having good business practices. There are studies that shown an increasing amount of investors would prefer companies with strong corporate social reporting program. The involvement of environmental and social reporting is an indication of the company's long term potential in the eyes of the investors. Hence, the sustainable business success and shareholder value could not be achieved by maximizing short term profits in the growing perception among the enterprises, but through responsible behavior and implementing environmental and social reporting programs.
Introduction on articles related to free-market approach
One of the articles indicates the study of influence of Islam on environmental and social reporting in Islamic financial institutions (IFIs). Most of the Islamic financial institutions (IFIs) disclose and practice the environmental and social reporting relative to employee, community, charity and Zakat, products and services and customers in the view of Islam principle and ethics. In another article, the authors, Md.Shariful Haque and Md. Mokhter Ahmad had made some justification on environmental and social reporting according to Shariah principle and the exercise of environmental and social reporting of some Islamic organization in Bangladesh. It also provides some recommendations to increase the awareness of the public towards the study of environmental and social reporting and encourages the Islamic organizations to practice environmental and social reporting in Islamic perspective.
This essay is an example of a student's work
Free market approach which subject to the forces of demand and supply has been applied in environmental and social reporting from both of the articles. The issue being raised is the Islamic financial institution (IFIs) disclosing its information on environmental and social to the public (supply) due to the concept of Shariah and Islam principles and ethics (demand). Shariah means the ways, which not only in the religious rituals, but also in aspect of daily life. Thus, due to the concept of Shariah, Islamic financial institutions (IFIs) contribute their social responsibility to the society. In addition, Islamic financial institutions (IFIs) are required to produce Shariah Supervisory Board (SSB) Report to meet their ethical expectations. Shariah Supervisory Board (SSB) is an independent external committee which the responsibility of the committee is to observe the operation of the business and provide assurance to stakeholders that the business is carried out in the light of Islamic principles. It encourages and motivates Islamic financial institution (IFIs) to improve on environmental and social reporting due to the obligation of understanding the Shariah principles.
Furthermore, some of the Islamic financial institutions (IFIs) are making contribution to charity and Zakat because Islam advices Muslims to spend their wealth on charity. According to Qur'an 64:11, it showed that "So fear Allah as much as you are able and listen and obey and spend (in the way of Allah); it is better for yours selves. And whoever is protected from the stinginess of his soul, it is those who will be the successful". With this strong doctrine, Islamic financial institutions (IFIs) help and donate to poor and needy people and also to charitable organizations. There are also different sources from Qur'an which emphasize on taking care on environment, quality of the products, fair treat to the employees, social economic justice and others. Indeed, it motivates Islamic financial institutions (IFIs) to disclose their information on environmental and social in the report.
The article regarding the corporate social responsibility disclosure and employee commitment: evidence from Libya discuss about the relationship between disclosures on environmental and social reporting on employee commitment and the implication of uses of corporate social reporting disclosure (CSRD). From the article, there are 68% of the employees agreed that the effect of corporate social reporting disclosure (CSRD) on employee commitment depend on establishing a sustained commitment to improve corporate social reporting disclosure (CSRD). Another articles showed that the study of how the bank users in Bahrain select the bank like conventional bank, Islamic bank or both kinds of bank based on the products and services provided. With this disclosure, the bank users will refer to the financial and non-financial information of the bank before purchase and invest. Both of the articles show the response of the stakeholders to the disclosure of environmental and social reporting in the company report.
Another issue being raised is private organization disclose more information on environmental and social reporting to the stakeholders (supply) due to the stakeholders also relies on non-financial disclosure (demand). Based on the research, few of the employees will convince the information about social activities and it gives them satisfaction which motivates them to perform well in their duties. Furthermore, when the company disclose about the employees training, employees' safety and so on, the employees have the motivation to strive for the company goals. It can be said that most of the employees have consent that the information about environmental and social activities will affect and improve the employee commitment. Thus, employees will get better understanding on the company's non-financial information which indirectly encourages the company to disclose more on environmental and social reporting meanwhile increase the performance of the employees.
In addition, some of the bank in Bahrain especially Islamic Bank will disclose Islamic products and services to stakeholders to attract them to purchase and invest. These products and services are Murabaha, Mudarabah, Ijarah and others. It encourages the stakeholders who are the consumers to purchase and investors to invest in these particular products and services. Besides, most of the stakeholders who believe in Islamic religious will purchase and invest in Islamic bank rather than investing in conventional bank. Subsequently, it will affect the bank to disclose more information in order to increase their profit and generate more potential stakeholders to rely on the non-financial information.
Earn money as a Freelance Writer!
We’re looking for qualified experts
As we are always expanding we are looking to grow our team of freelance writers. To find out more about writing with us then please check our freelance writing jobs page.
There is another article which is regarding the level of environmental and social reporting in Yemen. There is no stock exchange in Yemen, there is no compulsory in disclosure on environmental and social reporting. It is solely based on the supply and demand in the market. Adams (2002) noted that the reason behind the increase in the number of companies publishing environmental report since early 1990's, was due to their strategies to support their image with customers, state authorities and journalists without the influence of regulation of public pressure. In addition, based on (Neu et al., 1998, p.265), it stated that the environmental and social reporting disclosure practice in Yemen as least developed country due to absence of stock exchange market and lack powerful NGOs in Yemen, where companies will disclose social information in several medium such as annual reports, websites and newspapers, to improve their image and to ensure the continued inflow of capital, labour and customers necessary for their long-term survival.
Abu Baker and Naser (2000) had conducted studies in Middle East countries. He conducts research on sample of 143 companies in Jordan which is also one of the members in organization of Islamic cooperation (OIC) using content analysis approach. The results had shown that in terms of space given and subjects covered in annual report on environmental and social reporting disclosure were very little. In addition, another recent study done by (Rizk et al, 2008) examine environmental and social reporting disclosure about 60 annual reports of manufacturing companies in Egypt and also found out that the environmental and social reporting disclosure was low and descriptive in natural.
Furthermore, it was found out that the disclosure on environmental and social reporting is having direct relationship with profitability of the company. Mills and Gardner (1984) had done some analysis and concluded that the companies are more likely to disclose social responsibility activities when their financial statements indicate favorable financial performance. (Waddock and Graves, 1997) also provide arguments those companies with high profit tend to involve themselves in corporate social activities such as on community relations, environment issues and others.
Another important research was done on private entities in Yemen. It was found out that the disclosure on environmental and social reporting is having direct relationship with family group affiliation. Dyer and Whetten (2006) believe that families see their images and reputations connected to the firms they own, therefore they are unwilling to damage those reputations by making irresponsible decisions. There was study done by comparing social contributions of family and nonfamily firms in the S&P over 10-year period. It showed that family firms are more likely to be socially responsible than those firm without family members involvement. The private entities in Yemen are mostly family oriented, therefore it is expected that there is moderate impact on disclosure on environmental and social reporting disclosure.
Issues, arguments and critics against pro-regulation approach
The issue being raised is the Islamic financial instituitions (IFIs) disclose its environmental and social reporting to the public (supply) due to the concept of Shariah and Islam principles and ethics (demand). Furthermore, the other issue being raised is private organization disclose more information in environmental and social reporting to the stakeholders (supply) due to the stakeholders also rely on non-financial disclosure (demand). Based on the issues mentioned, we raised up several arguments for both of the approaches which are the Free Market Approach and the Pro Regulation Approach.
Under a free market, there are no regulations which formed to regulate the information of financial and non-financial being disclosed by the private organizations. It is purely based on the demand and the supply of information in the market. Some argued that with regulations, public interest can be safeguarded and quality of the information can be raised which would then protect the users from fraud and failures. However, free market approach is very much depending on market forces in order to decide what information to supply and also the quality of information supplied.
Based on free market approach, we argued that economic-based incentives and penalties would discourage the organizations for non-supply and/or supply misleading information. In other words, due to the incentives given from the economy, the organizations would be motivated to provide true and fair information in order to maintain, or even increase their reputations or images, which in return with raising of debts and equity capital (the incentives). Eventually, the organizations' values would be increased for voluntarily disclosing own financial and non-financial information, regardless good or bad. Penalties for not supply or supply misleading information from the organizations would result in some great consequences such as greater costs of capital and potential litigation cost imposed. Organizations would have greater costs of capital as the investors do not trust the information provided by them and do not want to invest in the organizations. Furthermore, the organizations may face some court cases if they supply misleading information.
Besides, some argued that with regulations, the organizations will have to disclose same standard of information to the public in which it helps the public to do comparisons between organizations easily. Nonetheless, this would make the information supplied to be lack of flexibility and creativity. In pro regulation approach, the organizations disclose information merely for the sake of regulations. This would have a high possibility to obtain misleading and untrue information. We argued that free market approach would have an optimal supply of information as the organizations treat the cost of disclosing information as their benefits. In short, more accurate and fair information provided to stakeholders or users, more market-based incentives would be obtained.
In the article of corporate social responsibility disclosure and employee commitment: evidence from Libya, it is shown that the disclosure of non-financial information is provided to stakeholders, in this case, the employees. The employees were being educated for the importance of non-financial information in their trainings and hence demand for more disclosure of corporate social responsibility (CSR) of the organization. In this case, we could comment that people nowadays are more educated and understand the importance of both financial and non-financial information. Years ago, the information disclosed was more towards financial and only few stakeholders were look important on it. Nevertheless, more and more group of people requires the information not only financial but also non-financial information for decision making.
On top of that, Islam principles and concepts are important especially in Organizations of Islamic Countries (OIC). One of the important Islam concepts is the Shariah concept. This Shariah concept had affected the organizations, which are the Islamic financial institutions (IFIs) to disclose and practice their non-financial information. This issue is discussed in the article of narrative disclosure of corporate social responsibility in Islamic financial institutions. Customers or clients of Islamic financial institutions (IFIs) tend to look importantly on the environmental and social reporting disclosure before they decided to invest, save or loan. In this case, it could be considered as an incentive for the Islamic financial institutions (IFIs) to disclose more information as this could bring them benefits in terms of profitability and reputations. Thus, we could comment that the Islamic principles and concepts are important in the free market as the stakeholders of Islamic Financial Institutions (IFIs) serve them as guidelines to judge on the information supplied.
Summary on articles regarding free-market approach
By reading on various articles regarding free market approach, we can conclude that in free market approach the level of disclosure on environmental and social reporting is basically based on the supply and demand of the market. The supply of information is always determine by the cost and benefits itself. For example, when the company is having more profit or having good financial performance, the company tends to disclose more on environmental and social reporting. The main intention is to have a good public image in the eyes of shareholders and investors. Furthermore, some of the bank in Bahrain especially Islamic Bank will disclose Islamic products and services to stakeholders to attract them to purchase and invest. It encourages the investors who are having strong believes on Islamic religious view.
The second determinant on level of disclosure on environmental and social reporting is determined by the strong believes on Islamic principle which is Shariah principle. Shariah means the ways, which not only in the religious rituals, but also in aspect of daily life. Thus, due to the concept of Shariah, Islamic financial institutions (IFIs) contribute their social responsibility to the society. It encourages and motivates Islamic financial institution (IFIs) to improve on environmental and social reporting due to the obligation of understanding the Shariah principles. Zakat is a compulsory distribution for all Muslims over the organization of Islamic countries (OIC).
In addition, the employee commitments are having positive response regarding the disclosure on environmental and social reporting. From the article, there are 68% of the employees agreed that the effect of corporate social reporting disclosure (CSRD) on employee commitment depend on establishing a sustained commitment to improve corporate social reporting disclosure (CSRD). Furthermore, the securities commission plays an important role on enforcing the disclosure on environmental and social reporting. For example, in Yemen, there is no stock exchange and causing the levels of disclosure on social reporting is below the expected level. Absence of stock exchange market and lack of powerful legislator would be the reasons why the disclosure on environmental and social reporting is unsatisfactory in those least developed countries.
Besides, the family involvement is also playing an important part on the disclosure on environmental and social reporting. The results showed that family firms are more likely to be socially responsible than those firm without family members involvement. This rules happened in Yemen which is one of the members in organization of Islamic cooperation (OIC).
Issues on pro regulation approach
The environment and social reporting among private entities in Organisation of Islamic Countries (OIC) member countries is still in the stage of progressing, for example in Malaysia. Indeed, the companies' annual reports disclose more social responsibility when shares are possessed by government agencies (Mohd Ghazali, 2007 cited by Mustaruddin et al, 2010). There is no specific legal requirement for public-listed companies to disclose the information which involving CSR practices. Since there are no any standards listed, some private entities will just ignore the disclosure in their annual report. Nevertheless, there are still many companies wish to disclose the CSR activities to the public with the reason to gain investors' attractiveness to invest in their companies. Government has encouraged the companies to be involved in CSR activities through acts and regulations. Based on research of Mustaruddin (2010), the 2006 Budget speech of Prime Minister of Malaysia had required all public listed companies to disclose their CSR activities.
In fact, the size of the organisations will affect the disclosure of CSR activities in the annual report. Larger organisations are susceptible to scrutiny by various groups in society and thus, face greater pressure to disclose their social activities in order to be legal and socially responsible (Cowen et al., 1987 cited by Chamhuri and Siti, n.d.). In general, the larger organisations will contribute more to the society compared to small and medium entities. This is due to having more capital and profit; accordingly, the larger organisation will undertake more activities. In addition, they have a greater influence on the society and a larger number of shareholders; for sure these companies will receive more attention from public and having greater gravity to reveal the social responsibility.
Table 1: Existence of CSR policy in various organisations.
Nature of company
No CSR Policy
According to the research (Table 1) of Chamhuri and Md Tareq (2009), 83 % of multinational companies (MNCs) are having CSR policy while only 26% of small and medium enterprises (SMEs). This is due to most of the SMEs may facing financial problems and need external support to involve in environmental and social practices in their organisation. Furthermore, government link organisations (GLCs) are involving more in CSR practices compared to non-government organisations (Non-GLCs). Consequently, we can conclude that some of the private entities are still lack of the awareness of social reporting.
Nowadays, companies are trying hard to improve and maintain their public image. They believe that a good image and reputation may increase the profitability of the companies. The disclosure of CSR activity is an effective way to represent as ethical and socially responsible image and to be seen as responsible corporate citizens. For instance, provide scholarship to students and donate to approved institutions. There is a CSR framework set by Bursa Malaysia which requires the public listed companies to reveal the environmental and social activities (Bursa Malaysia, 2008 cited by Sabarudin and Norhanim, 2010). The four main focal areas for CSR practice in Bursa Malaysia CSR Framework are the environment, the workplace, the community and the marketplace. Hence, normally the private entities will follow the CSR reporting in order to fulfill the requirement set by Bursa Malaysia.
Besides, the incentives, for instance, in term of awards and prizes, given by the government are actually improving the CSR reporting, for instance Malaysia Environment and Social Reporting Awards (MESRA) in Malaysia. The same result goes with the ISO 14001 certification which is giving to the companies that perform well in pollution abatement and some environmental related actions. The governments are actually playing vital roles in encouraging companies in Islamic countries to involve in CSR practices and reporting. Based on the research (Table 2) done by Maria Gjølberg (2011), there is high percentage of companies are believed that the government should increase the efforts to achieve global minimum standards related to CSR and to strive for binding international rules and laws.
Table 2 : The Role of Governments
The less the government intervenes in the economy, the better it is for my company
The government should raise social and environmental standards to increase pressure on laggards
Increase government efforts to achieve global minimum standards related to CSR
National governments should strive for binding international rules and laws
Reporting is one of the activities used by companies in a strategic and instrumental manner (Nielsen and Thomsen, 2007 cited by Sabarudin et al, 2010). In the view of pro-regulation approach, there is still room for the private entities in OIC member countries to improve the environmental and social reporting. The experts in our study emphasized that it would be better to address CSR through legislation rather than keeping it at the voluntary level (Jye and Pavel, 2009).
Issues, arguments and critics against free-market approach
Based on our research, the example organization of Islamic countries (OIC) that applying pro-regulation approach is Malaysia. However, the implementation of pro-regulation in Malaysia is depending on the size of organization. The size of organization influences the level of corporate disclosure in the annual report cited by Haniffa & Cooke. 2005. 500 sets of questionnaire had been distributed to different size of organizations and industries in Malaysia. Based on the analysis from the questionnaire, it showed that most of the multinational corporations practice good CSR. The reason behind is they faces massive pressures from more stakeholders since it is operating internationally over the world. Examples of multinational company in Malaysia are Petronas and Sime Darby. In other countries, the people see CSR as an obligation and subjected to legal actions for non-conformance. Therefore, the multinational company seems to practice good CSR to avoid legal actions for non-conformance and having public good image.
Meanwhile, the local Malaysian corporation and small and medium-sized enterprise were lagging behind in the overall of CSR commitment. It was due to the lack of public awareness and laws and regulations implementation, not many interest groups in Malaysia that actually exert pressure on organization and having unclear terminology. Beside this issue, it was found out that a typical CSR performer would have great commitment and CSR policies handle by a special individual itself.
Under pro-regulation approach, there are certain regulations formed as a guideline to regulate the information of financial and non-financial information being disclosed by the private entities. Some argued that without regulation, the disclosure of information is depending on the demand and supply forces of the market. The disclosure of information is based on voluntarily basis of the entities. Some important or sensitive information might be omitted from the report for own benefit. However, pro-regulation approach is implemented to protect the public interest and ensure the quality of the report. This is because there is possibility failure of free market approach users especially the monopoly suppliers to under-produce their company information since there is no any comparison and reference can be made.
Based on free market approach, some argued that the reported information tends to be public goods whereby everyone can be accessed to it. The information is available to everyone and there is the occurrence of free-riders. Free-riders are referring to the potential investors, existing and potential competitors of the organization, researchers and others. The free-riders can obtain the information easily without paying any money. It is the cost and losses for the company. We argued that pro-regulation approach might helps to ensure that there is no under-produced of information. There is the mandatory disclosure of information for every private entity. This is to avoid under-produced of information in free market. There is the possibility of under-produced information when the producers of information unable to impose production costs to meet the demand various users. This can be further explaining as the information provider provides some desired results or omit some information in order to meet the demand of the users.
Besides, some argued that without regulation, the organization would have optimal supply of information as they treat it as the benefits to the company itself. The cost of providing information is equal to the benefits. Thus, more accurate and fair reports will be produced. Some organizations tend to volunteer themselves by providing information to raise capital, apply loan for the business expansion purpose and attract the potential investors. The information provided may be is just merely for the company own benefits and not to think about whether it is true and fair. We argued that regulations are needed to ensure that the real demand of accounting information is met. When there are regulations, the information regardless good or bad will be supplied to communicate to the security markets. On the other hands, it shall make the information compatible with other firms. A necessary comparison can be easily made. Without regulation, there might be the possibility of insiders having information that is not available to the stakeholders. Misconduction of information might happen.
On the other hands, some argued that in free market, over-production of information can be avoided. The information providers can provide its information whichever they think are necessary and benefits to them. It is based on voluntarily basis and costs only imposed on the user. It is a two-way benefit for the two parties which are between the company and the users. However, there is the possibility of people who genuinely desired information to purchase the private information which are unavailable in report from the employees, intermediaries and others. The privacy of information and self-interest issues will be raised. However, when pro-regulation is imposed, there is a standard for reporting. Every user got access to the same information and makes their own decision making or whichever action is appropriate. Furthermore, with the implementation of standards, the percentage of fraud and failure of disclosing necessary information can be reduced to minimum. Besides, motivation on disclosing true and fair information can be generated to avoid any penalty on legal actions.
Summary on articles regarding pro regulation approach
The pro regulation approach is implemented by some of the countries, but the approach can be unsatisfactory when there is no strong enforcement and penalty implemented. Based on the articles, the environment and social reporting among private entities in organization of Islamic Countries (OIC) member countries is still in the stage of progressing, for example in Malaysia. Indeed, the companies' annual reports disclose more social responsibility when shares are possessed by government agencies. There is still no specific legal requirement for public-listed companies to disclose the information which involving CSR practices.
In fact, size of the organization determines the level of disclosure on environmental and social reporting. In Malaysia, the large companies and multinational company which having subsidiary in foreign countries tend to report more information on environmental and social reporting. The reasons are they receive greater pressure from the foreign stakeholders who always emphasize on CSR practices. The organizations even hire a specialist to handle this issue in order to avoid any charge or legislation or non-conformance of information.
However, based on research, 83 % of multinational companies (MNCs) are having CSR policy while only 26% of small and medium enterprises (SMEs). This is due to most of the small and medium enterprises (SMEs) are facing financial problems and need external support to involve in environmental and social practices in their organization. They focus more on profitability and having insufficient capital and work force to contribute to CSR practices. The different level of disclosure of information on environmental and social reporting between large company and small enterprise in Malaysia are also due to the lack of public awareness regarding the importance of CSR practice and absence of interest groups that actually can exert pressure on the environmental and social reporting.
Besides, there are some incentives given by the government in Malaysia to encourage the organization to carry out CSR practice. For example, those companies that provide donation to approved organization and scholarship for students would have tax deduction or incentive from Inland Revenue Board (IRB). In addition, there are Malaysia Environment and Social Reporting Awards (MESRA) and ISO 14001 certification which will be given to the companies that perform well in pollution abatement and some environmental related actions.
From the articles, we can conclude that there is still a room for the private entities in organization of Islamic countries (OIC) member to improve the environmental and social reporting. The experts in our study emphasized that it would be better to address CSR through legislation rather than keeping it at the voluntary level (Jye and Pavel, 2009).
Comparative analysis between free-market approach and pro regulation approach
Pro regulation approach
No regulations formed to regulate the information of financial and non-financial being disclosed by the private organizations.
Certain regulations formed as a guideline to regulate the information of financial and non-financial information being disclosed by the private organizations.
Purely based on the demand and the supply of information in the market.
Disclosure of information is based on standards enforced by government of the entities.
Diversity of procedures, given the flexibility in the choice of accounting techniques used to report particular event.
There are some rules and guidelines to follow which is the limitation for the organization. It is a mandatory disclosure.
Optimal supplies of information as the organizations treat the cost of disclosing information as their benefits.
Possibility of under-produced of information when the producers of information unable to impose production costs to meet the demand various users
Without regulation, there might be the possibility of insiders having information that is unavailable to the stakeholders. This action is illegal.
Complexity of rules of and regulations. Organization may follow blindly.
Lack of objectivity- no subject criteria available, management can raise it choice of accounting techniques and it is incomparable output. Monopoly supplier can have full control on disclosure of information.
Too many standards to apply. Misconduct of behavior may happen when the organization unable to achieve the standard set by the regulation bodies. There might be the losing of integrity on the disclosure of information.
If you are the original writer of this essay and no longer wish to have the essay published on the UK Essays website then please click on the link below to request removal: