Bangladesh University of Professionals

Assignment
Course Name: Accounting Theory
Course Code: ALD 4201

Submitted By:
Greg Anindya Talukder
Roll: 17211042
Section: B
Department of Accounting and Information Systems
Session: 2016-17

Submitted To:
Umme Hania
Lecturer
Department of Accounting and Information Systems
Faculty of Business Studies

Date of Submission: 12/07/2020

Differences between Stewardship Theory and Agency Theory
Agency theory concentrates primarily on the association between the principal and the agents in
corporations, having a formal and contractual nature of relationship however with the presumed
goal indifference and incongruence of interest. Meanwhile, Stewardship theory is involved mainly
in analyzing the importance of the co-existence of trust-based relationships along with agency
relations in firms. The stewardship approach, which encompasses commitment and trust to shared
goals and desires exhibited by the principal and the manager alike, aligns the interest of the two
parties. There are two key points that differentiates the Agency Theory and Stewardship Theory.
These are the motivation and power comparison. In an agency type, the manager is motivated by
personal interests and extrinsic rewards. In the stewardship, the manager is motivated by the
human need for intellectual growth, achievement, and self-actualization, and by intrinsic rewards.
In an agency theory, the power is institutionally directed while in the stewardship, it is based on
personal ability and power to run the particular organization.

Difference between Normative and Positive Accounting Theory

In positive accounting theory, academics view a company as the total of the contracts they have
entered into. The theory posits that, because companies are fundamentally about the contracts that
dictate its business, a core driver of company success is efficiency. That means minimizing the
costs of its contracts to unlock the most value from them. From that basis, positive accounting
examines real life occurrences and seeks to understand and then predict how actual companies
address the accounting treatment of those transactions. Normative accounting, on the other hand,
takes a fundamentally different approach. Instead of looking at what is already happening at
companies today, normative accounting theory tells accounting policy makers what should be done
based on a theoretical principle. Logically, normative is more of a deductive process than positive
accounting theory. Normative starts with the theory and deduces to specific policies, while positive
starts with specific policies, and generalizes to the higher-level principles.

Difference between Inductive and Deductive Research

The main difference between inductive and deductive approaches to research is that whilst a
deductive approach is aimed at testing theory, an inductive approach is concerned with the
generation of new theory emerging from the data. A deductive approach usually begins with a
hypothesis, whilst an inductive approach will usually use research questions to narrow the scope
of the study. For deductive approaches the emphasis is generally on casualty, whilst for inductive
approaches the aim is usually focused on exploring new phenomena or looking at previously
researched phenomena from a different perspective. Inductive approached are generally associated
with qualitative research, whilst deductive approaches are more commonly associated with
quantitative research. However, there are no set rules and some qualitative studies may have a
deductive orientation.

Why Accounting Theory is Necessary for Accounting Students

Accounting theory has great utility for improving accounting practices, resolving complex
accounting issues and contributing in the formulation of a useful accounting theory. Accounting
theory has a great amount of influence on accounting and reporting practices and thus serves the
informational requirements of the external users. Whenever the need for a new application of
practice arises, the accounting theory should provide accountants with guidance on the most
appropriate procedures to adopt in the circumstances. If accounting practices emerges from the
application of rigorously constructed accounting theory, then practice has been tested for logic,
consistency and usefulness. Accounting theory aims to serve practice even when it advances
reasons against a familiar practice. A knowledge of accounting theory equips a person to exercise
independent judgment with confidence besides enabling him to react according to the
circumstances.

Roles of AICPA
The AICPA is responsible for-

i. Establishing professional standards

ii. Recruiting and educating prospective members
iii. Certification and licensing of new members.

Roles of AAA
The role of AAA is to further the discipline and profession of accounting through education,
research and services. It aims to accomplish its role through-

i. Expanding knowledge and idea development

 ii. Promotive effective learning
iii. Informing and influencing policy and practice
iv. Advancing faculty careers.

Roles of SEC
The roles of the SEC are-

i. Regulating the business of the Stock Exchanges or any other securities market.

ii. Registering and regulating the business of stock-brokers, sub-brokers, share transfer
agents, merchant bankers and managers of issues, trustee of trust deeds, registrar of an
issue, underwriters, portfolio managers, investment advisers and other intermediaries in the
securities market

iii. Registering, monitoring and regulating of collective investment scheme including all forms
of mutual funds.

iv. Monitoring and regulating all authorized self-regulatory organizations in the securities
market.

v. Prohibiting fraudulent and unfair trade practices relating to securities trading in any
securities market.

vi. Promoting investors’ education and providing training for intermediaries of the securities
market.

vii. Prohibiting insider trading in securities.

viii. Regulating the substantial acquisition of shares and take-over of companies.

ix. Undertaking investigation and inspection, inquiries and audit of any issuer or dealer of
securities, the Stock Exchanges and intermediaries and any self-regulatory organization in
the securities market.

x. Conducting research and publishing information.

Roles of FASB
The collective role of the FASB, the Governmental Accounting Standards Board (GASB) and the
FAF is to establish and improve financial accounting and reporting standards to provide useful
information to investors and other users of financial reports and educate stakeholders on how to
most effectively understand and implement those standards. The specific roles are-

i. The FASB and the GASB are charged with setting the highest-quality standards through a
process that is robust, comprehensive, and inclusive.

ii. The FAF management is responsible for providing strategic counsel and services that
support the work of the standard-setting Boards.

iii. The FAF Trustees are responsible for providing oversight and promoting an independent
and effective standard-setting process.

Roles of ICMAB
The role of ICMAB is to develop, equip and promote Cost and Management Accounting
profession by maintaining highest professional standard of its members in order to enable them to
provide better services to the society. The Institute is entrusted with the formulation and
implementation of National Accounting as well as Cost Accounting Standards and take other
necessary steps with a view to regulating the Cost and Management Accounting profession
commensurate with global standard with the ultimate objective of developing Bangladesh’s human
and natural resources to ensure common welfare and to enrich our shared future.

Roles of ICAB
The roles of ICAB are-

i. Regulate the Accountancy Profession and matters connected therewith

ii. Administer its members and students

iii. Ensure professional ethics and code of conduct

iv. Provide specialized and professional training in Accounting, Auditing, Taxation,

Corporate Laws, Management Consultancy, Information Technology and related
subjects.
 v. Impart Continuing Professional Development (CPD) to members.

vi. Foster acceptance and observance of International Accounting Standards/ International

Financial Reporting Standards (IAS/IFRS) and International standards on Auditing
/International, Auditing Practices Standards, (ISA/IAPS) and adopt the same in
Bangladesh as Bangladesh Accounting Standards/ Bangladesh Financial Reporting
Standards (BAS/BFRS) and Bangladesh Standards on Auditing/ Bangladesh Auditing
Practices Standards (BSA/BAPS) respectively.

vii. Keep abreast of the latest developments in Accounting techniques, Audit methodology,
Information technology, Management consultancy and related fields and

viii. Liaise with international and regional organizations to strengthen mutual cooperation.