 Accounting, Governance and the Crisis: Is Risk the Missing Link?Michel Magnan () and Garen Markarian European Accounting Review, 2011, vol. 20, issue 2, 215-231 Abstract: The period 2007-2010 marked one of the most severe economic and financial crises in living memory. In this paper, we focus on two of accounting's key functions within organisations and markets, financial reporting and governance. In this respect, we find that accounting exhibited shortcomings in its structural foundation and in its application. Salient is its failure to account for uncertainty and to adequately capture, measure and disclose the impact of risk-taking on the financial statements, thus undermining their reliability and, potentially, their relevance as indicators of economic performance. Consequently, boards were provided with misleading numbers, and compensation was based on paper profits that did not materialise. As such, accounting carried undesirable elements that interacted with other malicious market characteristics such as excessive risk-taking by bankers, and failure in regulatory and market oversight, thus potentially contributing to deteriorating economic conditions. The paper concludes with suggestions for further research in this area. Guns don't kill people, but they sure help. (Exchange between Clive Owen and Paul Giamatti, Shoot 'Em Up, 2007) Date: 2011 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:euract:v:20:y:2011:i:2:p:215-231 Ordering information: This journal article can be ordered from DOI: 10.1080/09638180.2011.580943 Access Statistics for this article European Accounting Review is currently edited by Laurence van Lent More articles in European Accounting Review from Taylor & Francis Journals |
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