ARTICLE IN PRESS

The British Accounting Review 39 (2007) 271–289

www.elsevier.com/locate/bar

Critical reflections on research approaches, accounting

regulation and the regulation of accounting$
Richard Laughlin
Department of Management, King’s College London, University of London, London SE1 9NH, UK

Abstract

The design and choice of research approaches, the nature of accounting regulation and the reactions to these regulations
in organisations, involving, in effect, the regulation of accounting, are three themes of considerable importance in
accounting research. They are the three themes that have dominated the research agenda of the author throughout his
academic career. This paper explores the nature of these three key research themes developing some critical reflections on
what has been discovered about each of these themes using the author’s sole and joint research and publications as a
vehicle for this analysis.
r 2007 Elsevier Ltd. All rights reserved.

Keywords: Research approaches; Accounting regulation; Regulation of accounting

1. Introduction

To be awarded the BAA’s Distinguished Academic Award is a great honour. It also provides a unique
opportunity to write a rather more personal and reflective paper than normally appears in journals such as The
British Accounting Review. The paper reflects interests I have had since I first started my journey to become an
academic—initially under the tutelage of Trevor Gambling in the University of Birmingham, when I registered
for a MSocSc degree in 1970. These interests developed further when I was appointed by Tony Lowe to join
his increasingly significant team of young staff in Sheffield in 1973 and continued through my 22 years at the
University of Sheffield, then at University of Essex and now at King’s College, London in the University of
London. This paper provides a critical, reflective analysis of these interests into research approaches,
accounting regulation and the regulation of accounting with a particular personal1 view on this understanding.

$
This paper formed the basis for the Distinguished Academic Award Plenary Lecture on 3 April 2007 to the British Accounting
Association Annual Conference at Royal Holloway, University of London. The author would like to thank Jane Broadbent, the Editors
and an Associate Editor of The British Accounting Review for their helpful and insightful comments on previous drafts of this paper.
Despite this assistance the author takes full responsibility for the following.
E-mail address: richard.laughlin@kcl.ac.uk
1
Perhaps here is the place to acknowledge the immense contribution that Jane Broadbent has made to my (and our) publications and
ideas related to these three themes. Whilst each of us has made a unique and separable contribution to the development of accounting
knowledge on these themes, much of our work is inextricably intertwined making it difficult to be absolutely clear who has been the main
contributor to particular ideas. Hopefully in the following there is a bit more ‘me’ than ‘us’ but only marginally.

0890-8389/$ - see front matter r 2007 Elsevier Ltd. All rights reserved.
doi:10.1016/j.bar.2007.08.004
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272 R. Laughlin / The British Accounting Review 39 (2007) 271–289

My interest in research approaches is because of their importance for understanding the nature of
accounting policy and practice. Despite my profound disagreement with Watts and Zimmerman’s Positive
Accounting Theory (PAT) (1986), PAT’s ‘success’ was to finally burst the bubble of normative thinking that
had dominated accounting thought for too long before its arrival. Many of us had this empirical interest long
before the ‘PAT revolution’ but also had much more sympathy with the scholarship and empirical relevance of
some of the great normative thinkers, than, seemingly, Watts and Zimmerman and other positivists.
Mattessich, for instance, whilst a normative thinker, saw theory as a bridge to understanding empirical
situations.2 Mattessich was also acutely aware of the need for sophistication in research approaches as key in
aiding our understanding of empirical situations as is apparent from his book on instrumental reasoning and
systems methodology (Mattessich, 1978). The nature of accounting policy and accounting practice is
exceptionally complex and contextually defined, requiring considerable sophistication in the research
approaches used to access this complexity. Anthony Hopwood was undoubtedly key in breaking the illusion
that accounting was nothing more than a technical activity (Hopwood, 1978, 1983, 1985). He was also key in
reminding us ‘y how little we know about the actual functioning of accounting systems in organisations’
(Hopwood, 1979, p. 145) and the need for extensive research into these complex systems. This gave increased
emphasis to the need to be clear about the nature of research approaches to discover this complexity.
Accounting regulation is of interest to me for two reasons. First, having started my academic career in
1973—soon after the formation of the UK’s Accounting Standards Steering Committee—I have been
fascinated with the way accounting regulation has developed over the years. My interest has always been with
the social and political processes at work in both the way the standard setting bodies have changed as well with
the specific standards that have emerged. Second, because accounting regulation goes beyond accounting
standard setting to much wider forms of societal regulatory processes which are driven by what we have
referred to as ‘accounting logic’ (cf. Laughlin, 1992; Broadbent, 1998). Accountants do not necessarily
explicitly design regulation in accordance with ‘accounting logic’, but it is a way of thinking that comes from
accounting and, as such, is embedded in accounting regulation.
The way organisations ‘regulate’ accounting to serve organisational needs and values, in the context of
societal (accounting) regulatory requirements, has also been an area of considerable interest for a number of
reasons. First, because understanding this organisational dynamic provides valuable pointers to questions
about the social worth and role of accounting requirements. Organisational and societal values and concerns
are central to this analysis. The play on the word regulation is very deliberate3 to register the fact that
organisations are not isolated islands but rather are located in a society that has regulatory intents over the
direction in which they are heading. Yet organisations can and do have views on these regulations and can and
do regulate their impact. Some of these regulations caught in this dynamic are accounting regulations.4 So a
second reason for this interest in the way organisations ‘regulate’ societal regulations is because it allows a
much needed linked analysis between societal and organisational relationships with a focus on accounting.
The analysis of accounting regulation and the regulation of accounting, and also the design of research
approaches, raises important questions and issues about legitimacy, which links to the final element in the
title—‘critical reflections’. The interest in critique has been second nature since I started out as an academic—
this was something implanted into my academic genetic code from my Birmingham days, was reinforced ever
more forcefully in Sheffield, and continues to this day. This interest has also been fuelled by a constant
awareness that understanding is only part of the discovery process. What we do with understanding,
2
Interestingly Mattessich’s Accounting and Analytical Methods (1963) was the first ever academic accounting book I ever read—the
MSocSc in Birmingham in 1970 was a challenging experience! I still see it as a profound manuscript and one which has had more than a
passing effect on my understanding and advocacy of ‘middle range thinking’.
3
In fact the title of this paper mirrors, to some extent, my 1992 professorial inaugural lecture at Sheffield which had a question within its
title of ‘Accounting Control or Controlling Accounting?’. For all sorts of complex reasons this paper never was published but the
fascination with societal controls and the way organisations exercise control over these controls has been a long standing interest. Fifteen
years down the line I am less assured that ‘control’ or ‘controlling’ is a certainty and, it is for this reason, the rather softer and more
uncertain ‘regulation’ and ‘regulating’ has been used. However, the interest in the links between macro societal regulations and the micro
reactions to regulate these societal directions remains just as strong.
4
In the following, when discussing accounting regulations it is important to read this as including more recognisable forms of regulations
that have clear accounting elements to them as well as the more subtle forms that include ‘accounting logic’, in all its diverse forms, in their
content.
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particularly in relation to engagement with practitioners to consider changes in the phenomena being
analysed, has also been second nature to me. Inevitably, therefore, this is a core element of ‘middle range
thinking’ (MRT) (cf. Laughlin, 1995, 2004; Broadbent and Laughlin, 1997).
The remainder of this paper is divided into three substantive sections followed by a reflective conclusion.
The following three sections address the three central concerns of the paper: the nature and design of research
approaches, issues and insights related to societal accounting regulation and finally to organisational
responses to regulating accounting with a particular emphasis on regulating societal accounting regulations.
The final concluding section summarises the paper through a range of critical reflections on understanding in
relation to these important agendas of discovery.

2. Research approaches

An understanding of research approaches was dominant in the early 1970s, particular at Sheffield. Much of
the debate, certainly in Sheffield, was in relation to the value of systems thinking to analyse the nature of
accounting within organisations and society. But also we were venturing into wider social science approaches
not least Marxism, Habermasian Critical Theory, Ethnomethodology and Symbolic Interactionism. We were,
however, talking to ourselves in those early years and publishing little.5
All of this changed when the ‘market for excuses’ paper was published (Watts and Zimmerman, 1979) and
possibly, more importantly, the development of this thinking in terms of Positive Accounting Theory (PAT)
(Watts and Zimmerman, 1986). PAT, as Sterling (1990, p. 98) makes clear, ‘yrests entirely on the claim that it
is a scientific theory whereas other accounting literature is composed of unscientific musings’. It changed the
questions that accounting researchers should ask from ‘‘What ought accounting practices be?’ to ‘What are
accounting practices’’ (Sterling, 1990, p. 98). Or, as Watts and Zimmerman (1986, p. 2) make clear, ‘The
objective of accounting theory is to explain and predict accounting practice’. Accounting theory to Watts and
Zimmerman was not to provide a normative superstructure, which had dominated the thinking of many but
not all6 of the great accounting theoreticians up to this point.
This concern with understanding accounting practice was second nature to many of us at this time but what was
not second nature, and quite objectionable, was to claim that PAT was a scientific theory and that their research
approach was the only way to develop this understanding. It was the latter ‘scientific’ claims, and insistence that their
positivistic alternative was the only pathway to truth, which led to intense debate in Sheffield and elsewhere.7 Yet our
battles to get these critiques, particularly in relation to the ‘market for excuses’ paper, published in The Accounting
Review—where the original paper appeared-were sidelined. The painful processes involved in this are forever
recounted in the insightful archival work by Tinker and Puxty (1995) under the highly descriptive but provocative
title of ‘policing accounting knowledge’. A critique by Charles Christenson (Christenson, 1983) was finally published
in The Accounting Review—four years after the ‘market for excuses paper was published in the same journal. Our
own critique entitled ‘simple theories for complex processes’ finally appeared in the same year as Christenson’s article
(Lowe et al., 1983). However, this was not in The Accounting Review, where it was originally targeted.
Christenson and our own critique should have restricted the growth and relevance of PAT but it has gone
on from strength to strength. Sterling (1990, p. 131), in a much later critique, drawing strongly from the earlier
critical analyses, summarises well the concerns that ‘yinstead of applying the norms of science, it [PAT]
flagrantly violates these norms’. Where Sterling got it right and wrong was his contention that: ‘The
accomplishments—actual and potential—of positive accounting theory are found to have been nil and are
projected to be nil’ (Sterling, 1990, p. 98). Sterling is right in terms of what, many of us would argue, has been
5
It is interesting to note that my first publication—in the unlikely outlet for my work in the Journal of Business Finance and Accounting
was in 1977 (Laughlin, 1977)—four years after I started in Sheffield. Such dilatoriness would be both unheard of and unacceptable in the
current RAE-world and the probationary arrangements of most universities. However, it did mean that I could read widely as a full-time
lecturer—something my younger colleagues, when they start their lecturing careers, rarely have the time to do.
6
As indicated in the introduction there were notable exceptions (cf. Mattessich, 1963, 1978).
7
Notable in this regard was the work of Cyril Tomkins and his co-researchers at the University of Bath. Cyril was not active in the
battles with Watts and Zimmerman but his work was highly influential in opening up new ways of thinking about research approaches and
his paper on the ‘everyday accountant’ with Roger Groves (cf. Tomkins and Groves, 1983) remains, to this day, of seminal importance for
understanding interpretative approaches to research in accounting.
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discovered through PAT. He is, however, wrong to say that the accomplishments are not considerable given
the incredible worldwide influence of this way of thinking to accounting research and the journals that are
associated with PAT and its derivatives, at the heart of which is the Journal of Accounting and Economics.
This fraught debate was not the only cause for the development of the ‘interdisciplinary perspectives on
accounting (IPA) project’ (Roslender and Dillard, 2003, p. 325) but it certainly played its part. As Roslender
and Dillard (2003, p. 327) point out: ‘ythe contemporary IPA project was a reaction to the positivist and
functionalist orientations, and their attendant motivations’. For many, after the bruising with PAT it was
decided that further engagement with this branch of, primarily American, thinking was pointless. More
proactively, it led to the development of new, diverse social science-based ways of looking at accounting
practice. With Accounting, Organizations and Society already in existence as an outlet for IPA work, it was
only a matter of time before other key international journals emerged—notably Accounting, Auditing and
Accountability Journal in 1988 and Critical Perspectives on Accounting in 1990-given the growing interest in
IPA thinking that was emerging. This was accompanied by an annual conference circuit, alternating between
Europe, North America and Australasia/Asia—starting with the Interdisciplinary Perspectives on Accounting
Conference (the first of which was held in 1985), based in the UK and now other countries in Europe, the
Critical Perspectives on Accounting Conference based in North America (which started in 1994) and the Asia
Pacific Interdisciplinary Research on Accounting Conference based in Australasia and Asia (which started in
1995). Together these have, over the years, provided a forum for, exposure to and impetus for IPA research
and knowledge formation and a new and significant worldwide academic community.
The latter part of the 1980s and the early 1990s were times of considerable activity in the burgeoning IPA
community. The diversity of social science approaches emerging during this time was immense and has created
internal tensions.8

2.1. Alternative social science research approaches and MRT

My own response to this diversity and disagreement was contained in a paper I published in 1995 (Laughlin,
1995) which quite wrongly, in my view, has been called my ‘middle range’ paper (Lowe, 2004). Certainly MRT
appears in the title, yet as I tried to make clear in my response (Laughlin, 2004) to Alan Lowe’s critique in the
Special Issue of Critical Perspectives on Accounting9 this was not the main point of the paper. The main
purpose of the original paper was to provide an overview of the characteristics of different research
approaches so they could be compared and contrasted. It was also to make clear, with more than an eye on the
claims of PAT, that there are multiple research approaches not one, and that no one approach can claim to
discover absolute truth—not even spurious or even ‘properly conducted’ science—and that all understanding
is inevitably partial. Choices on research approaches, therefore, need to be made. It was only in relation to the
latter that ‘middle range thinking’ was introduced as my chosen research approach. It was intended, first and
foremost, to illustrate how this choice process might operate. It was also to make transparent the research
approach that has dominated and still dominates my empirical work and the reasons for it.
The overview of research approaches contained in Laughlin (1995) and developed further in Laughlin
(2004) traces these to four key philosophers-Auguste Comte, Immanuel Kant, Georg Hegel and Joanne
Fichte—giving three key ‘family trees’ of research approaches—named as Comtean, the Kantian/Hegelian
and the Kantian/Fichtean to reflect the significance of the respective ‘father figures’. Each of these steams of
thought was analysed in relation to theory, methodology and change. The theory and methodology elements
were further refined in Fig. 1 in Laughlin (2004), which is reproduced in slightly adapted form in this paper as
also Fig. 1. Fig. 1 provides a detailed analysis of the ‘modal’ research approaches10 in these three family trees.
8
Notably, but not exclusively, between the Marxists and the Foucauldians—see the special issue of Critical Perspectives on Accounting
(5:1) entitled ‘Accounting and Praxis: Marx after Foucault’ for a flavour of these disagreements.
9
See ‘Debating the Middle Range’ contained in Volume 15:2 in 2004.
10
It is important to point out that there are other Comtean, Kantian/Fichtean and Kantian/Hegelian research approaches that are not
portrayed in this ‘modal’ model, although these will still possess a clear ‘family resemblance’ containing many of the key characteristics. It
is also important to stress that despite the accusation by Lowe (2004) that change has been lost in the 1995 paper and looks somewhat lost
in this Figure this is not the case. The point of the diagram is to provide comparative characteristics of the various theory and
methodology elements of the modal research approaches. The views on change are apparent at the top of the diagrammatic presentation of
each of the modal research approaches.
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COMTEAN KANTIAN/HEGELIAN KANTIAN/FICHTEAN

LOW CHANGE MEDIUM CHANGE LOW CHANGE
ASSUMED GENERAL
EMPIRICAL PATTERNS COMPLETE PARTIAL NONE

RELEVANCE OF PRIOR ALL DEFINING & PROVIDING

THEORY AT OUTSET OF ENCOMPASSING ‘SKELETAL’ IGNORED
RESEARCH: TO BE THEORY

ROLE OF OBSERVER
SUBJECTIVITY IN
EMPIRICAL MINIMISE COMPLETE
STRUCTURED
ENGAGEMENT

METHODOLOGICAL CRITICAL
POSITIVIST
INTERPRETIVE
APPROACH REALIST DISCURSIVE
ANALYSIS

DATA NARRATIVE QUANTITATIVE

QUALITATIVE 2 QUALITATIVE 1

DATA QUESTIONNAIRES
INTERVIEWS
COLLECTION
DOCUMENTS OBSERVATION
METHODS

ORGANISATIONS AND SOCIETIES MADE UP OF PEOPLE AND NON-HUMAN PHENOMENA

Fig. 1. Modal research approaches.

What is clear from even a cursory look at Fig. 1 is that the generic term ‘research approaches’ is intentional.
Any research approach contains all aspects from ontological assumptions to detailed choice of data collection
methods. Choose a research approach and you choose a coherent way of thinking that needs to be
operationalised in accordance with its ontological, epistemological and methodological underpinnings,
without mixing and matching unrelated elements that lead to inconsistent and ultimately incoherent ways of
undertaking empirical research.
The reason for advocating MRT (a Kantian/Hegelian alternative) as a research approach—which has the
theoretical, methodological and change characteristics of the mid-column in Fig. 1—is based on its positive
attributes along with the way it overcomes perceived deficiencies in Comtean and Kantian/Fichtean
alternatives—the left and right columns respectively in Fig. 1. Some of these key arguments for MRT are at
the ontological and prior theoretical levels (the top two levels in Fig. 1). The rationale for MRT is because of
the assumption that there are ‘skeletal’ generalisations and theories that exist and once discovered can guide
and provide a conceptual language for analysing empirical situations, whilst still recognising the distinctive
differences between these empirical situations. This contradicts the Comteans who assume that theories
are complete, in the sense that everything of importance is encapsulated in the theoretical elements, making
the empirical detail nothing more than data for empirical testing of these theories. Equally it contradicts the
Kantian/Fichteans who assume that no conceptual theories exist and that each situation is unique and
separate and needs to be analysed as such. Methodologically (the next two levels in Fig. 1) MRT maintains
that subjectivity and structured formality can both work together to provide a meaningful way to draw from
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276 R. Laughlin / The British Accounting Review 39 (2007) 271–289

LIFEWORLD

STEERING MEDIA
(SOCIETAL
REGULATORY
INSTITUTIONS)
STEERING
MECHANISMS (Notably
SYSTEMS (MICRO money and power guided
ORGANISATIONS) often by accounting
processes)

Fig. 2. Habermas’ model of society.

skeletal theories to engage with empirical situations. The other two approaches either want nothing to do with
subjectivity (the Comteans) or nothing to do with structured formality (the Kantian/Fichteans). MRT also
maintains that it is necessary to go beyond understanding to strategies for policy and practice change in the
phenomena being analysed. Change is not an inevitable outcome but MRT does require undertaking a
separate user-led, but researcher-informed, process to be enacted to consider change possibilities. This is in
marked contrast to the Comteans who rule out change considerations on the grounds of its lack of scientific
objectivity and the Kantian/ Fichteans who rule it out because of the need to leave the actors in any empirical
situation untouched and undisturbed, in an anthropological sense, by the analysis of researchers.
What this highlights is that the disagreements so prevalent in the literature about quantitative versus
qualitative data narrative and data collection methods—the bottom two levels in Fig. 1—are not as important
as the ‘higher’ levels. Decisions on these ‘fall out’ of adopting different research approaches once the
ontological, theoretical, methodological and change issues are resolved. It is for this reason it is important to
talk in terms of ‘research approaches’ in their entirety rather than concentrating on methodologies and
methods which are only part of the issues and concerns that need to be addressed.

2.2. MRT and Habermas

The nature and content of the MRT research approach draws heavily from an adaptation of Jurgen
Habermas’ (cf. 1984, 1987) critical theory. This is not the paper to provide a detailed summary of this thinking
and how we have adopted and adapted Habermas’ models11 in our empirical work over the years. All that can
be done at this stage is to highlight a few key theoretical propositions to help make the following sections on
accounting regulation and the regulation of accounting more meaningful.
Central to Habermas’ theory, methodology and in fact to his whole way of thinking is related to the power
and significance of human discourse. A key element of this is in relation to his understanding of the evolving
nature of society and institutions and organisations that are part of any society. A simple diagrammatical
presentation of his ideas are contained in Fig. 2. Fundamentally, to Habermas, any society has a discursively
agreed set of explicit or implicit values, called a lifeworld, that comes from an accumulated understanding of
insights into our world, our social relations and ourselves. To achieve these values requires forming tangible
systems that express and take forward different aspects of these value requirements. As society gets ever more
complex a new intervening element is introduced, called steering media, whose specific purpose is to regulate
the systems so that societal lifeworld values are achieved.
11
But see for instance Laughlin (1987), Broadbent et al. (1991), Power and Laughlin (1996) and Broadbent and Laughlin (1997) for some
of the key concepts and concerns. As indicated in Laughlin (1999, p. 75) we have long been of the view and have practiced that this is not a
‘one way traffic’ of striving to provide an absolute and untainted interpretation of such great social scientists as Habermas, but rather as
adding ‘y our small part to their ongoing project by our endeavours, however stumbling, in critical accounting research’. What we have
tried to do is retain the spirit and essence of Habermasian thinking but at the same time amplified and developed this thinking.
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Broadbent et al. (1991) and Power and Laughlin (1996) develop this analysis by reshaping these somewhat
abstract steering media and systems into tangible societal steering institutions and actual organisations
respectively. These institutions and organisations are argued to have their own internal lifeworlds, steering
media and systems allowing them to, in effect, be self-standing systems in their own right with the potential to
have a life of their own. This creates the critical problem that both steering institutions and organisations can
venture beyond the confines of societal lifeworld requirements.
Given the key importance of societal steering media (institutions) and, more importantly, the mechanisms
they issue, Habermas was acutely aware of the need to evaluate the content of these mechanisms.
Of central importance in this evaluation, to Habermas, was whether the mechanisms could command
wide-ranging consensual support and were understandable to those being regulated. In this sense
Habermas argued that mechanisms could be seen to be either ‘regulative’ and ‘amenable to substantive
justification’ or ‘constitutive’ and ‘legitimised only through procedure’ (Habermas, 1987, pp. 365–366).
Steering mechanisms that are ‘regulative and amenable to substantive justification’ are ‘freedom guaranteeing’
(Habermas, 1987, p. 367) whereas those that are ‘constitutive’ and ‘legitimised only through procedure’
are ‘freedom reducing’ (Habermas, 1987, p. 367). Whilst ‘freedom reducing’ mechanisms might have
their place, Habermas was clear that ‘freedom guaranteeing’ mechanisms should always be the aspired
ideal.
This conceptual thinking is typical of MRT—conceptually rich with possibilities but needing empirical
engagement and empirical detail to become meaningful. This conceptualisation provides a powerful way to
look at both accounting regulation and the regulation of accounting. Accounting is one of the key steering
mechanisms used by societal regulatory institutions. It is not the only steering mechanism, but accounting,
combined with underlying money flows—which Habermas saw as the archetypal steering mechanism—are of
central importance. The conceptual criteria of seeing, from a societal perspective, whether the resulting
mechanisms are ‘regulative and amenable to substantive justification’ provides a conceptually rich way to
analyse the justifiability of any accounting regulation. It also provides a way to look at the compliance, or
otherwise, to any societal regulation at the organisational level. Where any societally-driven accounting
regulation is deemed ‘constitutive and legitimised only through procedure’ rather than ‘regulative and
amenable to substantive justification’, resistance to the intrusion, in all sorts of different forms, will be the
likely behavioural response at the organisational level.
With this critical theoretical analytical framework in mind, the following turns to the empirical application
of this way of thinking in relation to an analysis, initially, of societal steering mechanisms in the form of
accounting regulations.

3. Accounting regulation

My interest in accounting regulation dates back to the early 1970s but was accentuated with the publication
of The Corporate Report (Accounting Standard Setting Committee (ASSC), 1975). This Report fascinated me
then and still does. The mid-1970s were a unique time when a stakeholder emphasis could have taken hold in
this country and led to very different forms of accounting regulation.
This section looks at this development but goes beyond it to other forms of accounting regulation directed
by what can be called ‘accounting logic’ (Laughlin, 1992; Broadbent, 1998). Accounting logic is the belief that
it is possible to evaluate the use of financial transactions through the outputs or outcomes achieved and that
these can be assessed, invariably in measurable form. Accounting logic is not something that is only exercised
by accountants but is a way of thinking that permeates all of society. Its roots may be in accounting but its
influence and practice goes way beyond the confines of practicing accountants. This section also looks at this
‘other’ form of accounting regulation.

3.1. Accounting regulation through accounting standard setting

The Corporate Report (CR) (ASSC, 1975) provided a watershed in the development of accounting
regulation in the UK. It argued that accounting, and, by implication, accounting regulation, needs to serve the
accounting information needs of all stakeholders and not just shareholders and other finance providers. This is
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not novel in itself since even the dominant stewardship emphasis so prevalent at that time and even now,12 and
on which the CR is built, has a general purpose (and stakeholder) user emphasis in mind. What was unique in
the CR was the recognition that whilst stewardship reporting13 was deemed important, and addressed a
general use function, it needed to be complemented with additional specific information for a range of
stakeholders—all of whom were seen as equally important as were their information needs.
This raises important questions about the nature of the objectives of accounting (Laughlin, 1977), and
therefore the nature of the accounting regulation that needs to be in place. Is it to supply the generalist needs
of all users through stewardship reporting—as understood by CR (vis the Value Added Statement) rather than
as currently understood in terms of a general report geared towards the residual interests of finance providers-
or is to satisfy the specific information needs of all stakeholders who are equally entitled to be served in
this way?
The latter model, accompanied by the Value Added Statement, nearly succeeded in becoming the norm. The
CR metamorphosed into a Government Green Paper (HM Government, 1976) and was moving towards a
White Paper and legislation when, in 1979, as Burchell et al. (1985) make plain, in their analysis of the rise and
fall of the Value Added Statement, the ‘constellation’ was ‘ruptured’. The new Conservative Government, led
by Margaret Thatcher, banished such a compassionate understanding of stakeholders, and their information
needs, and put in their place the information needs of finance capitalists-notably shareholders and other
finance providers.
At this point these needs were somewhat massaged by shifting the objectives of accounting and by
implication the regulatory focus from wider stakeholder needs to the seemingly more neutral concern for
‘decision usefulness’ of a ‘softer’ variety in terms of stewardship reporting of a certain sort. Yet ‘decision
usefulness’ was, and is, far from neutral and actually means giving particular emphasis to the information
needs of finance providers to the exclusion of other stakeholders. Despite the critical analysis of many,
including myself and the late Tony Puxty (cf. Laughlin, 1980; Laughlin and Puxty, 1981, 1983a, b; Puxty and
Laughlin, 1983) ‘decision usefulness’ and its interpretation in relation to one set of stakeholders (financial
providers) has largely persisted. The ‘softer’ decision usefulness, stewardship emphasis, which still privileges
finance providers, has dominated standard setting by the UK’s Accounting Standard Board (ASB), and the
IASB and their respective forbears. However, a stronger decision usefulness emphasis, with its continuing
emphasis on the information needs of finance providers, is currently gaining new ground with the initial
chapters in the conceptual framework that the IASB and the FASB have recently published (IASB, 2006).
Unlike in previous eras, this new framework seems set to expunge stewardship reporting and remain largely
indifferent to the information needs of any other stakeholders apart from finance capitalists.
What came clearly through this early analysis, and has been an ongoing concern, is the way certain
‘interests’, of which government interests are, in the final analysis, paramount, dominate the nature of
accounting regulation. Robson et al. (1994, p. 531) highlight an interesting distinction between the ‘regulation
of the profession’ and the ‘regulation by the profession’. If we take the ‘profession’ in this sense as professional
accounting regulators14—namely the accounting standard setters—Robson et al.’s distinction becomes
particularly interesting. The nature of the regulation by the profession through accounting standard bodies
and in terms of accounting standards is defined according to the parameters permitted in the regulation of
these standard setters. As Broadbent and Laughlin (2005b) make clear, whilst some regulatory interests over
standard setting bodies come and go it is the government of the day that keeps an ongoing watching brief and

12
It is interesting that the dissenting voices in the International Accounting Standards Board (IASB) when publishing the first chapters
of their recent joint (with the US’ Financial Accounting Standards Board (FASB)) ‘decision useful’ conceptual framework (IASB, 2006)
argued for an underlying stewardship emphasis. In the main though FASB and IASB are increasingly seeing stewardship reporting as ‘old
thinking’ and ‘backwards looking’.
13
It is important to note that stewardship reporting in the CR was not what we understand by this term to-day. The profit and loss
accounting and balance sheet to the CR was actually not a stewardship report, strictly speaking, since if was geared to residual interests of
finance providers. Value Added Statements, where the value added is a residual but one that is available to all stakeholders, was what CR
understood by stewardship reporting.
14
Clearly this is a simplification since the profession is wider than the accounting regulators—for more on this see footnote 16. But the
accounting regulators are of central importance and are often the focus for the regulation of the profession due to their particular role and
importance in the workings of the profession.
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has the power and authority to require the accounting standard setters’ attention. In this connection had the
Conservative Government, in 1979, wanted to, they could have supported the work that the previous Labour
administration had started and accounting regulation (the regulation by the profession) could have been
totally different. They didn’t and they didn’t because they believed that it would not be in the ‘public interest’
to develop a stakeholder emphasis.
In fact the very existence of a separate accounting standard setting body as well as the nature of many
standards can be traced to this same dynamic.15 The formation of the Accounting Standards Steering
Committee (ASSC) in 1970, and, in effect, a self governing profession-led accounting regulatory body can be
seen as the Government sanctioned solution to the (Government-led) public interest concern about financial
scandals such as GEC/AEI and Pergamon in the late 1960s. Yet, in 1974, the Government, frustrated by the
lack of progress on inflation accounting by the quasi-independent ASSC, moved over the head of this body
and formed its own committee to investigate inflation accounting. This led to the Government’s 1976
Sandilands Report—a year after the CR was published and the same year as the Green Paper on The
Corporate Financial Report. Clearly the Government was very active in accounting matters at this time, not
least because of the high levels of inflation raging in the late 1970s. The accounting standard setters, at that
time, welcomed the The Green Paper but not the Sandilands Report.
The more general point is that it is the government of the day that allows the profession to either regulate
itself or to restrict this self-regulation. If this self-regulatory body ventures beyond acceptable levels in relation
to a perceived public interest criteria (however defined) government will intervene. The interventions are
complex and varied, as Broadbent and Laughlin (2005b) demonstrate in their analysis of inflation accounting
and accounting for the private finance initiative, but they can occur at anytime. They will only occur, however,
if the government of day deems that the quasi-independent regulatory authority is not working in the
‘public interest’.16
A very recent intervention, and one that brings the argument full circle, is the debacle over the Operating
and Financial Review (OFR). The OFR was seen as the nearest report that might provide an opportunity to
return to the stakeholder concerns of the CR—which, as indicated above, had been expunged in 1979 under
the ‘public interest’ argument of the new Conservative Government. The OFR was the first Reporting, as
distinct from Accounting, Standard—at least for a few months until Gordon Brown, the UK’s Chancellor of
the Exchequer, and now Prime Minister, decided, in November 2005, that it was no longer in the ‘public
interest’ to allow the OFR to be mandatory. As a result the OFR is now a Financial Statement rather than a
Reporting Standard and stakeholder reporting remains a peripheral activity.
It is always dangerous to look back and nostalgically think about what might have been. But things could
have been so different if the Labour Government had not lost the election in 1979. If the CR had become the
basis on which accounting regulation should be based, it is not too fanciful to suggest that all the endeavours
of the social and environmental accounting scholars, led by Rob Gray, David Owen, Keith Maunders, Jan
Bebbington and their many associates (cf. Gray et al., 1987, 1988, 1996; Gray, 2002; Gray and Bebbington,
2001) might not have had such an uphill battle and maybe, just maybe, accounting could have played a more
important part in preventing the world facing the environmental and climatic crisis that it does.
There is no more important comment than this, but the key point to stress in the context of the current
argument is that the government of the day has a unique role in the regulation of the accounting standard
setters. Government can and does allow quasi-independence of the accounting regulators to regulate the
profession, both generally as well as specifically, providing it is working in whatever they deem to be the
‘public interest’. Where this is perceived not to be occurring then they will intervene and these interventions
cannot be ignored. Governments, therefore, hold a unique position in this regard and can change the whole
nature of the accounting regulatory process if they so choose. When any government does not intervene it does

15
The events recounted in this paragraph have been well covered in the literature—see Broadbent and Laughlin (2005b) for details.
16
This is where the restriction on seeing the profession as only the accounting regulators needs to be relaxed. As Prem Sikka has
constantly reminded us (e.g. Sikka and Willmott, 1995; Arnold and Sikka, 2001), there is also, or certainly should be, a direct relation
between the state and the professional accounting firms, rather than indirectly through the accounting regulators. The public interest
argument applies also to this relationship, even though, as Sikka makes clear, these interventions have been rare. This raises the critical
concern as to whether there should have been more state interventions, and what this says about the state’s priorities—an agenda Prem has
been bringing to our attention over many years.
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not mean that this watching brief, led by public interest perceptions, is not in operation. It is indeed like a
watching brief—when there is no intervention it can be assumed that government is still watching but they are
content that the current regulatory activities are working in their perception of the ‘public interest’.
Given the power of governments to intervene the question this raises is whether they are right to intervene
when they do and right when they do not. Clearly this is an empirical question and, using the Habermasian
framework, the key question is whether any intervention or lack of intervention, on the basis of a ‘public
interest’ argument, can be seen as ‘regulative and amenable to substantive justification’. This needs empirical
evidence, yet the ambivalence to certain stakeholders and the undue importance given to one particular
stakeholder group at the expense of the others is unlikely to meet this condition. Clearly this debate should
have occurred in 1979, but it didn’t happen. But it is still not too late and maybe the OFR debacle could still
form the focus for this much needed discourse.

3.2. Accounting regulation led by accounting logic

Accounting regulation extends beyond more traditional accounting standard setting into the very heart of
other forms of regulation within society. Much of this regulation is permeated by what we have called
‘accounting logic’ (Laughlin, 1992; Broadbent, 1998). Accounting logic is often seen when monetary flows are
the key content of any regulatory process. Accounting logic assumes that it is possible to evaluate each and
every financial flow in terms of the outputs, and preferably outcomes, that come from these flows, the majority
of which, it is assumed, can be expressed in measurable form. Accounting logic is, in effect, a way of thinking
that makes clear linkages between financial inputs to outputs and outcomes achieved. It is ‘y the monetarized
organisation of means-ends flow’ (Meyer, 1986, p. 349). It also creates an ‘aura’ (Gallhofer and Haslam, 1991,
p. 488) of ‘ycompleteness and precision in its representation of reality which has ramifications for the control
process and comes to dominate it’ (Broadbent, 1998, p. 272). Accounting logic provides the questionable
confidence to supply a ‘y rational calculation about the specific means of achieving definite ends’ allowing
seeming surety to ‘ydo something because it is the effective means of achieving a specific goal’ (Allen, 2004,
p. 78).
The roots of accounting logic are in double entry book-keeping. Double entry book-keeping always
portrays two sides of any transaction demonstrating that cash is exchanged for something in return.
Accounting logic is, therefore, an outgrowth of the seeming certainty that comes from the accounting
technology of double entry book-keeping set within a wider social and political framework attached to all
financial flows.
Accounting logic is, however, not restricted to the practices of professional accountants. It certainly has
influenced economic thought17 but it has also permeated the thinking of social and political regulators. Its
‘escape’ into the wider ether, however, has not been accompanied by the caution with which many accountants
would bring to the assumed duality relationship between means and ends. It would be wrong to assume,
however, that greater involvement of accountants in wider regulatory processes might temper the influence of
accounting logic to more realistic proportions. What is clearer is that unreflective accounting logic does have a
strong foothold in all manner of regulatory circles whether undertaken by accountants or politicians or
anyone else.
A typical example of societal regulation permeated by accounting logic is the series of regulatory changes
coming from the ‘New Public Management’ (NPM) (Hood, 1991, 1995). NPM involves ‘y shifting the
emphasis from process accountability towards a greater element of accountability in terms of results’ (Hood,
1995, p. 94). NPM involves using regulatory processes to change underlying values from what Hood (1991, p.
11) calls ‘lambda-type values’ (‘keep it robust and resilient’) to ‘sigma-type values’ (‘keep it lean and
purposeful’). It is accounting logic that has allowed NPM to flourish. It shifts the regulation of the public
sector away from a concern for long term sustainability (‘keep it robust and resilient’) to a concern with
efficiency and deliverables (‘keep it lean and purposeful’).
Interestingly NPM in the UK has been evolving over the years involving a greater and greater
intensification and increasing visibility for the accounting logic that underlies its operationalisation. In a recent
17
In this connection Klamer and McCloskey (1992, p. 159) note ‘economics lives on accounting ideas’.
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as yet unpublished paper (Broadbent and Laughlin, 2007) we trace the evolution of NPM in the UK,
notably through the Financial Management Initiative (FMI) in 1982, through the 1988 ‘Next Steps’
Programme to 1998, and the start of the current ‘Target Era’. The latter, involving the Comprehensive
Spending Review, Spending Reviews, Public Service Agreements and accompanying targets, is the clearest
expressing of accounting logic at work where ‘something (money) for something (outcomes to achieve)’ is the
central characteristic. It is interesting to note the pathway to this point has taken so long even though
the FMI, in 1982, was certainly a key moment of a very different way of thinking about the regulation of
the public sector. Accounting logic created this gestalt shift, yet its fuller expression—not the full expression
since there still may be further pathways to travel in this regulatory revolution—has taken some time to
become apparent.
The development of NPM is only one example, albeit an important example, of accounting logic at work.
The politicians who have been so instrumental in the development of NPM in the UK are not necessarily
accountants but they are imbued with the thinking that comes from accounting logic.
The question is: are these developments in Habermasian terms ‘regulative and amenable to substantive
justification’? Part of the answer to this, as indicated above, can be discovered through the reaction by micro
organisations to the wave of NPM regulations over the years. Are they owned and encompassed or are they
resisted? If the latter then questions have to be raised as to their legitimacy, certainly from the perspective
of the micro organisations that are the target of these regulations. The reactions of these organisations and
how, if at all, regulations imbued with accounting logic, such as NPM, are regulated, is the focus of the
following section.

4. The regulation of accounting

The evaluation of steering mechanisms is complex. It cannot be undertaken on a universal basis by,
in effect, saying that all societal steering mechanisms from a particular steering media are ‘regulative and
amenable to substantive justification’ or are ‘constitutive and only legitimised through procedure’. A
meaningful evaluation can only be undertaken by looking at particular steering mechanisms and judging their
merit and worth in the particular context to which they are targeted. It is, therefore, the reaction of the
targeted organisation(s) that is(are) the key litmus test for judging whether the particular steering mechanism
can be seen as ‘regulative and amenable to substantive justification’. This does not rule out seeking out and
using wider societal views about the nature of specific steering mechanisms to arrive at this evaluatory
judgement but a key pointer to this comes through the views and reactions of those to whom the steering
mechanisms are targeted.
It is for this reason that our research over many years has concentrated on the way particular steering
mechanisms have led to particular changes and behavioural reactions by the organisations targeted for these
mechanisms. This research has concentrated on health organisations—in primary and secondary care-and
education institutions—in schools and higher education. Specifically these studies have explored the way
schools reacted to the major steering mechanism instituted in 1988 through the local management of schools
initiative which involved a considerable shift in the devolution of (primarily financial) responsibilities
(cf. Broadbent et al., 1993; Laughlin et al., 1994; Broadbent and Laughlin, 1998). A further project explored
the 1990 contract for general practitioners (GPs), which required a considerable change of emphasis for the
work of GPs, and how this was handled in primary care practices (cf. Laughlin et al., 1992, 1994; Broadbent
and Laughlin, 1998). The way the societal requirement to pursue hospital procurement through engagement
with the private sector through the private finance initiative (PFI) and its effects on hospital trusts has also
been a key research focus (cf. Broadbent et al., 2003, 2004, forthcoming; Broadbent and Laughlin, 2003).
More recently attention has turned to higher education to explore the way that the numerous societal steering
requirements are both formulated at different levels in the regulatory ‘delivery chain’ as well as the way these
are handled at the level of actual universities.
The following does not provide a detailed overview of these studies but rather brings out two theoretical
themes that run through this work—namely the sacred and secular divide and the role of absorption and
absorbing groups.
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4.1. The sacred and secular divide

The sacred and secular divide is an important concept coming initially from a study of the accounting
systems of the Church of England, which was undertaken in the late 1960s and early 1970s and formed my
doctoral thesis (Laughlin, 1984). It was a formative study on the regulation of accounting, and has continued
to play a major part in the subsequent studies summarised above. Part of the reason for the choice of this
organisation was because of its lack of intrusion by societal steering mechanisms, certainly of an accounting
nature. Unlike the extensive steering using accounting logic in the public sector, the Church of England is, or
certainly was when I undertook my research, completely spared from steering of this sort. It was, therefore,
free to decide how best to manage itself and where, if at all, accounting would fit or not fit and what form it
would take.
What was key to understanding the Church of England and the role of accounting within this institution
was what was referred to as the ‘sacred and secular divide’ (cf. Laughlin, 1984, 1988, 1990). This is a slippery
concept but one that is arguably present in all organisations but has caused disquiet to a number of scholars
who argue that the divide does not exist even in religious organisations (cf. Jacobs, 2005; Irvine, 2005; Hardy
and Ballis, 2005).18
The sacred and secular divide is primarily an organisational and sociological phenomena and any structural
implications are more context dependent. It is saying that some values and concerns in organisations are more
important (the sacred) than others (the secular) and, whilst the latter might have a part to play in
organisational life, the role of the (secondary) secular elements is to enable the sacred agenda to be achieved.
If, for any reason, these secular service functions forget their role and attempt, or are perceived to attempt, to
direct the nature and functioning of the sacred agenda these intrusions will be resisted. This can be expressed
structurally, as it is in the Church of England, with internal funding bodies actually physically created to
ensure that the sacred work of the Church is separate and continues untroubled by such perceived
unimportant resourcing matters. Yet this structural expression of the divide is neither universally applicable
nor a necessary requirement.
Accounting is invariably caught in this divide. Certainly in the Church of England accounting was very
important. However, it was most apparent in the separate internal funding units, and, even here, its nature was
rudimentary. It also did not feature strongly, if at all, when sacred matters were discussed and decided. The
study of the Church of England demonstrates the extensive use of accounting but of a certain sort, which was
used in a certain way.
The sacred and secular divide arguably exists in all organisations but the 1984 thesis and the 1988 paper
only touched on some of the key characteristics of this divide. The wide applicability of this divide was hinted
at in the 1988 paper but it was wrong to link this to resourcing arrangements, which largely relate only to the
Church of England:

Miners, doctors and academics are the new priests, with defined sacred worlds (collieries, wards and
academic departments) which should continue their sacred role with adequate resourcing without these
issues interfering with their important spiritual work. (Laughlin, 1988, p. 39)

The first part of this quote is still applicable—although the detail of the specific professionals listed need to
be seen as illustrative and not definitive—but the latter part is wrong. Many, if not most organisations and
certainly the professionals who constitute them do have a clear view of what is important and central (the
sacred)19 and what is of lesser importance (the secular), which has no role in intervening into the central core.
The nature of the secular, however, is variable and can only be defined in specific empirical situations. Whilst
unquestionably many organisations, and the professionals who constitute them, would prefer a happy state of
being resourced without having to worry about this, it is unrealistic. It also makes the sacred and secular
18
These papers appeared together in a Special Edition of the Accounting, Auditing and Accountability Journal in 2005 entitled ‘Critiqing
the Sacred and Secular Divide’ (Volume 18 No. 2).
19
The words ‘sacred’ and ‘secular’, which are somewhat emotive and with religious overtones, could be changed. The essence of the
conceptual distinction is, in the final analysis, much more important than the labels used. However, for convenience the descriptive labels
are retained in this paper. It is hoped this will not deflect from an understanding of the conceptual distinctions that are being made.
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divide too simplistic, too structuralist and too open to be critiqued. Resourcing and accounting are actually
not key to understanding the working of the sacred and secular divide. Both are, however, caught in the divide
particular in organisations and professions who do see resourcing and accounting requirements as a potential
threatening force to the sacred core. In other organisations—profit oriented?—resourcing and accounting
could be seen as part of the sacred core. In these cases there are different issues and concerns that will be seen
as secular. What is key is the understanding that some values and concerns are much more important than
others—in all organisations—and if the former are perceived to be under threat either from the less important
values or by intrusions from outside the organisation, they will be resisted because of the sacred and secular
divide. This understanding has provided a key ‘middle range’ theoretical proposition that has informed the
change studies in schools, GP practices, secondary health and universities, although clearly in these situations
the ‘sacred’ was not, and should not be seen as, the same as the one that was present in the Church of England.

4.2. Absorption and absorbing groups

The second key theoretical concept that has informed our various studies is related to absorption processes
and absorbing groups. This understanding came out of the first two studies in schools and GP practices
(cf. Broadbent and Laughlin, 1998). It is a concept of resistance to steering requirements through forms of
internal absorption. The concept can be likened to a ‘sponge’, often involving locking individuals in this
process of ‘soaking up’ steering requirements. These absorption processes ensure societal steering compliance,
but in such a way that it has minimal effect on important (sacred) values and concerns. The idea of absorption
was developed further conceptually through an analysis into the societal offer to GPs to become fundholders
and purchasers of secondary care—an offer which a number of GPs had accepted. Absorption, in this case,
was not a reactive sponge-like form but rather through a proactive attempt to influence and change the
underlying societal offer to become fundholders (Broadbent et al., 2001).
Reactive or proactive absorption are strategies to prevent the perceived sacred core of any organisation
from being ‘colonised’ by societal steering mechanisms. This conclusion comes from the way organisational
changes have been analysed. This has involved designing a ‘middle range’ conceptual language for
understanding organisational change processes. To arrive at this conceptualisation involved typecasting
organisations as an amalgam of interpretative schemes, design archetypes and systems, which mirrors the
lifeworld, steering media and systems of Habermas’ model of society (cf. Laughlin, 1991; Broadbent and
Laughlin, 2005a). These three organisational elements attempt to be in a dynamic balance, a state that is also
aspired towards at the societal level, and it is only environmental ‘jolts’, in the systems-sense of disturbances,
over which the organisation has little to no influence, that disturbs this balance. These disturbances, it is
argued, can take a number of different pathways though the organisation leading to a new equilibrium state.
Conceptually there are four possible change pathways along which a disturbance can travel: two ‘first order’
where the interpretative schemes (the sacred core) are not affected and two ‘second order’ where the sacred
core is changed. With regard to the latter this can be either through chosen change in the core (‘evolution’) or
through forced change (‘colonisation’). The first order changes can involve active boundary control—
preventing the disturbance entering the organisation in the first place (‘rebuttal’) or can be allowed to cross the
organisational boundary but are handled in such a way that the sacred core is not affected (‘reorientation’).
Reorientation invariably leads to reasonably permanent design archetype and systems changes but the
interpretative schemes remain the same. The implication of this is that there can be a number of design
archetype and systems configurations that can exist that are conducive with any interpretative scheme.
Reactive and proactive forms of absorption have dominated the way the organisations we have investigated,
have reacted to steering mechanisms. Both are forms of first order change. Reactive absorption is a form of
reorientation (first order) change since the disturbance enters the organisational boundary and leads to actual
structural changes but not in the interpretative schemes. Proactive absorption is a form of rebuttal (first order)
change attempting to prevent the disturbance entering the organisation in the first place. In both cases the
reason for these reactions is because the disturbances are perceived to be potentially threatening to the
interpretative schemes—the sacred core.
Before returning to this underlying theme, it is helpful to provide some empirical detail on these concepts
through a brief summary of the nature of the actual absorption processes at work in the various empirical
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situations we have researched. In the schools project the absorption of devolved responsibilities, coming from
the local management of schools initiative, was handled by the headteachers. They deliberately took themselves
out of front-line teaching to take the strain of these new responsibilities and so protect the remaining teaching
staff so that they could continue, as before, to concentrate on the (sacred) activity of teaching undisturbed by
the societal requirements. High levels of employment of practice nurses and practice managers handled the
absorption processes in GP practices, in reaction to the 1990 contract. The Contract required a shift to more
preventive rather than curative practices, and to achieving specific targets, leading to increased levels of
accountability. Nurses and practice managers were employed to fulfil these requirements. It did not involve
taking out one or more of the GPs to undertake these tasks as the schools had been forced to do. This left GPs
free to pursue their more curative concerns, which they considered to be their central (sacred) role.
The case of PFI was rather different in terms of absorption relative to the schools and GP practices. The
PFI research raised a wide range of other more recognisable accounting concerns—not least about contracting,
financial and management accounting and the role of the National Audit Office and Government
(cf. Broadbent and Laughlin, 2002, 2003, 2005b; Broadbent et al., 2003, forthcoming). However, it also provided
further evidence of absorption processes. One of the major fears in the secondary care sector is that once a PFI
project is underway, it has the potential to have a damaging effect on the provision of services. This was and is
due to the concerns about the private sector supplying services formerly supplied by the public sector. The
perceived view was that these private sector partners were not part of the ‘NHS family’ and therefore lacked
‘appropriate family values’ as one of our interviewees put the underlying anxiety and concern. In most PFI
projects a facilities management (FM) team has been formed to, in effect, manage the contract through the
monthly payment mechanism and so carefully monitor the service performance to relieve this anxiety. The work
of these FM teams is complex both conceptually and in practice (cf. Broadbent et al., 2004, forthcoming). More
importantly for the current argument, they form an absorption group to handle the collective societal and
organisational anxieties surrounding the strong societal steering to pursue PFI and to ensure that, once
contractually bound, this will not lead to long term problems for the secondary care health organisations.
The analysis of the reactions of GPs to the strong encouragement for all GP practices to become
fundholding practices, and so become purchasers of secondary care, raised very different forms of absorption
processes (cf. Broadbent et al., 2001). Fundholding had been adopted with some enthusiasm by some GPs. It
was, however, resented by many and seen as something that would seriously undermine key values.
Absorption, in the sense of soaking up the pressure through internal mechanisms, was not going to solve the
problem. What was required was a new form of funding arrangement, one that was more conducive to the vast
majority of GPs, whilst also keeping those who had adopted fundholding to agree to the developments. The
way key actors reshaped the policy through political lobbying leading to the development of primary care
trusts, as the new form of secondary care purchasers, which the study analysed, provides key pointers to the
way absorption can be proactive and successful.
Finally, the recent study into performance management of higher education (HE) has raised yet further
insights into this complex idea of absorption. The analysis of this data is still ongoing, but what is clear is that,
in the case of HE, there are various forms of absorption at work. One is at an institutional level, which
involves the funding councils—notably the Higher Education Funding Council of England (HEFCE).
HEFCE provides an institutional form of absorption between the political demands of government and
their increasing desire to exercise what can be called ‘transactional’ forms of performance management
systems (cf. Broadbent and Laughlin, 2007), and the more ‘relational’ needs of higher education institutions
(HEIs). HEIs also have their own range of absorption processes—the key one of which involves the senior
management team who absorb both the (modified—see above) pressures of HEFCE, the increasing demands
of boards of governors and the complexity of other environmental demands so that their HEIs can continue
pursuing their prime responsibilities and (sacred) values.

4.3. A concluding thought on the sacred and secular divide and absorption processes

The sacred and secular divide and absorption processes are ‘middle range’ theoretical concepts and have
both been discovered from, as well as providing a conceptual language for analysing diverse empirical
situations. The sacred and secular divide provides the reason for why absorption occurs. If the sacred core is
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perceived to be under threat then some form of absorption will occur either of a proactive form through direct
attack on the steering mechanism or through a more reactive form, so as to be seen to be doing what is
required but in such a way that the sacred core (the interpretative schemes) remain undisturbed. Using the
conceptual language developed in Laughlin (1991) first order change is pursued, of a ‘rebuttal’ or
‘reorientation’ form, to avoid second order ‘colonisation’ change.
The constant presence of absorption processes in the studies raises serious questions concerning the merit and
worth of the original steering mechanisms, and whether or not they are regulative and amenable to substantive
justification. The indications, based on these studies, is that they are not ‘regulative and amenable to substantive
justification’—certainly to the organisational systems at which they are targeted, which, as indicated at the end
of the last section, is key in judging the societal value of the particular steering mechanisms.

5. Critical reflections and conclusions

Perhaps I could end this paper in a slightly unconventional way by making a range of statements about
insights which remain convincing, certainly to me, and others that give cause for concern with regard to
research approaches, accounting regulation and the regulation of accounting.

5.1. Research approaches

On research approaches I remain convinced that:

 There are multiple ways to explore accounting reality. The proponents of a single and only approach to
undertake this exploration are, in the final analysis, mistaken.
 All research approaches provide partial depictions of reality. In this regard there is no absolute truth. As a
result knowledge generated by particular research approaches is contestable.
 Choices have to be made as to which research approach to adopt and a simple amalgamation of the insights
from all research approaches in the hope that this will discover absolute truth is misguided. The latter is
because of the mutually exclusive nature of many of the ‘higher level’ assumptions of different research
approaches. Choices are complex but once made in an informed way, they create, or should create, whole-
hearted commitment to the value of the approach as well as the insights forthcoming.
 MRT as a research approach based on Habermas’ critical theory, for me, provides a powerful approach to
understanding and changing accounting systems in organisations and society. But, like all research
approaches, the empirical insights forthcoming are only ever partial depictions of reality.
 We need to go beyond understanding to active engagement with the accounting world that we are analysing
to use our knowledge to lead to possible changes in the policies and practices analysed.

On research approaches I remain concerned that:

 PAT (and its derivatives20) is alive, well and flourishing worldwide.

 There are multiple alternative research approaches to the one adopted by PAT, thanks to the success and
liberality of the IPA programme, but the IPA community is not creating a serious and concerted challenge to
PAT. The last thing needed in the IPA community is a replication of the uniformity to a research approach
as PAT demands. There is, however, scope for developing IPA programmes of research that are built on one
or more than one selected research approach which might provide a more meaningful challenge to PAT.
 In connection with the previous two bullet points, we may have gone backwards rather than forwards in
our appreciation and use of research approaches. The discussions now seem to centre on methods—often
20
PAT is, to many, rather ‘old thinking’. It is for this reason that ‘and its derivatives’ have been added. PAT set in place a way of
thinking—that there is only one approach to discovery, namely a form of scientific instrumentalism—that still dominates the research
agendas, in different forms, in the US and in many others pockets across the world who aspire to be likened to and be engaged with the
accounting research emphasis of these US accounting scholars. In the following PAT should be read as a shorthand for PAT and its
derivatives.
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typecast in terms of quantitative versus qualitative—somewhat independently of the way these derive from
a choice of a wider research approach.

5.2. Accounting regulation

On accounting regulation I remain convinced that:

 It is important to appreciate that accounting regulation includes regulation through accounting standards
as well as the regulations that rely on ‘accounting logic’. The former is designed by accountants whilst the
latter may not be.
 There is a need to understand and critique both forms of accounting regulation. Understanding and
critiquing of accounting standard setting by accounting academics is not hard to justify. However, the need
to understand and, more importantly, critique regulation driven by ‘accounting logic’ may need more
extensive justification. The reason is that even though the latter may not be undertaken by accountants it is
still traceable to accounting, giving us a collective responsibility to critique any spurious claims that are
made in the resulting regulations.
 An adapted understanding of Habermas’ framework provides a powerful approach to understanding these
regulations and for developing a basis for undertaking a critical analysis of the societal worth of both forms
of accounting regulation.
 Accounting standard setting may not fulfil the litmus test of being ‘regulative and amenable to substantive
justification’ due to its active rejection of a wider stakeholder commitment and the preferential treatment of
finance capitalists.
 Similar ‘substantive justification’ concerns can be raised about government interventions into accounting
standard setting. Governments have the power to intervene in accounting standard setting and have,
certainly in the UK, done so on many occasions. Even though these interventions are in the name of the
‘public interest’, whether these, in particular circumstances, can be equated with being ‘regulative and
amenable to substantive justification’ is open to question.
 Societal steering mechanisms guided by ‘accounting logic’ are equally questionable in terms of being
‘regulative and amenable to substantive justification’ as judged by an analysis of the reactions of the micro
organisations, which are targeted by the steering mechanism(s).

On accounting regulation I am concerned that:

 Despite a range of significant social and political studies of accounting standard setting, both generally and
in relation to specific accounting standards, they are relatively small in number.
 Despite the extensive and excellent research that has been undertaken in corporate social and environmental
reporting, in all its diverse forms, this remains only marginally influential on either accounting standards or
accounting practice. There are, however, thankfully, positive glosses on this somewhat negative comment.
But these are small positives and it remains disappointing in terms of influence—something that might have
been different if The Corporate Report (ASSC, 1975) had become the accepted norm.
 Few recognise, or want to recognise, the immense dangers of an underlying ‘accounting logic’ in societal
steering mechanisms, particularly when these mechanisms are designed and controlled by uncritical actors
whether they be accountants or, more usually, non-accountants.

5.3. Regulation of accounting

On the regulation of accounting I remain convinced that:

 The most effective analysis of the way organisations handle societal steering regulations is through detailed
indepth case studies due, largely, to the empirical detail that is needed to thoroughly understand the
subtleties of organisational reactions.
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 These studies provide important pointers to judge the merit and worth of particular societal steering
regulations since they can indicate whether they are regulative and amenable to substantive justification to
the actors targeted by particular regulations.
 These studies need to build on each other by drawing wider theoretical implications and insights that can be
used to inform further specific studies.
 The sacred and secular divide and absorption processes and absorbing groups, provide important concepts
for understanding the way societal regulations are viewed and handled. They provide theoretical concepts
that can be used in further empirical studies. The common strategy of absorption, albeit in different forms,
raises serious questions about whether the initial societal steering mechanisms are ‘regulative and amenable
to substantive justification’.

On the regulation of accounting I remain concerned that:

 Despite the recognition of the importance of case studies the use of prior theories and the development of
common theoretical propositions that are drawn from these case studies is not seen as a priority.
 Case studies may be too costly, from many viewpoints, and too problematic in the academic world we live
in to-day, to pursue.

5.4. A concluding comment

The empirical and evaluatory agenda into accounting regulation and the regulation of accounting, and the
concern with developing meaningful research approaches, which has been necessary to allow this
understanding to emerge, are very important. It has been a research priority of mine from the time I first
became an academic and will continue to be of central importance in, certainly, my future research and
publications.
It is an agenda where there are many issues that remain unexplored and others that have been only partly
analysed. It is a programme of research that calls for the engagement of many scholars. As indicated above it
is here where the IPA community is not very strong in contrast to other communities, notably those adopting
PAT and its derivatives, who work together in tightly defined ways. Apart from one or two notable exceptions,
the IPA community prides itself on diversity and liberality in relation to research approaches and research
themes. The real challenge for the IPA community, which despite its worldwide presence still remains
relatively small, is to maintain these values—the last thing we want is PAT-type uniformity—yet, at the same
time, to work more closely together on thematic concerns. Hopefully the IPA community will see this as
important. If they do, there is already a research programme and agenda into accounting regulation and the
regulation of accounting that will provide a rich seam to mine where some, but only some, of the groundwork
has already been completed.

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