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Political Aspects of Financial Accounting Standard Setting in the USA

Timothy J. Fogarty
Case Western Reserve University, Cleveland, Ohio, USA,

Mohamed E.A. Hussein

University of Connecticut, Storrs, Connecticut, USA and

J. Edward Ketz
Pennsylvania State University, University Park, Pennysylvania, USA
Financial accounting standards in the United States are set by the Financial Accounting Standards Board (FASB). This private sector organization is empowered by the Securities and Exchange Commission (SEC) through a delegation of its authority created under the amended Securities Act of 1934 and is charged with specifying the content of Generally Accepted Accounting Principles (GAAP). Rule 203 of the American Institute of Certified Public Accountants Code of Ethics obligates members, except in unusual circumstances, to refrain from asserting conformity to GAAP that does not also follow FASB pronouncements. This article pertains to this regulatory process at its focal point of the FASB[1]. This article proposes that the standard setting process can be better understood by recognizing its political nature. However, to do so requires the identification and isolation of that which constitutes the political. A new understanding of the political dimensions requires an intellectual grounding sensitive to the nature of the power, rhetoric and the ideology of interested parties. The many meanings attributed to politics requires some initial stipulations. In one sense the envelopment of any specific action with a broader social environment suggests a contextual meaning of politics. This implies that the realm of politics cannot be artificially separated from the social and that a certain degree of integration between various levels of analysis (e.g. individual, group, organizational) is necessary. Politics also refers to the process of consensus development. In this vein, matters such as socialization, participation and the antecedents of efficacy are put into issue. Again, a micromacro perspective problem must be addressed to go beyond descriptions of what should happen in any particular episode. Finally, politics also describes the outcomes or consequences of social action. Who achieves what by virtue of a mixed co-operative competitive orientation to action always merits

Accounting, Auditing & Accountability Journal, Vol. 7 No. 4, 1994, pp. 24-46. MCB University Press, 0951-3574

development in a milieu of scarce resources. The stability of particular Political Aspects resolution, as well as the impact of resolutions on the process also requires of Financial consideration. Accounting Politics in Accounting Standard Setting: Previous Approaches FASB leaders have freely admitted the political potential of standard setting (see Armstrong, 1977; Kirk, 1978; Wyatt, 1986). However, the recognition that accounting is political does not necessarily result in the acceptance of that situation (Solomons, 1978; 1991). Many professional leaders believe that standard setting should be insulated from politics (e.g. Armstrong, 1977; Kirk, 1978; 1986; and Wyatt, 1990). This preference contrasts sharply with many academic treatments of politics. In cases where standard setting is influenced by, and in turn affects, the frontier of technical and social turmoil[2] the disjuncture of these beliefs may be consequential. This article concerns itself with the extent to which academic treatments have provided, and could provide, useful knowledge about these political dimensions. The emergence of a broad realization of political factors in standard setting, derived from the recent recognition of the importance of the economic consequences of accounting standard setting. Economic consequences[3] are the results of the reallocative outcomes of accounting rules, and hence form the central political outcome. Zeff (1978) linked the recognition of economic consequences by the FASB with a variety of social trends, and asserted that dealing appropriately with them would persist as the chief challenge to standard setters. Seen in these terms, economic consequences conflict rather decisively with the FASBs stated goal of providing neutral information regardless of effects on particular interests (see FASB, 1980, paragraph 98). The position of the FASB, however, seems to be that economic consequences provide the FASB with information that can be abstracted from its political nature. In furtherance of this belief, FASB members have stated that an appeal based on the economic consequences that a proposed standard might impose on particular interests would not be as favoured as an appeal that was logical, well-reasoned, and of a suitable length (Miller and Redding, 1988). On one level, the FASB is officially blind to the self-interest of advocates. At the same time, these motivations are tolerated and encouraged sub rosa if translated into the neutral language of standard setting and accounting theory. The aversion to politics in the standard setting process may be attributable to the historic association of politics with government intervention in US standard setting[4]. The casual definition of politics as that which occurs in government tends to obscure the more robust meanings of the term. Furthermore, given the strong and persistent opposition to government-set accounting (Ronen and Schiff, 1978), this conceptual overlap tends to cast unwarranted aspersions on political processes in this context.

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A Classification of the Literature An understanding of past work on the political dimensions of standard setting for financial accounting can be organized into three interpenetrating topics. The first sets out to illustrate the impossibility of the conventional wisdom of apolitical action. The second builds on the first by identifying the existence and operation of special interests. The third accepts the first two in order to construct political milieux. The literature that has challenged the sufficiency of the conceptual categories and processes of the FASB is too vast to summarize fairly. Suggestions that accounting theory was not critical or definitive to the final regulatory outcome precede the organization of that body (e.g. Gerboth, 1973). Since that time, the Conceptual Framework project has drawn the most criticism since it represents the apogee of hope for a deductive theory-driven standard setting. While many challenged the precision of its distinctions (e.g. Joyce et al,. 1982), others launched less technical arguments. These ranged from a recognition that the agenda of organizational survival was paramount (Miller, 1985) to the more salient underlying conditioning of common occupational values in socialization (Gerboth, 1987). Brought into the specifics of particular standard setting episodes, concepts such as neutrality, cost/benefit, relevance and reliability lose substantial credibility (see Daley and Trantner, 1990). Another branch of this literature, takes issue with the economic presumptions of standard setting. Exploding Zeffs (1978) identification of the centrality of economic consequences, writers such as Hines (1989a) challenge the reality of an objective, competitive and rational economy for standard setting purposes. To this, Taylor and Turley (1986) illustrate how standard setting works bad economics by implicit assumptions of single period simple equilibrium. A third way of illustrating that what the FASB says it does is not a plausible or complete explication is to identify procedural shortfalls. Notable studies include those that have questioned issue disaggregation (Amershi et al., 1982), voting procedures (Shenoy et al., 1989) and agenda formation (Fogarty et al., 1992; Young, 1993). The thrust of this section of the literature is to argue that financial accounting standard setting by the FASB is political. Where it differs from the many recognitions of that by FASB board members lies in that this literature suggests that standard setting must be political[5]. In this tradition, the intellectual poverty of conventional FASB doctrine is believed by many to allow accounting to become political. However, this literature tends to settle for this small victory. Very little guidance is provided on what the content of a political standard setting might be. A second classification of the literature on politics in standard setting identifies specially interested parties to the process. The incentives and victories of these groups are placed in counterdistinction to the public interest that should be served by the FASB.

The largest subgroup of this classification is represented by studies that Political Aspects examine the lobbying process. FASB standard setting invites various forms of of Financial constituent participation and therefore there is very little to be said other than Accounting to report on the explicit and legitimate attempts to sway the results (see Hope and Gray, 1982). For these purposes, the tendency to use standard setting episodes as discrete units of analysis tends to project the notion that coalitions 27 are evanescent and results are difficult to generalize. Some studies remove themselves further from the political action by endeavouring to predict participation through economic conditions and incentives (e.g. Watts and Zimmerman, 1978). More common, however, is the attempt to classify participants and correlate their common positions to accounting standard outcomes (e.g. Brown, 1981; Haring, 1979; Moody and Flesher, 1986). These results, used on an inductive basis, have supported inferences about the distribution of participant power (Newman, 1981a; 1981b; 1982). In a similar approach, Hussein and Ketz (1980) examine the unity of similarly situated participants to decide whether rule-making by the FASB was more pluralistic or lite dominated. Most studies in this tradition tend to be without the explicit guidance of theory. However, Sutton (1984) and Johnson and Messier (1982) use economic models to generalize the role of special interests in lobbying for or demanding accounting standards. Public accountants have only recently been recognized as a specially situated influence group for these purposes. Hussein and Ketz (1991) detail the many means whereby the accounting profession has special access, and attribute its rise to a proactive concern over legal liability. This conflicts with Puros (1984) empirical assessment wherein public accountants were shown to take positions as advocates for the interests of current and potential auditing clients. Whatever its true motivation, the notion that accountants possess a professional obligation for the conceptual integrity and the overriding spirit of standards has been blurred (see Dermer and Robinson, 1989; Gerboth, 1987). A second branch of studies in the special interest group tradition studies the capabilities of the FASB to manage the exertion of political influence. In economic terms, this has been described as the supply of standards that corresponds to the aforementioned demand (e.g. Johnson and Messier, 1982; Watts and Zimmerman, 1979). How this is accomplished varies greatly in the literature from the pursuit of implicit negotiation in relatively reactive modes focusing on political astuteness and marketing skills (Horngren, 1973; 1976) to more proactive strategic alignment and economic consequence imposition (Bryant and Mahaney, 1981; Haring, 1979). Key resources brought to bear by the FASB in political management include inclusive procedures (see Miller and Redding, 1988), consensus building in advance of initiating action (Johnson and Solomons, 1984) and conceptual frameworks (Hines, 1989a). The process of political management is itself tempered by the need for the appearance of an independent and objective pursuit of the public interest, as well as by

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intellectual discipline and the bona fide constraints of interpersonal agreement about good accounting (Gerboth, 1987). Although most would agree that the existence of special interests in the standard setting process requires a standard setting entity that is responsive but not subservient and that offers more responses than solutions, the role of the FASB is not settled. Whereas Hussein and Ketz (1991) argue that the FASB is not a participant as much as a resolution facilitator, Fogarty (1992) suggests that the FASBs legitimacy agenda removes self-interested advocacy to a secondary role. This disagreement reflects the limitation of all studies in this classification. Although they recognize the parties to standard setting conflict, these articles fail to specify the processional elements of this political action. The third classification of studies pertaining to politics in standard setting attempt to broaden the conceptual limitations of this research. By casting a wider theoretical structure, these studies subsume work in the first two categories and lay the groundwork for better understanding of the political. Several studies extend the logic that the demise of conventional theory will offer new perspectives on standard setting. Hines (1989b) shows that the belief by standard setters in an unproblematic economic reality creates an apparatus of power that provides the process of standard setting with flexibility to accomplish many implicit goals. OLeary (1985) focuses more on the underdetermination of accounting theory and agenda control to present a milieu of politics based on the periodic and strategic suspension and falsification. These studies may also be thought to cumulate into the humorous but telling insights in Hines (1988). Other pieces in the literature build more on the self-interested category above. For example, Laughlin and Puxty (1983) expand the typical idea of special interests into a framework of worldviews. This questions the episodic coalition tendencies of the literature and contributes a fresh perspective on user needs as political ammunition. Although not specifically addressed to financial standard setting, Burchell et al. (1980) serves as a reminder to avoid oversimplifications of the intertwinement between accounting and sociopolitical forces. This study suggests that the causal assumption that these forces create accounting regulation should not be made without a consideration of the converse. Cooper and Sherer (1984), in arguing for a political economy of accounting, contribute the need to be always aware of distributional consequences. They also construct a theoretical model of financial accounting that is designed purposefully to avoid economic reductionism. Finally, Hope and Gray (1982), in the examination of standard setting episode in the UK, assert that the study of politics in this context requires a theoretical conception of power as a omnipresent, unifying force. These studies come closest to a specification of the political. Although they point to different aspects and outcomes of the process, they collectively provide materials to build upon. However, none of the studies in this section specifically address the FASB and its unique institutional setting. Nonetheless, they offer

the beginnings of treatments less disposed towards the idea that political Political Aspects standard setting is either transparently evil or an unknowable black box. of Financial Politics in Standard Setting: Some Initial Ideas Recognizing that accounting is political is tantamount to acknowledging disparate, conflicting interests among participants. A necessary further step is to anticipate that those interests will have some impact on the output of the standard setting process. The recognition of differing preferences among participants tends to obscure the more important issues about who wins and who does not, about how winning is accomplished and about how losers accommodate themselves to defeat. Schattschneider (1975, pp. 1-19) offers one avenue of more direct study by portraying how winners tend to renew their support for the solution process, whereas losers advocate its reform and reconstitution. In the present context, winning and losing entities are sometimes difficult to identify, due partially to the diversity of participants and the heterogeneous uses of accounting information. However, this difficulty does not gainsay that more attention should be given to allocation consequences, the relationship between advocacy and result, and the process of consensus building. Disputes over good accounting and accounting progress are rather incapable of offering progress in those directions. As long as these other constructs garner most of the attention, politics is marginalized and treated as a perversion. In an equally credible view, the political is the appropriate and necessary milieu for resolution of matters, such as accounting, that are not characterized by indisputable fact and unanimous preference. Given scarce resources, conflict is as inevitable in the setting of accounting standards as it is in deciding the proper use of public monies. However viable the societal mechanisms for its management, conflicts omnipresent nature should not be suppressed. For political resolution in standard setting not to become akin to horse trading (Gerboth, 1987), it has to be achieved within theoretical and empirical foundations. Despite its notable shortcomings, accounting theory is capable of guiding standard setting and is likely to be the most important force in those instances where standard setting action escapes attention and notoriety (Zeff, 1974). This tends to preclude certain resolutions notwithstanding political pressures. However, Hendriksen and Van Breda (1992, p. 255) believe that even technical issues are embedded in the political process since, following exhaustion of technical processes, dissatisfied users possess rights to political remedies. In a business community increasingly sensitized to the importance of accounting to reporting results (e.g. Loomis, 1988), instances of theoretical determinism decline in number. Standards on leasing (SFAS 13), on restructuring of troubled debt (SFAS 15) and on pensions (SFAS 87) are examples of standards where lobbying overwhelmed theoretical and conceptual considerations (Wyatt, 1989). In summary, there appears to be great confusion about the role of politics in accounting standard setting despite broad tacit awareness that the process is

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political. Although some writers see the action agenda that this situation calls forth as one of keeping the Government at bay by gainsaying economic consequences, this article suggests that the milieu of politics in standard setting must be more squarely embraced. New Dimensions for Understanding FASB and Its Actions The above discussion suggests that conventional approaches and categories are insufficient for understanding accounting standard setting. A new set of concepts need to be made more salient if the division between manifest and latent political process is to be, if not narrowed, at least laid bare. If accounting standard setting is political, in the full sense of the term outlined above, power must be appreciated as a means to provide some predictability of outcome possibilities when preferences are antagonistic. But a consideration of power should not be limited to the power of the constituent groups to influence the FASB. Instead, an inquiry into the extent and source of the power of the FASB is also necessary. A second important concept in understanding the political process is ideology. Ideology is a construct that attempts to investigate less obvious aspects of why different preferences exist. This may be helpful when potential gainers and losers cannot be readily identified. But in order for ideology to have a role in standard setting, it must be made manifest through the language of persuasion. This terrain necessitates the study of rhetoric. Although the constructs of power, ideology and rhetoric, either separately or together, cannot provide a full understanding of the politics of standard setting, their importance and relevance can be defended as superior to more conventional analysis. They provide a starting point for understanding political aspects, rather than simply dropping the analysis after the conclusion that political action is afoot is reached. Power: A Problematic Concept Parsons (1963, p. 237) defined power as the generalized capacity to secure the performance of binding obligations. Weber (1968) added to the concept the necessity of overcoming the resistance of another. However intuitive these statements may be, power as a social-psychological concept involves a lack of consensus on several central issues (see Mooney, 1984). That power is a relationship rather than a characteristic, that power can assume a variety of forms, and that power is not synonymous with control, are among the few statements that can be agreed on. Furthermore, future definitional harmony is unlikely (Hope and Gray, 1982; Parsons, 1963). The proliferation of topologies of power (see Kalbers, 1989, Chapter 6) has obscured as much as enlightened the construct. A tendency for power to be unobserved in its overlay with consequential actions (Farrell and Peterson, 1982) also hampers its use. In such circumstances, a grounded approach that allows a certain degree of richness of explanation, even at the expense of parsimonious closure, would seem appropriate (see Hope and Gray, 1982; Newman, 1981a; 1981b) for the purpose

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of arguing that power is a construct worthy of more systematic inquiry in the Political Aspects context of accounting standard setting. of Financial The theoretical nature of power seems highly consistent with the nature of Accounting standard setting. Power and standard setting are multi-dimensional, allowing for numerous tradeoffs and overall results that are not necessarily zero sum (Hussein and Ketz, 1991; Parsons, 1963). Winning and losing are matters of 31 interpretation and are highly influenced by the interpretive time frame adopted (Amershi et al., 1982). Exercising power and influencing standards involves a mobilization of resources (Miller, 1991; Pfeffer, 1981, Chapter 5). Payoffs exist for winners (Sutton, 1984) and coalition formation is an essential technique (Moody and Flesher, 1986; Newman, 1981a; 1981b). While specific instances of the exercise of power will vary in their methods and results, the concern with power requires treatments beyond the consideration of benign intentions, expertise and authority. In the rest of this section three conceptions of power are offered as viable frameworks for these purposes. Exchange and Dependency Some perceive dependency to be the central feature of power. Those dependent upon others are inclined to accept the influence of others as a precondition for the acquisition of the deficient object (Pfeffer, 1981, Chapter 4). Emerson (1962) predicts that one partys attempt to gain power over another will be proportional to the perceived value of the resources controlled, and the relative scarcity of alternative sources. The FASB is dependent upon its collective constituents for legitimacy as well as for financial support. Those groups that can effectively threaten to withhold these resources from the FASB (see USC Study Group, 1991) may be able to garner power over outcomes. On the other hand, some groups have not provided these resources and have not demonstrated a capacity to articulate the conditions of dependency. Since this perspective translates this scenario to the absence of power, any impact upon standards could be predicted to be no more than incidental. The ability to create dependency conditions tilts standard setting in favour of highly organized entities that are positioned well enough in the social structure to control valued outcomes for the FASB. Power in the standard setting process might be usefully conceived as part of a broader process of inter-organizational exchange. In this perspective, influence over another is obtained by providing rewards for such an acquiescence. Baldwin (1978) suggests that such a view is advantageous to overcoming the misconceptions that power is necessarily asymmetrical, unilateral, punitive and villainous. This view is not inconsistent with dependency since there have to be patterned incentives to create and sustain an exchange relationship. Differential control over resources also necessarily connotes a structural location (Foa and Foa, 1976). This conception advocates the examination of the relationship between different sectors of the economy that engage in exchange through FASB action. If the FASB conforms to the

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survival tactics of agencies dependent upon constituent support, it must act to keep these parties optimally disgruntled (Wilson, 1980, p. 361), in recognition of their respective power in the exchange between each other. Economic consequences becomes the currency that helps quantify the exchange that is organized around the road set out by due process. Questions beyond the theoretical nature of power typically centre around its distribution. The pluralism model of power suggests a broad distribution, whereas litist models describe more narrow distributions. If the realistic ability to influence the FASB exists widely on both a within and between group basis, the process is well described by the pluralistic official mission statement and its official proponents. An litist model would be able to pinpoint a cluster of key participants whose positions carry more influence than others. Bachrach and Baratz (1970) argue that the pluralism model equates potential power with actual power. They suggest that actual power is marked by a severe concentration of power in favour of the proponents of the status quo. Evidence for an elitist model in accounting standard setting would begin with the narrow bands of actual due process involvement, overlooking potential involvement. Massive economic consequences assertable by larger organizations would also systematically skew standard setting towards these entities in litist conceptions. This is not necessarily controverted by findings that predictable voting blocs do not always form (Brown, 1981; Moody and Flesher, 1986). A larger question is what standard should be used to support the conclusion that an act of power has occurred. The requirement of overt displays may miss real power behind the scenes. However, implicit power presents measurement problems that some would argue involve unavoidable leaps of faith. Consistently, overt conceptions show that the exercise of power is nearly random (Hussein and Ketz, 1980) whereas covert conceptions imply that power is much more omnipresent than conventional research methods are capable of observing (Hope and Gray, 1982). There is much to be said for the latter approach since it recognizes the selectivity of action, the expectational basis of interaction, and the possibilities for agenda and consciousness control (Bachrach and Baratz, 1970, pp. 4-9, 39-51; Lukes, 1974, pp. 21-5; OLeary, 1985; Parsons, 1963). Brown (1986) conceives of power as occurring in covert as well as overt ways and as including instances of co-optation as well as those of conflict. These possibilities necessitate a closer examination of the projects that appear and fail to appear on the FASBs agenda. Rather than taking positions on their face, how participants come to favour resolutions and how they visualize the range of alternatives are issues that would need to be addressed. However, continued problems of data unavailability, baseline identification and hypothetical alternatives may limit this research (Wolfinger, 1971). Even so, the recognition of these possibilities, asserted with the appropriate modesty, and backed by experimental proxies (e.g. Molm, 1981) would represent progress. Lukes (1974, p. 47) argued that it is not impossible to adduce indirect evidence that an apparent case of consensus is imposed rather than genuine.

A Foucauldian Conception Political Aspects Power, as theorized by Foucault (1979), represents one conception of how power of Financial may be relevant to accounting standard setting. Since Foucaults interpretation Accounting puts power at the heart of how society is constructed, particular instances of its application are not seen as exceptional events. An application of such an analysis would centre upon how FASB standard setting became accepted as the 33 normative definition of proper accounting and the consequences that this acquiescence has had for the definition and sanctioning of deviance. How the forces that once composed the FASB subsequently became subservient to it represents a Foucauldian power. A Foucauldian analysis would also focus the accounting profession and its role in the development of various discourses that came to define the subjects that are the targets of the search for knowledge. The FASB cannot be understood apart from the power implicit within the data accumulation and irregularity identification that originated accounting technology. The essence of this analysis is the duality of knowledge and power. The formalization of knowledge and the acquisition of power are mutual reinforcing phenomena that, while not causally limited, are pervasive, strategic, intentional and calculative (Goldstein, 1984; Miller, 1987, Chapter 4). Despite the lack of any clear theory of power in Foucaults writings, there are several points of appreciation for FASB standard setting. FASB research can be thought of as indirectly extending FASB power over its constituents. Furthermore, related academic research objectifies and perpetuates the implicit facts of power relations (Hines, 1989a). FASB standards, invoking the abstractions of accounting classification, extend the monopoly claim of the profession over the content of information produced by corporations. Each standard invokes the implicit power that ultimately results in the unconscious self-regulation of the ruled through the internalization of the discipline of the accounting standard setting process. Therefore, FASB due process may be approached as what Foucault calls the universal reign of the normative (1979, Chapter 6). Additionally, the FASB could be seen as obtaining power through an examination process, insofar as due process extracts from participants knowledge of their economic consequences. In turn, the content of standards become new objects of knowledge that deepen the purview of those with the expertise to manipulate them. In sum, an appreciation of Foucault offers new potential for the identification of open-textured and omnipresent power relations in accounting standard setting. A Libertarian Conception An alternative perspective on power begins with an examination of the sociopolitical conditions that lead to the formation of the social collective in the US. Since individuals have been viewed historically as the basic units of that society, the natural and inalienable rights claimed for them should be recognized. Collective bodies, such as government, are formed to enforce these

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rights through the rule of law and the maintenance of those conditions necessary to the removal of obstacles to liberty (Hayek, 1960, Chapter 15; Hobbes, 1947, pp. 92-105; Locke, 1960, Chapter 3). However, power remains with the people to form purposes and plans, as does the responsibility to act based on personal knowledge and moral principles (Hayek, 1960, Chapter 13; Ostrom, 1987, Chapter 1; Siegan, 1980, Chapter 11). The powers of the collective in the USA must be scrutinized closely. Despite Lockes keen concern with the need for a strong government to protect and secure the individual, he was cognizant of the need for limited powers through the subjugation of statutes to a higher law. Thomas Paine (1942, pp. 17-21) characterized government as a necessary evil, and expressed a sentiment that pervaded the design of the US government as a compound republic (see Ostrom, 1987, Chapter 7). Hayek (1960, Chapter 14) distinguished the permissible governmental function of facilitating order from the suffocating usurpations of individual liberties implicit in the maintenance of order. In order to constrain government in its proper role, both formal and informal devices must be in place, including constitutionalism and willing citizen challenge (Ostrom, 1987, Chapter 3), principled lawmaking (Hayek, 1960, Chapter 9), overlapping responsibilities (Ostrom, 1987, Chapter 7), and judicial review (Siegan, 1980, Chapter 14). Governments coercive power, especially over individuals contractual freedoms, is very likely to be misapplied and abused, even if exercised in the spirit of rationality and public betterment (Hayek, 1960, Chapter 1; Siegan, 1980, Chapter 15). In this view, the liberty of individuals must be protected diligently against the coercion by leaders who become tyrants in exercising their powers beyond that necessary for the prevention of harm to others. The premiss that social advance is most possible under conditions of individual liberty is believed based on the essentially unconscious nature of social evolution and progress (see Hayek, 1952, Chapter 9). In an unregulated market, wherein each person is given freedom to formulate both means and ends, the human condition is enhanced. No single criterion of merit exists nor does any particular definition of success. Only in the resulting proliferation of trial and error lies the route to fullest human development. However, the collective has interrupted and suspended this marketplace with regulation and the imposition of governmental monopolies (Hayek, 1960, Chapter 16; Siegan, 1980, Chapter 6). Planning is seen as a rational substitute for the market (see Dahl and Lindblom, 1953, Chapter 1), which may erroneously take pride in precluding opportunities for failure and meting out limited freedom as needed (Hayek, 1960, Chapter 6). At its essence, the belief that a mastermind can and should control the course of its own development (Hayek, 1952, Chapter 10) dictates great reductions in individual liberties. Governmental coercion in the USA often utilizes the principle of majority rule to justify its righteousness. This precept, however, may create excessive potential domination by certain factions and leaves the enslavement of the individual in its wake (Ostrom, 1987, Chapter 5). The potential tyranny of the

majority in a democracy is precipitously and eloquently described by Alexis de Political Aspects Tocqueville (1945, Chapter 4), who argued that when equality is valued over of Financial freedom, people are gradually prepared for their loss of free agency to Accounting government. In numerous ways, the empty phantom of public opinion chills innovation and weakens the intellect. The governmental manipulation of these tendencies produces a very subtle denial of liberty (Paine, 1942, pp. 21-3). 35 However, the prerogatives of majority rule tend to be based on fictitious homogeneity and fleeting conditions, and are likely to lead to inflexibility, unwanted results, and the increased coercion of both political losers and winners (Hayek, 1960, Chapter 7). This intellectual tradition applies to accounting standard setting in several ways. The delegation of regulatory power to the FASB violates the spirit of the concentric power of the compound republic (see Ostrom, 1987, Chapter 8) and may be an unconstitutionally extensive use of control over commercial speech (see Committe, 1990; Johnson, 1981). Not only does this delegation heighten the coercion of individuals in its effects. It also removes regulation from whatever protection existed in the democratic control over elected officials (see Committe, 1990; Siegan, 1980, Chapter 13). Even worse than the delegation itself is the lack of a substantive judicial review for accounting standards. External review of FASB action is justified by the need for political restraint, the desirability of social change and the need to establish a presumptive burden against administrative coercion. The increasing specificity of FASB pronouncements (see Previts, 1991), as well as the more discrete transition from guideline to mandate, may be part of a more general move away from a rule of law that would meaningfully constrain administrative action (Hayek, 1960, Chapter 16). Not only does this deepen the departure from individual liberty, it also makes the societal accumulation of knowledge that benefits all, less likely. The demand that everything in accounting be controlled may denote ignorance of how these social forces must operate (Hayek, 1952, Chapter 8). As applied to due process, the singularity of the FASB as an authority is likely to prevent the proper articulation of interests (Ostrom, 1987, Chapter 7). This may be due to narrowness of constituent interests (Siegan, 1980, Chapter 10) and the construction of knowledge as ammunition in such a context (Lindblom and Cohen, 1979, Chapter 15). Accounting standard setting may presume more power than it is entitled to by failing to recognize the looseness of the nexus between value and merit, the difference between facts and models, and the relative contribution of action and ideas. For these purposes, the FASBs Achilless heel may include its mandate for cost benefit analysis that is subject to speculative definition, evanescent conditions, and the presumption of omniscience. Accounting standards that idiosyncratically embrace contractual freedom may produce unintended wealth redistributions, and sometimes work more harm than good on US society. To the extent that the FASB serves as a model for accounting regulation in other countries, the damage may not be limited to those boundaries.

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The Role of Ideology The role of ideology in accounting regulation has been mostly ignored despite its potential to provide a more systematic appreciation of the standard setting process. Generally defined as an organized set of fundamental beliefs that vary across groups, ideology would include the tendency to advocate different regulatory solutions on a somewhat predictable basis. The existence of ideological differences among groups envisions the mobilization of political influence to reproduce or transform the nature of accounting in accordance with varying perceptions of how things should work. Ideologies are versions of reality that are based on unshakeable presumptions that are not uniformly held, thereby engaging those that hold them into conflict. This process can be expected to use facts selectively and purposefully (Buckley, 1978) and to have espousals vary with actualities when such is advantageous (Enz, 1988). Unfortunately, like terms such as power and politics, ideology has unnecessarily pejorative connotations that have tended to limit its use. Ideologies differ by virtue of the structure of social relations within and through which they are formulated and legitimated (Willmott, 1984). As such, they bear a systematic relationship with self-interest, as perceived by parties. Accounting, as an activity whose current existence is highly dependent on corporate patronage and state-defined needs and customers, produces ideologies that pattern various structural positions within this social edifice. Continued exposure and consistent affiliations perpetuate an interested partys ideological position. Ideology implies a genuine inability to appreciate inconsistent positions, rather than a purposeful strategy of deceit. The consideration of ideology within standard setting is similar to the recognition of cultural relativity in accounting systems. Like ideologies, cultures produce group values as their principal measurable product (Soeters and Schreuder, 1988). Just as culture shapes accounting forms (Violet, 1983a), the objectives sought by participants in accounting standard setting episodes are ideologically organized. Accounting must also reflect basic postulates of culture (Violet, 1983b). Likewise, standard setting can be understood in terms of the ideologies of participants. Part of this may include varying degrees of acceptance for the preference of judgement over strict compliance and of secrecy over full disclosure (Perera, 1989). Laughlin and Puxty (1983) provide the most sustained consideration of ideology as a means of understanding standard setting. Acknowledging the political realm, they introduce the concept of world view as a systematic socially constructed approach that parties bring to the standard setting task. They contrast the two a priori world views of users and producers in this process. However, this analysis is somewhat limited by the official endorsement of the user perspective (FASB, 1990) and by the lack of any meaningful user input. The user perspective, rather than a true ideology, may be an ideological ammunition for all parties including the FASB. Therefore, the user-producer

schism also may act to obscure more important ideologies among producers Political Aspects that would help to interpret standard setting. of Financial One obvious approach is to separate producers according to the size of their Accounting organizations. Watts and Zimmerman (1978) provide evidence that suggests that interests in the standard setting process differ as a function of size. Even if political costs of visibility exist, as those authors suggest, the homogeneity 37 among producers that it implies is a serious limitation. Also relevant is the possibility that the particular nature of flexibility desired in accounting methods is a qualitatively different phenomenon for large and small firms (Mosso, 1985). The persistently lower level of satisfaction with the FASB by small business (Ronen and Schiff, 1978; Upton and Ostergaard, 1986) has been interpreted as that groups alienation from the standard setting process (Seidler, 1978). This sheds new light on the FASBs rather tepid response to the standards overload problem that is asserted periodically by small business[6]. In general, such ideological positions would predict that differential power held by larger organizations would allow their desires to be more firmly imprinted upon accounting standards. However, large versus small business remains a rather primitive a priori classification that should be interpreted as a limited first step toward an appreciation of the role of ideology. The FASB itself cannot be considered ideologically neutral (see the debate between Solomons, 1991 and Tinker, 1991). Laughlin and Puxty (1983) assert that members of the regulatory body develop a user orientation that reflects genuine beliefs through their socialization as standard setters. This negates alternative interpretations of any possible self-interest. However, for each individual, there are unspecified ideological payoffs associated with being part of a successful coalition (Anderson, 1982; Laughlin and Puxty, 1983; Newman, 1982). Beyond this, individuals on the FASB may have ideological positions that are in various degrees of congruity with other participants. If congruence translates into perception of power and effectiveness (Enz, 1988), the degree of consideration each constituent argument receives may be better understood. The vague method by which positions are converted into standards could facilitate something other than the ideological blindness currently asserted as the party line (see Beresford, 1988). Interpreting the FASB itself as an ideological player is tantamount to suggesting that the process is likely to be influenced by the overriding ideology of institutional legitimacy. Arguments by other parties that imply, in their consequences, a possible lack of adherence to the righteousness of the private sector standard setting process, transcend the particulars of an issue and engineer ideological conflict that, ceteris paribus, makes other factors less salient. Rhetoric and Validity Claims Whereas ideology is grounded in the structure and genesis of belief, rhetoric prioritizes the discourse employed in the process of persuasion. This approach

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to the nature of politics involves the careful study of language as the medium for the communication of validity claims. Discourse, defined as a disciplined means of constituting subjects and relationships (McGee and Lyne, 1987), is a pervasive element of all scientific reasoning practices because it deals with what people ought to believe (McCloskey, 1983). The study of rhetoric implies challenges to the supremacy of the expert. By demanding to authenticate claims to knowledge, the indeterminacy of these demands is made more visible through subverting the hegemony of the text. This allows the terms of the exchange between default liberty and the submission to expert power to become more apparent. Rhetorical inquiries attempt to see through the words of an argument to detect defects and implicit premises necessary to its acceptance (see Arrington and Frances, 1989; Klamer, 1987; McCloskey, 1983; Nelson, 1987a). Rhetoric therefore should improve debate by delineating degrees of persuasiveness, thereby freeing researchers from preoccupation with tangential pseudo-questions (Nelson, 1987b). The very nature of rhetorical analysis entails the abandonment of attempts to reflect reality and to discover certainty. No a priori models for, or tests of, truth in argumentation exist (Nelson, 1987a; 1987b). The distinction between knowledge and opinion is not made, conflict is embraced as the essential human activity, and the convergence to a single rational truth is not seen as the pursuers responsibility (Rorty, 1987). Instead, the complex web of relationships is filtered to produce self-scrutiny, self-improvement and a more successful means of talking that is primarily interpretive and hermeneutical. The immutability of any first principle in accounting, as well as the compulsion to establish one, is a myth (see Arrington and Frances, 1989). Nelson (1987b) examined the special relationship between rhetoric and political processes. Politics is discourse that occurs primarily through talk. Therefore, political action forms a natural laboratory for rhetorical inquiry. This nexus is amplified when the broad sets of intellectual connections that converge to form current institutional arrangements, and efforts to improve upon them, are subsumed into the political sphere. Rorty (1987) goes even further, arguing that what appears to be objective is, in fact, only a consensus. Insofar as others have explored the special relationship between economics and rhetoric (e.g. Klamer, 1987; McCloskey, 1983), they have also added to the case that ties rhetoric to politics. The method of rhetorical analysis is much too detailed to summarize fairly. However, some of the elements include the identification of culturally unchallengeable axioms (Rorty, 1987), illustrating the use of standardless standards and metaphors (McCloskey, 1983), and examining the significance of taken-for-granted and context-free assumptions (Klamer, 1987). Nelson (1987b) provides a more exhaustive account of the techniques involved in this study of communications. The application of rhetorical study to accounting standard setting has not been initiated, despite its intuitive appeal. The statement that standard setting

in the private sector is superior to that in the public sector is never subjected to Political Aspects analysis. Standard setting involves extensive communication about which little of Financial is actually known. Very likely, extensive assumptions are being made without Accounting any explicit rationale. Which aspects of financial reporting the FASB chooses to enliven and which it suppresses have been greatly underappreciated in a communicative tradition. The language of standard setting, as well as that of 39 due process, needs to be assessed in a rhetorical light sensitive to the communication needs of the FASB and its projected audiences[7]. An Alternative Scenario for the Future of Standard Setting Accounting standard setting could be reorganized in a way that would call attention to its immutable political nature. Such an alteration would recognize the indeterminacy of good accounting, the distributive consequences of accounting and the lack of correspondence between desired standard setting and an undisputable economic reality. By reducing the grandiosity of its claims, accounting standard setting might better protect itself from devastating criticism and what White (1991) has called the negative spiral of reduced authority and effectiveness. By making explicit the pressures and constraints that now exist in an implicit and disguised form, accounting standard setting might enhance its legitimacy by better conforming to the precepts of democratic decision making[8]. Such a change probably would have to weather a short-run crisis since it entails abandoning the pretence that accounting is neutral (Tinker, 1991). However, the power inherent in the ostentatious display of powerlessness (Meyer, 1983) should not be jettisoned lightly. Although the need for user confidence in the short run cannot be ignored, this objective is not necessarily inconsistent with a greater recognition of the political nature of the proceedings. Over the longer run, however, the viability of standard setting might actually be enhanced by a greater approximation of service to a broad conception of social needs than the needs of what the FASB now calls its constituency. Revising accounting standard setting in this direction would lead to a new openness about the political realities of the process. Appreciating political motivation, the sources of political power, and the issue-specific formation of political coalitions could normalize the now problematic place of self-interest. However, standard setting would have to find a new source of credibility beyond the current skilful manipulation of the ideal. A more self-admitted political standard setting would embrace, rather than deny, the role of economic consequences. If economic impacts were more rigorously studied, their potential use as instruments of private interests would be lessened and their role in the furtherance of social policy would be better understood. Distribution consequences would not be inadvertent but could be part of a systematic trade-off of efficiency and equity. The framework of economic incidence proposed by Taylor and Turley (1986) might be one means of information generation and evaluation consistent with these purposes.

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A new system of standard setting might be an important part of helping accounting information escape the rather tight confines of its current usefulness and relevance. The gap that now exists between desired information and provided information (see Elliott, 1991) might be narrowed by the liberalization of our conception of how standards are set. Recognizing the political means recognizing the relationship among accounting and macroeconomic fluctuations, corporate governance and various interpretations of fairness. It is also conceivable that this could lead to progress in accounting for social performance through the incorporation of transactions now considered externalities. Breaking the bonds caused by the selective operationalization of objectivity and history, US accounting standard setting might be able to produce more than a very rarified type of information if it embraced, rather than denied, the fact that politics is intertwined in its very essence. This alternative future for US standard setting will probably not occur. The institutionalization of societal expectations around standard setting suggest that change is difficult to accomplish (Fogarty, 1992). A dramatic turnaround in the substance of standards is more likely than the alteration of the process by which the standards are set. However, the legal command retained by the US Government can unilaterally accomplish a change even of this magnitude. Such change might be triggered by the leadership role the USA will want to play in the inevitable internationalization of financial accounting. Future Research Whether or not the US financial accounting standard setting is reformed to allow more explicit treatment of power, ideology and rhetoric, this article recommends a new agenda for accounting research. First, there is a need for research on the role of power on the standard setting by researchers within all the major perspectives because power is brought to bear on the FASB. Conversely, although poorly understood, power is also manifested in the ability of the FASB to force participants to reverse their future standard setting positions. In addition, research into the potential conflict between the role of the large public accounting firms as the enforcers of accounting standards and their client service to the preparers community should be explored in a power-based qualitative assessment. The study of ideology first requires better historical work on the emergence of current institutional arrangements. Accounting history must be redirected to greater sociopolitical relevance for these purposes. The boundaries of the accounting discipline must become more flexible in such inquiries. The texts produced by the standard setting process (e.g. exposure drafts, final standards, advocacy letters, etc.) require greater examinations in the traditions of rhetorical analysis. The research which has been done to date by conducting primitive counts and classifications, raises more questions than it answers and has not even exhausted the capabilities of what must be the first

step in content analysis. Finally, more idiographic sensitivity to the meaning of Political Aspects texts will provide accounting researchers with the opportunity to pursue of Financial extensive and valuable avenues of research. Accounting
Notes 1. A complete treatment of the US regulatory process would have to consider groups such as the US Congress, the Securities and Exchange Commission, committees of the American Institute of Certified Public Accountants, the preparer community and several other bodies in a manner that extends beyond their interaction with the FASB. 2. Recent US examples include standards pertaining to computer software development (SFAS 86), pension accounting (SFAS 87) and post-retirement non-pension employee benefit accounting (SFAS 106). 3. Zeff (1978, p. 56) defined economic consequences as the impact of accounting reports on the decision-making behaviour of business, government, unions, investors, and creditors. While decision making is important, other economic questions could form a broader notion of economic consequences. To what extent is accounting implicated in issues of income distribution? To what extent does accounting help or hinder societys efficient allocation of scarce economic resources? Does accounting assist in the process of capital formation? Do accounting numbers contribute or impair international trade? To what extent does accounting exacerbate problems of inflation or aid in containing it? 4. The investment tax credit debate of the early 1960s proved to be quite a watershed for private sector standard setting. The APB advocated one method but, following Congressional action disallowing the prohibition of the alternative method, reversed its choice. Similar inconsistency over accounting methods between the APB and the SEC, and between the FASB and the SEC occurred in the areas of accounting for business combinations and extractive industry accounting. For a fuller rendition of these conflicts see Moonitz (1966), Burton (1970, p. 6), Gerboth (1973), Ijiri (1979) and Wolk et al. (1992, pp. 58-68). 5. Academic writers do not uniformly accept this conclusion. See opposite arguments by Solomons (1978; 1983; 1986). 6. Despite rather broad recognition that small business may be disproportionately burdened by the proliferation of accounting standards (i.e. Mosso, 1985; Upton, 1987), actual relief such as provisions for differential measurement has not been generally implemented. Committees have been formed (see Upton and Ostergaard, 1986), and the problem for the FASB seems to have been deflected, insofar as less attention to it has appeared recently in the literature. 7. Since the accounting literature is a primary vehicle for understanding financial accounting standard setting, it also requires a rhetorical assessment. For a more detailed introduction see Arrington and Schweiker (1992). 8. It would be revealing to furnish a discussion of the debates within the FASB and to indicate how compromises were made in order to reach consensus. It may even be more telling if the FASB would display its evaluations of comments made to it. One place where the FASB can disclose such information is in the section in the SFAS entitled Basis for Conclusions, which now is mostly limited to commentary on technical details. References Amershi, A., Demski, J. and Wolfson, M. (1982), Strategic Behavior and Regulation Research in Accounting, Journal of Accounting and Public Policy, Vol. 1 No. 1, pp. 19-32. Anderson, J. (1982), A Discussion of Coalition Formation in the APB and the FASB, Accounting Review, Vol. 57 No. 1, pp. 190-5.

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Foa, E. and Foa, U. (1976), Resource Theory of Social Exchange, in Thibaut, J., Spence, J. and Carson, R. (Eds), Contemporary Topics in Social Psychology, General Learning Press, New York, NY, pp. 99-131. Fogarty, T. (1992), Financial Accounting Standard Setting as an Institutionalized Action Field: Constraints, Opportunities and Dilemmas, Journal of Accounting and Public Policy, Vol. 11 No. 4, pp. 331-55. Fogarty, T., Ketz, J. and Hussein, M. (1992), A Critical Assessment of FASB Due Process and Agenda Setting, Research in Accounting Regulation, Vol. 6, pp. 25-38. Foucault, M. (1979), Discipline and Punish: The Birth of the Prison, Vintage Books, New York, NY. Gerboth, D. (1973), Research, Intuition and Politics in Accounting Theory, Accounting Review, Vol. 48 No. 3, pp. 475-82. Gerboth, D. (1987), The Conceptual Framework: Not Definitions but Professional Values, Accounting Horizons, Vol. 1 No. 3, pp. 1-8. Goldstein, J. (1984), Foucault among the Sociologists: The Disciplines and the History of the Professions, History and Theory, Vol. 23 No. 2, pp. 170-92. Haring, J. (1979), Accounting Rules and the Accounting Establishment, Journal of Business, Vol. 52 No. 4, pp. 507-15. Hayek, F. (1952), The Counter-revolution of Science: Studies on the Abuse of Reason, Liberty Press, Indianapolis, IN. Hayek, F. (1960), The Constitution of Liberty, University of Chicago Press, Chicago, IL. Hendriksen, E.S. and Van Breda, M.F. (1992), Accounting Theory, 5th ed., Irwin, New York, NY. Hines, R. (1988), Financial Accounting: In Communicating Reality, We Construct Reality, Accounting Organizations and Society, Vol. 13 No. 3, pp. 251-62. Hines, R. (1989a), Financial Accounting Knowledge, Conceptual Framework Projects and the Social Construction of the Accounting Profession, Accounting, Auditing & Accountability Journal, Vol. 2, pp. 72 -92. Hines, R. (1989b), The Sociopolitical Paradigm in Financial Accounting Research, Accounting, Auditing & Accountability Journal, Vol. 2 No. 1, pp. 52-76. Hobbes, T. (1947), Leviathan, Macmillan, New York, NY. Hope, T. and Gray, R. (1982), Power and Policy Making: The Development of an R&D Standard, Journal of Business, Finance and Accounting, Vol. 9 No. 4, pp. 531-58. Horngren, C. (1973), The Marketing of Accounting Standards, Journal of Accountancy, Vol. 137 No. 4, pp. 61-6. Horngren, C. (1976), Will the FASB Be Here in the 1980s?, Journal of Accountancy, Vol. 142 No. 5, pp. 90-6. Hussein, M. and Ketz, J.E. (1980), Ruling Elites of the FASB: A Study of the Big Eight, Journal of Accounting, Auditing & Finance, Vol. 3 No. 4, pp. 354-67. Hussein, M. and Ketz, J.E. (1991), Accounting Standard Setting in the U.S.: An Analysis of Power and Social Exchange, Journal of Accounting and Public Policy, Vol. 10 No. 1, pp. 59-81. Ijiri, Y. (1979), Oil and Gas Accounting Turbulence in Financial Reporting, Financial Executive, Vol. 47 No. 8, April, pp. 18-26. Johnson, O. (1981), Some Implications of the United States Constitution for Accounting Institution Alternative, Journal of Accounting Research, Vol. 19, Supplement, pp. 89-120. Johnson, S. and Messier, W. (1982), The Nature of Accounting Standard Setting: An Alternative Explanation, Journal of Accounting, Auditing and Finance. Vol. 5, pp. 195-213. Johnson, S. and Solomons, D. (1984), Institutional Legitimacy and the FASB, Journal of Accounting and Public Policy, Vol. 3 No. 2, pp. 165-83. Joyce, E., Libby, R. and Sunder, S. (1982), Using the FASBs Qualitative Characteristics in Accounting Policy Choice, Journal of Accounting Research, Vol. 20 No. 2, pp. 654-75.

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Kalbers, L. (1989), The Power and Effectiveness of Audit Committees: A Conceptual and Empirical Investigation, unpublished dissertation, Pennsylvania State University, University Park, PA. Kirk, D. (1978), Business and the FASB: The Need for Effective Interaction, Management Accounting, Vol. 60 No. 3, pp. 17-20. Kirk, D. (1986), Can You Hear Me Now?, CPA Journal, Vol. 56, pp. 67-70. Klamer, A. (1987), As if Economics and Their Subject Were Rational, in Nelson, J., Megill, A. and McCloskey, D. (Eds), The Rhetoric of the Human Sciences, University of Wisconsin Press, Madison, WI, pp. 163-83. Laughlin, R. and Puxty, A. (1983), Accounting Regulation: An Alternative Perspective, Journal of Business, Finance and Accounting, Vol. 10 No. 3, pp. 451-579. Lindblom, C. and Cohen, D. (1979), Usable Knowledge: Social Sciences and Problem Solving, Yale University Press, New Haven, CT. Locke, J. (1960), Two Treatises on Civil Government, Cambridge University Press, Cambridge. Loomis, C. (1988), Will FASBEE Punch Your Bottom Line?, Fortune, 19 December, pp. 54-7. Lukes, S. (1974), Power: A Radical View, Macmillan, New York, NY. May, R. and Sundem, G. (1976), Research for Accounting Policy: An Overview, Accounting Review, Vol. 51 No. 4, pp. 747-63. McCloskey, D. (1983), The Rhetoric of Economics, Journal of Economic Literature, Vol. 21 No. 2, pp. 481-517. McGee, M. and Lyne, J. (1987), What Are Nice Folks Like You Doing in a Place Like This?, in Nelson, J., Megill, A. and McCloskey, D. (Eds), The Rhetoric of the Human Sciences, University of Wisconsin Press, Madison, WI, pp. 381-406. Meyer, J. (1983), On the Celebration of the Rational: Some Comments on Boland and Pondy, Accounting, Organizations and Society, Vol. 8 Nos 2/3, pp. 235-40. Miller, P. (1987), Domination and Power, RKP Press, London. Miller, P.B. (1985), The Conceptual Framework: Myths and Realities, Journal of Accountancy, Vol. 159 No. 3, pp. 62-71. Miller, P.B. (1991), letter to Shaun OMalley, unpublished correspondence. Miller, P.B. and Redding, R. (1988), The FASB: The People, the Process and the Politics, 2nd ed., Irwin, New York, NY. Molm, L. (1981 ), The Conversion of Power Imbalance to Power Use, Social Psychological Quarterly, Vol. 4 No. 3, pp. 151-63. Moody, S. and Flesher, D. (1986), Analysis of FASB Voting Patterns: Statement Nos. 1-86, Journal of Accounting, Auditing and Finance, Vol. 1 No. 4, pp. 319-30. Mooney, L. (1984), The Social Psychology of Power, Sociological Spectrum, Vol. 4 No. 1, pp. 31-51. Moonitz, M. (1966), Some Reflections on the Investment Credit Experience, Journal of Accounting Research, Vol. 4 No. 1, pp. 47-61. Mosso, D. (1985), The FASB Emerging Issues Process, Government Accountants Journal, Vol. 34 No. 4, pp. 12-8. Nelson, J. (1987a), Stories of Science and Politics, in Nelson, J., Megill, A. and McCloskey, D. (Eds), The Rhetoric of the Human Sciences, University of Wisconsin Press, Madison, WI, pp. 198-220. Nelson, J. (1987b), Seven Rhetorics of Inquiry, in Nelson, J., Megill, A. and McCloskey, D. (Eds), The Rhetoric of the Human Sciences, University of Wisconsin Press, Madison, WI, pp. 407-45. Newman, D. (1981a), An Investigation of the Distribution of Power in the APB and the FASB, Journal of Accounting Research, Vol. 19 No. 1, pp. 247-62. Newman, D. (1981b), The SECs Influence on Accounting Standards: The Power of the Veto, Journal of Accounting Research, Vol. 19, Supplement, pp. 134-51.

Newman, D. (1982), Coalition Formation in the APB and the FASB, Accounting Review, Vol. 57 No. 1, pp. 196-262. OLeary, T. (1985), Observations on Corporate Financial Reporting in the Name of Politics, Accounting, Organizations and Society, Vol. 10 No. 1, pp. 87-102. Ostrom, V. (1987), The Political Theory of a Compound Republic: Designing the American Experiment, University of Nebraska Press, Lincoln, NE. Paine, T. (1942), Basic Writings of Thomas Paine, Wiley, New York, NY. Parsons, T. (1963), On the Concept of Political Power, Proceedings of the American Philosophical Society, pp. 107-29. Perera, M. (1989), Toward a Framework to Analyze the Impact of Culture on Accounting, International Journal of Accounting Education and Research, Vol. 24 No. 1, pp. 42-56. Pfeffer, J. (1981), Power in Organizations, Ballinger Publishing, New York, NY. Previts, G. (1991), Summary Report of Discussion Session, in Previts, G.J. (Ed.), Financial Reporting and Standard Setting, AICPA, New York, NY, pp. 61-9. Puro, M. (1984), Audit Firm Lobbying before the Financial Accounting Standards Board: An Empirical Study, Journal of Accounting Research, Vol. 22 No. 2, pp. 624-46. Ronen, J. and Schiff, M. (1978), The Setting of Financial Accounting Standards Private or Public?, Journal of Accountancy, Vol. 145 No. 3, pp. 66-73. Rorty, R. (1987), Science as Solidarity, in Nelson, J., Megill, A. and McCloskey, D. (Eds), The Rhetoric of the Human Sciences, University of Wisconsin Press, Madison, WI, pp. 38-52. Schattschneider, E. (1975), The Semi-sovereign People: A Realists View of Democracy in America, Dryden Press, New York, NY. Seidler, L. (1978), The Accounting Establishment: What Are the Facts? A Critique, Proceedings of the Arthur Young Professors Roundtable, pp. 37-46. Shenoy, P., Shriver, K. and Smith, D. (1989), The Potential Effects of Different Voting Roles on the FASB Due Process, Research in Accounting Regulation, Vol. 3, pp. 125-32. Siegan, B. (1980), Economic Liberties and the Constitution, University of Chicago Press, Chicago, IL. Soeters, J. and Schreuder, H. (1988), The Interaction between National and Organizational Cultures in Accounting Firms, Accounting Organizations and Society, Vol. 13 No. 1, pp. 75-85. Solomons, D. (1978), The Politicization of Accounting, Journal of Accountancy, Vol. 146 No. 5, pp. 65-72. Solomons, D. (1983), The Political Implications of Accounting and Accounting Standard Setting, Accounting and Business Research, Vol. 13, Spring, pp. 107-18. Solomons, D. (1986), Making Accounting Policy, Oxford University Press, New York, NY. Solomons, D. (1991), Accounting and Social Change: A Neutralist View, Accounting, Organizations and Society, Vol. 16 No. 3, pp. 287-95. Sutton, T. (1984), Lobbying of Accounting Standard Setting Bodies in the U.K. and the U.S.A.: A Downsian Analysis, Accounting Organizations and Society, Vol. 9 No. 1, pp. 81-95. Taylor, P. and Turley, S. (1986), Applying Economic Consequences Analysis in Accounting Standard Setting: A Tax Incidence Approach, Journal of Business, Finance and Accounting, Vol. 13 No. 4, pp. 467-88. Tinker, T. (1991), The Accountant as a Partisan, Accounting, Organizations and Society, Vol. 16 No. 3, pp. 297-310. University of Southern California (USC), (1991), Financial Accounting Study Group, Setting Accounting Standards for the Twenty-first Century, in Previts, G. J. (Ed.), Financial Reporting and Standard Setting, AICPA, New York, NY, pp. 45-60. Upton, W. (1987), The FASB and Small Business: An Update, Journal of Accountancy, Vol. 163 No. 6, pp. 136-40.

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