A Critical Perspective on the Harmonisation of Accounting in a Globalising

World1
Glen Lehman

Brighton, South Australia

This article explores cosmopolitan implications associated with the

accounting harmonisation project. It takes up Hopwood’s (1994) invitation
to explore accounting harmonisation affects. This article explores processes
of globalisation by focussing on Kant’s work on cosmopolitan governance. It
uses Foucault’s work on Kant’s notion of a peaceful world and applies it to
the accounting harmonisation project which has been approved by accounting
standard-setting bodies around the world. It is argued that international
accounting harmonisation projects extend notions of accounting decision-
usefulness and representational faithfulness, but this only reflects an
instrumental stance toward how we account for corporate activity and its
impacts on communities. A critical conception of ‘accountability’ is
developed in this article by teasing out ideas for a critical accountability by
comparing it with postmodern and post-structural accounting models. The
aim is to balance modernity’s dominant and instrumental stance to global
social and environmental impacts which harmonisation perpetuates.

Introduction
Arguments advocating globalisation2 have been matched by protests at world trade
meetings in Washington, Seattle, Melbourne, Prague and Genoa (Bailey, et al.
1994a, 1994b; Gill, 1995a, 1995b). In such an era it is important to consider the
cultural, environmental and social impacts of global financial harmonisation (see
Arnold and Sikka, 2001; Johnson and Kaplan, 1987; Held, 1995; Nobes and
Parker, 1995; Peters and Waterman, 1987; Stace, 1997; Lehman, 2002). 3 The
dominant perspective on international accounting, it is argued, is based on

1
Thanks go to participants at the 2001 APIRA research conference in Adelaide – Rob Gray,
Mary Bowerman, Chris Humphries, Dean Neu, David Owen, Lee Parker and Kym
Thorne.
2
In this paper, globalisation refers to economic processes of internationalisation where
‘global’ refers to the expansion of trade and commerce between countries. Hirst and
Thompson explain that globalisation refers to the ‘large and growing flows of trade and
capital investment between countries’ (P. Hirst, and G. Thomson, Globalisation In
Question (Cambridge: Polity Press, 1996), p. 48. See also J. A. Scholte, Globalization: A
Critical Introduction (New York: Macmillan, 2000), p. 15.

3
In this essay free-market international accounting reform is assumed to be a part of the
globalisation process.
 Harmonising Accounting

principles of economic rationality which are designed to achieve global

harmonization, thereby creating win–win financial and political opportunities,
together with an open and accountable world order (Roberts, 1991).

A different way to think about global notions of accountability is advanced in this

article. It is constructed by revisiting the debates between Kantian and Foucaultian
perspectives (see for example Hopwood, 1994; Neu, 1999, 2000; Williams, 1987;
Roberts and Scapens, 1985). In particular, this critical conception of
accountability is especially suspicious of closed horizons and imperialist
discourses that curtails individual freedom (see Hopwood, 1994; Barber, 1995;
Taylor, 1998).4 Thus, a critical accountability framework broadens not only our
understanding of citizenship but also contextualises accountability within a
substantive moral framework. This framework combines a respect for local values
within a conception of the common good that is broad enough to critique the
assumptions of due process, harmonisation and the internationalisation of
accounting. The accountability argument in this article extends democratic and
non-imperialistic discourses to recognise the significant ‘values’ that have shaped
modern accounting’s relationship with ‘accountability’ criteria. More particularly,
it is argued that conceptions of human agency which underpin this picture of
accountability cannot be framed within the ‘abstract neatness and theoretical
simplicity’ implicit in cosmopolitan frameworks’ (Toulmin, 1990, p. 201).

This accountability perspective on harmonising accounting is in three sections.

The first section explores recent harmonisation arguments and relies on
Hopwood’s (1994) challenge to explore ‘new vocabularies and new perspectives
[which] might provide ways for more voices to enter the international accounting
arena’ (p. 251). The second section explores Foucaultian and Kantian conceptions
of cosmopolitanism with a view to teasing out its associated accounting
implications: it is argued that Foucault’s genealogy seems to insist on the
productivity of power in the formation and exploration of human attributes and
conditions. This section considers the normative implications of Foucaultian
4
Perspectives that rely on instrumental processes of practical reasoning have been criticised
in the wider field of international relations and political theory in that they do not
explicitly theorise the implications of nationalism and the rise of fundamentalism.

2
 Harmonising Accounting

research strategies and offers a two-step strategy to explore the dialectical and
geneological implications associated with the art of accounting harmonisation. In
that tradition, it is claimed that Hopwood’s (1994) important article points us
toward an awareness of our current dependence on neo-liberal structures and their
cosmopolitan limitations.5

The third section discusses the practical problems of international accounting and
harmonisation reform that can be isolated by Foucault’s critique of power
structures; arguably, it ‘forces’ global ideals into the lens of accounting ‘with the
purpose of cracking that lens’ (Bebbington and Gray, 2001, p. 562). In cracking
Foucault’s lens this article aims to comment on whether post-structural methods
have the power to resist capital domination. This involves teasing out notions of
‘cosmopolitanism’ which not only celebrate global differences, and determine
how to handle crucial issues associated with identity, culture and belonging. The
section suggests that Foucault’s normative themes imply that domination is
something to be avoided, which in turn returns to a critical perspective on
accountability research.

Finally, a comment is offered that concerns whether modernity’s concealed

mechanisms of power as reflected in the craft of accounting have the power to
explicitly tackle associated cultural and environmental implications. The search
undertaken in this article is for new ways to relate to the world and monitor global
accountability. The central issue to keep in mind is how a sense of cosmopolitan
accountability can address issues such as who is ‘responsible for genocide in
Chechnya, Bosnia, Kosovo and Rwanda, and equally for global warming, the
global narcotics industry and the global sales of small arms’ (Turner, 2002, p. 61).

5
While it is problematic whether Hopwood’s (1994) article offers an explicit Foucaultian
perspective it does - root and branch - invite us to consider how power pervades our society.
More particularly, Hopwood’s analysis of the power of the audit industry invites us to
confront the agonism at the base of society provides the accounting tools that connect
practice with the problematic implications associated with the harmonisation of accounting
project.

3
 Harmonising Accounting

1. State of the International Accounting Literature: Exploring

international accounting harmonisation processes
As a result of the acceleration of globalisation, a number of new free-market
global accounting institutions have been created at both national and international
levels. As Hopwood (1994) has observed we have witnessed the International
Accounting Standards Committee (IASC); the OECD Working Group on
Accounting Standards; the UN Intergovernmental Working Group of Experts on
International Standards of Accounting and Reporting (ISAR); the European
Union’s Accounting Advisory Forum and regular local groups move towards
harmonisation (see Hopwood, 1994; IMF, 1997). While Hopwood’s principal
focus is on Thorell and Whittington (1994) and their failure to provide either
analytic or empirical analysis on capital market demand for international
accounting regulation it is his challenge which invites comment. Importantly,
Hopwood challenges researchers to consider the processes and impacts of
international accounting.

Another important implication of Hopwood (1994) is that capital market research

and harmonising accounting impact on our human agency which are bound up
with different notions about how to make the world intelligible. Of critical
importance is how this way of thinking impacts on what is human agency and
global citizenship (Dreyfus, 1994, p. 2). These factors involve exploring whether
multinational corporations (MNCs) have the power to control agendas;
fundamentally, the question is whether accounting and political research asks
questions about who gains the most from global free markets and their informal,
discretionary and spatially diverse modes of coordination (see Arnold and Sikka,
2001). In recent times, moreover, the dominant model of harmonising-
international accounting is based on decision-useful accounting assumptions
which maintain that corporations can continue their operations if they achieve
efficient and effective outcomes (Peters and Waterman, 1982; Watts and

4
 Harmonising Accounting

Zimmerman, 1986).6 Here, Hopwood explains that international accounting has

been characterised by a ‘very skilful orchestration of the worldwide lobbying
pressures of the audit industry’ who have the power to control agendas and create
technologies of control (p. 245). He invites us to think about the power of the
audit industry and how rational technologies act to control large populations; that
is, how might critical accounting aid in understanding processes of accounting
harmonisation and how they might constrain a reformation of accounting
(Hopwood, 1994). Moreover, the internationalisation of accounting through
harmonisation processes has been given further impetus by new deregulation and
privatisation trends which underpin documents which advocate Total Quality
Management, Activity Based Costing, The Balanced Score-Card and the
Harmonisation of Accounting Standards (Johnson, 1994). These trends create a
culture that is motivated by self-interest where the aim is to implement efficient
management technologies and create even more competitive pressures.

Arguably, the effect of these global developments is to perpetuate an instrumental

culture associated with the processes of globalisation that underlie the power of
the Western world. Here, it is useful to refer to the accounting harmonisation work
of Arnold and Sikka (2001). Their important work explored how accounting
processes are associated with the accumulation of capital which led to the closure
of the BCCI Bank in the UK. They explained that as capital roams the globe,
nation-states are obliged to provide regulatory and other frameworks to bring it
under political control. They explain that regulators in the UK:

Facilitate and foster the conditions in which private accumulation can take
root and flourish. Such processes operate at the intersection of a state’s
domestic and global interests. Reflecting the globalization of finance, the
major nation-states co-operated through a College of regulators to regulate
BCCI. (Arnold and Sikka, 2001, p. 492).

Their argument explains how a culture of calculation and control perpetuates the
interests of private capital in a globalising world economy. More particularly, the
processes of capital flight submerge different political strategies which could
administer and govern relationships between communities in the globalising
world. The question that presents itself is whether these trends are democratic

6
In an accounting context, Watts and Zimmerman (1986) used similar forms of
instrumental reasoning to explain that calls for more regulation are just another excuse for
inefficient practices (see also Friedman, 1964).

5
 Harmonising Accounting

enough; especially given that it is the accounting profession who defines the
direction concerning what is to be reported and how (FASB, 1978). Another
question which follows concerns whether citizens are provided with access to the
processes that shape accounting in liberal-democratic societies? (SAC 2, 1992).

2. International democracy and republican self-rule: Kant to Foucault

Proponents of globalisation argue that an expanding world economy causes

dislocations and adjustments to domestic economies that increase the vulnerability
of those economies to external shocks. Adjusting to these shocks require markets
that function effectively, thereby providing funds to remedy any adverse
environmental and social impacts. A procedural accountability (SAC 2, 1992,
paras 17 and 18) assumes that competition throughout the world will realise the
natural capacities of each state to foster the rights of its citizens and will lead to a
just and fair cosmopolitan society. This strand of accounting research assumes that
‘cosmopolitan’ and ‘global’ accountability structures benefit everyone when the
market is allowed to work with minimal impediments. This conception of
‘accountability’ underpins the processes of harmonisation and is based on a notion
of governance predicated on the supposition that individual self-interest satisfies
common purposes.7

Furthermore, Hopwood’s invitation to explore harmonisation and globalisation

processes requires determining whether powerful accounting structures satisfy the
needs of all citizens. Or, whether they satisfy only a narrowly construed range of
users at the expense of the needs of the majority of the population (see Miller and
O’Leary, 1987, 1990). Indeed, in broader accounting work Hopwood is arguably
inspired by Foucault’s ‘perspectivism’; that is, it poses the question for accounting
to explore how power frames an instrumental global world order and how it
creates control and manipulative technologies. Principally according to this
perspective, power lies in the hands of accounting guilds, the audit industry and
capital markets. From this perspective the utility of Foucault’s genealogical
method is that it provides insight in to the processes through which power is

7
In this context the term ‘the global commons’ is an environmental term used to refer to the
effects of Western modernity throughout the globalised world.

6
 Harmonising Accounting

captured by vested interests: such as the audit industry, thereby maintaining their
position.

Importantly, Hopwood (1994) explained how accounting bodies have the power to
command accounting agendas and thereby govern the everyday world. What
follows from this philosophical way of thinking are a set of insights into how
capitalists search for increasing levels of wealth; where the net effect is that the
needs of the many are ignored. This consequence reflects a palpable inability to
monitor corporate effects on their local communities and environments.8 For
example, global corporations can withdraw from their economic role in local
communities when more profitable opportunities are available, reinforcing an
exclusive conception of citizenship implicit in Western discourse. Outsiders do
not share the benefits associated with this conception of cosmopolitan
globalisation (see Neu, 2002 and forthcoming).

Nevertheless, Hopwood’s (1994) work on power structures must tease out to

consider how global accounting impacts on culture and the natural environment.
These effects have created a climate where each person is governed according to
the dictates of instrumental liberal structures where the individual is reduced to a
governable unit; accordingly, populations are managed according to a vision of
the common good (see Miller and O’Leary, 1981; Hindess, 2000). As a
consequence, people no longer have the means to lead their own lives free from
intrusion from others and are subject to the dictates of capital accumulation. By
way of contrast, a geneological analysis of accounting practice illuminates how
power permeates all structures of modern societies. Within the accounting
literature, for example, calculation and time management practices have been
interrogated as part of a broader understanding of how accounting limits the
ability of people to lead their individual lives (see Miller and O’Leary, 1981).
Extending the accounting craft, beyond mechanisms of control and calculation,
8
Consider, for example, the indigenous Papua New Guineans who resent the presence of
mining corporations and have actively thwarted the development of mining activities. We
need a broader moral vision to understand their values and how our practices impact on
their being in the world.

7
 Harmonising Accounting

involves consideration of the ‘real’ effects of globalisation on local communities.

For example, what happens when companies move offshore taking their financial
capital with them?

One way to take up Hopwood (1994) is to explore dominant Kantian methods

which invariably advocate a cosmopolitan-liberal global world order. This
provides an opportunity to consider the debates between Kantian and Foucaultian
researchers and tease out the effects of globalisation on notions of accountability,
citizenship and the natural environment. Arguably, these debates can shed light on
how harmonisation frames a certain conception of citizenship and its association
with how accounting numbers impact on local communities. Kant’s conception of
citizenship is based on universal principles of justice and rationality, while
Foucaultian researchers argue against any universal prescriptions. Accounting
research, predicated on Foucaultian geneology, has focussed on exposing the
sources which repress people, limit their freedom and are intolerant of difference.
These debates are important for accounting researchers concerned with
confronting and respecting difference in a spirit of common endeavour. This
article, therefore, utilises Foucault’s method at the advocacy level while searching
for that political space that teases out an accountable future in a spirit that respects
those commonalities which allow difference to flourish.

Indeed, the technical accountant’s reliance on procedural notions of harmonisation

is entwined with deliberative democratic processes; and that different conceptions
of international accountability have organisational impacts on local communities.
In today’s global world order these trends require critical analysis. The conception
of accountability being teased out here, therefore, explores the logic implicit in
dominant free-market perspectives that are based on instrumental means–end
thinking. One pathway, as noted, is that provided by Michel Foucault who has
provided insight in to Immanuel Kant’s famous work on cosmopolitanism; for
accounting purposes, this opens up another ‘accountability’ that explores how
global financial accounting is an identifier belonging to a Western state. It is

8
 Harmonising Accounting

argued, therefore, that the debates between Foucaultians and Kantians can be used
to tease out a conception of accountability that critically analyses instrumental
means–end methods that fail to fill the ‘silence’ surrounding ‘[t]he confinement of
the user to a rhetorical representation by others, usually the audit industry or
capital market regulators’ (Hopwood, 1994, p. 249). The argument in this article is
that ‘ideas’ invariably create the world and alter how researchers and policy-
makers consider accounting, global relationships and notions of global
cosmopolitanism. A principal aim of this article is to substitute epistemological
questions concerning the relation of the knower and the known with ontological
investigations as a means to tease out accounting impacts associated with
governance and harmonisation. Here, it is useful to consider the moral-political
problem that proponents of harmonisation have invariably announced for
themselves. Here, it is worth remembering Foucault’s invitation to continue to
confront how we view the world: after all it is ideas which underlie our thought.
This process of confronting our values reflects Foucault’s development of
Nietzsche’s thought:

The only valid tribute to thought such as Nietzsche’s is precisely to use it, to
deform it, to make it groan and protest. And if the commentators say that I
am being unfaithful to Nietzsche that is of absolutely no interest to me.
(Foucault, 1990, p. 99)

As Foucault has done to Nietzsche, a critical conception of accountability extends

and interrogates the harmonisation processes of accounting. It aims to explore the
logic of capitalism and its impacts on local communities; namely, it hopes to
consider how accounting might be transformed. Critical ‘accountability’ goes
further, to consider not only the processes of governmentality, but also the context
in which different accounting discourses operate. Foucault is useful here because
of the way he embraces and comments on Kant’s ‘What is the Enlightenment?’
(see Foucault, 1976; Kant, 1971a). Foucault takes up Kant’s challenge and inverts
his philosophical question that focussed on the relationships between the universal
and the singular. It seems that Foucault’s purpose is to turn the Kantian question
into a positive one:

…in what is given to us as universal, necessary, obligatory, what place is

occupied by whatever is singular, contingent, and the product of arbitrary
constraints? (Foucault, 1986, p. 45)

9
 Harmonising Accounting

For accounting and accountability purposes, there is a sense of continuity and

discontinuity in modern definitions of power and its effects within organisational
accountability. The differences between the universal and the local, as isolated by
Foucault, actually boil down to his refusal to propose a normative ideal for
humanity to follow. Foucault continually refuses to succumb to that way of
thinking which searches to create procedural mechanisms: his aim is to escape the
ubiquitous effects of power and control. The strength of a Foucaultian re-
orientation of accountability is that it illuminates the limits of procedural
accounting. While positing a deconstruction to the dominant discourses of
capitalist hegemony there exists a need to also confront systemic structures of
domination. Power not only dominates but creates a narrow range of possibilities.
Returning to Hopwood’s challenge this article searches for that common space
where differences are worked out in a spirit of magnanimity and trust thereby
avoiding the pitfalls of a calculable and manipulable society based on technical
accounting.

Foucault’s major work seems to associate the civilising processes of modernity

almost entirely with repression.9 For example, in the work of Barry Hindess
(1996) it is argued that Foucault submerges the regenerative potential implicit in
projects to emancipate citizens from their everyday lives. From a Foucaultian
perspective, accounting and new notions of accountability might simply manifest
another will to power (see Hoskin, 1996); nevertheless, Foucault’s method has the
potential to submerge other strategies which might have the means and power to
escape the iron cage of epistemology. Another pathway to that of Foucault can be
teased out by remembering Mitchell Dean’s important argument that modern
social problems invite us to ‘invent new ways of doing this folding’ where the
folding reflects how to form oneself in the world. For Dean it is important to
remember that this folding must be ‘not in the absence, but in the presence of a
plurality of codes, and with a multiplicity of means’ (Dean, 1994, p. 216).
Extending this to accounting involves recognising warnings offered by Arnold and
9
It is important to remember, however, that some accounting researchers have posited a
positive ideal in restructuring accounting from the work of Foucault. My use of Kant,
Foucault and Heidegger aims to work toward this positive ideal in developing what it
means to be a person in the modern world.

10
 Harmonising Accounting

Sikka (2001) and the colonising forces which have led to the collapse of BCI in
the United Kingdom.

For accounting research, the debates between Kantians and Foucaultians can
provide news ways to think and act about what is accounting and how power
pervades all levels of society. Yet, genealogical research might fail to consider the
factors which shape how we think about cosmopolitanism, harmonisation and
international accounting. This is an important observation for accounting itself
trapped in an instrumental tunnel vision of the world. In extending Foucault’s way
of thinking about the world it is important to consider that communication and
discourse reveal new ideas and values. Arguably, this complex and dark way of
thinking about the world maintains that ‘new worlds’ to transcend globalising
capitalism are needed. For accounting researchers, this way to think about the
world points toward a conception of civil society where financial and economic
strategies are considered in a social framework that incorporates ‘other’ impacts.
The relevance of this for accounting is to understand how dialogue transmits and
reveals different conceptions of the importance that some people place on their
culture and background values.

Even more importantly, these debates concerning how to think about

accountability requires an understanding of the systemic and structural processes
of domination within capitalism. This takes global research towards a ‘political-
economy’ conception of accountability; namely, one which integrates Foucault’s
insights while remaining committed to minimising modes of domination (see
Cooper and Sherer, 1984). In thinking through these issues, then, accounting’s
commitment to the public might be affirmed through a process which explains and
narrates how corporations impact on the land and local environments (see
especially Shaoul, 1998). The ‘broader’ accountability argument, advanced in this
article, emerges from the confrontation between Foucault and Kant and recognises
that justice might mean that one group gives more ground on a certain issue,
owing to their erroneous stance on a particular matter. This way to broaden our

11
 Harmonising Accounting

accountability model is predicated on the assumption that while power is often

unavoidable, emancipation from systems of power is another matter entirely. In
fact, when thinking about globalisation and harmonisation processes it is useful to
examine limited and specific strategies to emancipate citizens where new notions
of civil society would, for example, clearly require new and different reporting
technologies. More particularly, these strategies for reconstructing civil society
might be regarded as desirable in some cases (see Hindess, 1996, p. 152).
Foucault stated:

I prefer the very specific transformations that have proved to be possible in

the last twenty years in a certain number of areas that concern our ways of
being and thinking, relations to authority, relations between the sexes, the
way in which we perceive insanity or illness… (Foucault, 1986, pp. 46–47)

Foucault’s analysis implies that the best that can be achieved is the substitution of
one set of power relations with another. Foucault’s account of domination,
however, is not so straightforward. For example, his ‘ethic of care’ for the self is
premised on ways to minimise domination whereby the ‘practices of the self
would allow games of power to be played with a minimum of domination’
(Foucault, 1988, p. 18).

A limitation of Foucault’s way of thinking is that a simple post-structural

emphasis on discourse through procedural accounting could lead to neglect
theorisation of the structural power wielded by transnational corporations. A
postmodern ‘new age’, at worst, could be a destructive or simply a distracting
attempt to create a ‘hyper-real’ world. The political question for accounting
involves an open-ended political process which defy attempts at theorising. More
seriously, a contempt for ontology does not suggest good prospects for developing
a critical postmodern accounting framework.10 Foucault genealogy invites
consideration about how accounting processes dominate the freedom of people
and how harmonisation processes are implicated. If, however, the Kantian–
Foucaultian method helps understand processes of globalisation, then another
10
A useful concept for accounting researchers is the notion of fortuna, which was to be
handled through to republican virtue (virtu), and offers a means to escape the restrictions
of procedural rationality (see Nelson, 1993). The implication is that accounting is based
on the Enlightenment assumption that humanity can control the world, but that this does
not seem to be happening.

12
 Harmonising Accounting

division created by accounting as it affects different communities presents us with

a far more serious challenge. This brings the article toward a second set of
concerns, and these concern the reform of institutional structures with a view to a
just and fair accounting (see Gaa, 1988; Lehman, 1995; Williams, 2002).
Processes of international accounting, as part of the globalisation process, have
accelerated with the advent of new, virtual corporate structures, associated
overwhelmingly with ad hoc, discretionary and minimal conceptions of the law
(see Bailey et al., 2000). They support a technical accounting, as opposed to an
interpretive and open accounting (see Shaoul, 1998; Taylor, 1989). In contrast
with Foucaultian ideas for global reform, it will be remembered that Kantian
arguments rely on an assumption that the natural capacities of human individuals
correspond to the capacities of rationality and morality. These are the values that
modern constitutional republics promote in their citizens and which frame
technical accounting. The ‘technical’ trends that dominate the modern world
parallel arguments for the internationalisation of accounting which have ignored
critical work on constructing notions of accountability. It has been argued that a
commitment to understanding the impacts of cosmopolitan globalisation are also
needed if we are to recognise accounting’s significant and systemic effects in
managing and partitioning populations to maximise corporate wealth.

The modern way of partitioning of populations in a global world order provides

another way for corporations to dominate local populations by minimising modes
of resistance. This, then, provides another opportunity to impose an external
financial structure that submerges local and intrinsic values. Moving beyond
traditional notions of accountability, the ‘otherness’ of being implies that
‘difference’ must be given expression and other voices considered. This supports
the critical accounting project’s attempt to consider accounting and the world in
which we live. It takes up Hopwood’s (1994) challenge to construct a vision of
accounting which regulate new organisational forms such as virtual corporations,
which have the ability to avoid local regulations. Attention to international
globalisation must focus on the positive aspects of Foucault’s work and its
relevance for social and environmental accountability.

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 Harmonising Accounting

3. Global international accounting: battling neoliberal pathologies

To this point, Foucaultian and Kantian ideas have been used to explore the
complexities of globalisation. This section extends that analysis to investigate
notions of nation-state sovereignty and how they affect the accounting activity
systems. More particularly, it is argued that this strategy helps ‘crack the
accounting lens’ to not only consider the political but also environmental and
social reporting practices. More importantly, it offers a new way to explore
globalisation and its association with cosmopolitan strategies which are often
based on positivistic assumptions. It is well known that positivistic methods
invariably submerge difference and diversity. It is important as accounting
researchers that in the 1990s this way of thinking about ‘what is liberal
globalisation’ is explored and how it has been replaced by an even more narrow
conception of liberalism. Namely, this conception of liberal-accountability
overlaps with free-market reforms that are supported by a benign and limited
government (such as the United Nations and the European Union). This has given
impetus to new deregulation and privatisation trends that can be found in
documents advocating total quality management, activity-based costing, the
balanced score-card, and the harmonisation of accounting standards to implement
efficient management practice. The net effect of these new international
accounting techniques is to propel globalisation throughout the world order. This
instrumental accountability structure projects a culture of calculation and control:
this is an accountability which submerge other value systems containing new
means to administer human communities. One wonders how democratic are these
modern trends when the accounting profession defines the direction concerning
what is to be reported and how (FASB, 1978). Are citizens given access to the
processes of accounting deliberation in liberal-democratic societies (SAC 2, 1992,
paras 16 and 17)?

In response, the critical accounting dialectic developed here works at the

ontological level to explore citizenship and accountability at both the local and the
global level.11 It remains committed to respect between cultures and a ‘peaceable
federation’. Yet this way of thinking about the role of accounting in civil society is

11
This is developed in Kant’s ‘On the Common Saying, “This may be true in theory but it
does not apply in Practice”’ (Kant, 1971c).

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 Harmonising Accounting

certainly aware that Kantian reforms might justify harmonisation processes. This
limitation of accounting, as is now well known, exists because accounting is
assumed to be a neutral arbiter of organisational reality (see FASB, 1978). A
broader ‘accountability’ attempts to avoid some of the darker implications of
capitalism’s logic of accumulation. Capitalism, and its processes of alienation,
create a subaltern existence for many citizens which rewards those with power
and prestige while submerging the adverse effects of calculation and competition
(see Miller and O’Leary, 1990). It remains problematic whether procedural
conceptions of accountability expand our understanding of citizenship. They
might simply lead to a consumerist mindset where the natural environment is
considered to be a reservoir for humanity’s convenience.

In developing a new and critical global perspective on accountability, this article

argues that Foucault’s insights can be extended. After all, interpretations differ and
no one is ever right. It is therefore perfectly fair to extend Foucault’s consideration
of how ‘sources of the self’ shape people’s being in the world. This way to think
about accountability aims to ‘bring into view the historically sedimented
underpinnings of particular “problematizations” that have a salience for our
contemporary experience’ (Barry et al., 1996, p. 5). In destabilising the structures
of the present we might not only explore the problematic effects of global
accounting reform, but also work with post-structural methods to uncover the
agonism within different ways of thinking about the world. 12
The aim of this
accountability perspective is to widen the role of public institutions with a mission
to explain and promote new technologies such as environmental and social
accounting. An information-rich world would imagine the otherness of humanity’s
being in the world. This way of thinking extends both Foucault and Kant to
analyse social change by not only extending a human rights culture but to embrace
all that is different within a common sphere of understanding. It reflects Kant’s
argument that:

The peoples of the earth have … entered in varying degrees into a universal

12
Interestingly, Foucault objected to the portmanteau classificatory term ‘post-structural’. A
more encompassing term is ‘perspectivism’, which has been used in accounting studies to
explore, deconstruct and interpret accountability and decision-useful processes.

15
 Harmonising Accounting

community, and it has developed to the point where a violation of laws in one
part of the world is felt everywhere. The idea of a cosmopolitan law is
therefore not fantastic and overstrained: it is a necessary complement to the
unwritten code of political and international law, transforming into a
universal law of humanity. (Kant, 1971b, pp. 107-108)

Kant developed the idea of a slowly spreading federation of internally peaceful

republics to civilise the world, based on liberal notions of tolerance and respect.
Many socialists and critics of globalisation find this way of thinking inadequate;
but, it is worthwhile exploring whether a transformation of our way of thinking
about ‘accountability’ might create a revolution in our understanding of the effects
of accounting and international globalisation.13

A first preliminary step involves a broader notion of accountability to develop

Kant’s idea of cosmopolitanism. It begins to create ways to think about how to
respond to the forces of power that Foucault exposed in his genealogy which
arguably intensify with globalisation. The aim of this ‘accountability’ model is not
simply to deconstruct the object, but also to investigate the moral and physical
structures that might alleviate the repression implicit in modernity’s grand
narratives. Following Dean (1994), then, it is argued that the utility of Foucault’s
genealogy lies in the way he explained how the modern self is moulded by forces
of power. Arguably, these forces are reflected in how technical accounting offers
only a universal definition of the person and the community in which they live.
Technical accounting and accountability assume that the person is ‘free to choose’
which leads to the Kantian notion that everyone benefits from free trade (see
Miller and O’Leary, 1993; Cooper et al., 1998). Neoliberal processes of free-
market harmonisation operate in a stealth-like fashion and assume that they are
the vanguard force in civilising the global world and its nation states. Kant’s
federal solution for the reform of nation-states in the world is similar because it
wants to expose the problems within instrumental reasoning which support
13
In the accounting literature this line of reasoning has informed Power and Laughlin’s
(1996) development of language theory to consider global communication backed by the
rule of law. Habermas argues ‘The correct solution to the problem of the moralization of
power politics is therefore ‘not the demoralization of politics, but rather the democratic
transformation of morality into a positive system of law with legal procedures of
application and implementation’. Fundamentalism about human rights is to be avoided not
by giving up on the politics of human rights, but rather only through the cosmopolitan
transformation of the state of nature among states into a legal order. (Habermas, 1997, p.
149)

16
 Harmonising Accounting

procedural accounting; namely, technical reform is assumed to create and lead to

accountability, emocracy and perpetual peace (Kant, 1971b, p. 102). But this
article asks us to do more. It invites us to embrace others in a spirit of
magnanimity and openness that extends accountability ideals.

Of course, extending this argument to the debates raging in the accounting

literature is not to deny that post-structural accountants have not explained the
limitations of annual reports, conceptual frameworks and the power structures that
underpin harmonisation projects. The notion that power is the variable left
unanalysed in accounting reform projects is an important observation, and one
which must be taken seriously if we are to understand how accounting dominates
and controls the possibilities available for people’s lives (see Nelson, 1993;
Taylor, 1989). Notwithstanding this observation more needs to be done. While
Foucault’s framework usefully explores notions of power, it is through
consideration of his critique of Kantian cosmopolitanism that puts us on ‘another’
pathway. At minimum, it teases out the potential for tyranny that is implicit in
meta-narratives such as accounting. It points toward a need for local and diverse
modes of co-ordination in creating an ‘information-rich’ global economic system.
This involves a vision of a conception of acountability that accommodates the
Other in a spirit of healing and providing information that enriches their decision-
making processes (see Hopwood, 1994; Power and Laughlin, 1996).

This conception of accountability teases out some of the differences between

Kantian and Foucaultian political methods with a view to visualise the problems
associated with the craft of harmonising accounting. The pathway from Kant to
Foucault aims to distil elements from divergent traditions to consider how to
confront values and ideas such as those involved in the harmonisation of
accounting. This broader notion of accountability does not simply accept
capitalism as a given, but critically reflects on the processes of globalising
capitalism through harmonisation. It involves as a first step developing another
way to think about how to govern societies; within this perspective accounting

17
 Harmonising Accounting

could provide information to enrich our understanding of the other and how we
treat others. A second step is to debate different interpretations about accounting
such as McIntosh’s argument that accountability processes can be constructed to
mediate people’s being in the world through accounting symbols (McIntosh,
1999). A problem with this type of debate, over what is accountability, is that it
rarely occurs and invariably focuses on one set of theoretical ideas without
comparing and contrasting different ideas.

The extensions to accountability that are proposed here involve developing

political ‘insight’ into the effects of accounting reform. Here, the practices of
accounting have submerged that which is authentic in conceptual frameworks that
assume that uniform accounting processes will achieve efficiency and justice (see
FASB, 1978). One wonders, however, whether free-market global accountability
can achieve a satisfactory standard of living and respectful work practices for all
people. It proposes a different conception of cosmopolitanism and accountability:

I prefer a third option: cosmopolitanism as the provocatively impure but

irreducible combination of a certain privilege at home, as part of a real
belonging in institutional places, with a no less real but much less common
(and therefore highly desirable) extension of democratic, anti-imperial
principles abroad. (Robbins, 1993, p. 211)

Robbins suggests that globalisation is ostensibly a dialectical process. It involves,

for example, balancing the rights of transnational corporations to enter developing
economies with the need to provide aid and infrastructure. Traditional accounting
approaches such as agency theory are ill-equipped to deal consider these effects as
they ignore the background contexts which shape people’s way of being-in-the-
world. These dilemmas clearly require more, not less, global governance. It
requires an accounting framework sensitive to local cultures and values that
invariably involves democratic accountability as Arnold and Sikka (2001) have
observed (see section 1 above).

A critical notion of accountability, mediated through reformed accounting

structures, promises political sovereignty so that local communities retain control
over their own destinies (see Neu, 2000, pp. 282, 283). Here, the role of
accounting is to monitor and regulate transnational corporate effects at enterprise,

18
 Harmonising Accounting

national and global levels. In this way, local communities and people retain the
hope of controlling their own life-goods and author their own accounts (Nelson,
1993, p. 220). Arguably, a critical-interpretive accounting offers similar
conclusions to those of agency theory in that economic incentives play a role in
moderating behaviour. What differs, however, is an avowed acknowledgment of
the broader contexts in which accounting operates and a method to ‘explore more
extensively the constitutive effects on accounting practice at various levels of the
regulative ideal’ (McSweeney, 1997, p. 708). This involves taking accounting in a
different direction, associated with winning back the position of the state to
regulate and monitor corporate effects. Ostensibly this involves explicit
acknowledgment of the limits of global free markets and capital markets that
emphasise incentive schemes that reduce to financial considerations the notion of
what comprises a full life. This would allow us, as accountants, to interpret the
international accounting impacts where ‘the lands, the reproductive ability, and
the long-term health of the indigenous population are irreparably damaged’ (Neu,
2000, p. 282).

Accounting impacts on the democratic ideal to the extent that local communities
must be involved in reporting environmental and social effects at the local level.
In conjunction with political self-rule, accounting might be accorded the task to
‘report’ and ‘explain’ different notions of ‘representational faithfulness’ as they
affect communities. Accountability, it will be remembered, when counter-posed
and developed in conjunction with critical theory, promotes discourse to work
toward not just representational faithfulness, but also better interpretations of
these representations (Taylor, 1975; McSweeney, 1997; Mason, 1999). In winning
back the role of accounting as a regulative ideal and virtuous practice it is possible
to begin to explore different representations of global reality. This is achieved
through reconstituted public spheres which not only deconstruct what is reported
in annual reports, but also construct institutions to determine who has power, and
how power is perpetuated in an instrumental means–end culture. A global
accounting must not only create and construct financial incentive schemes, but
also monitor corporate activity ‘in a world which satisfies users more attuned to a

19
 Harmonising Accounting

communication rich world’ than the current world led by ‘international accounting
politicians’ (Hopwood, 1994, p. 249).

This broader accountability framework that I propose aims to expose the logic
implicit in meta-narratives such as accounting, and change the focus to report on
that which is significant for communities within a changing global economy. 14
This is not the end of the story for accounting, however, because it is useful to
consider ‘the ideal of authenticity’ and explore the direction of communities. The
ideal of authenticity counteracts the proceduralism of global reform, offering a
means to consider the identity of citizens as fundamentally important. The focus,
therefore, shifts from a simple reliance on each individual’s labour in a global free
market to consider relationships between nation states, popular sovereignty,
identity and community. It is likely, then, that many citizens will be displaced and
marginalised when transnationals move offshore. These effects are deemed to be
fair and just if the accounting reports show a profit. Global accounting and
business reform, however, leave material problems under-theorised while ignoring
how accounting impacts on communities and cultures. We need to think about the
role of organisations; more particularly, what they do and how they transfer
certain cultural imperatives to different locations, nations and regions. A broader
conception of accounting involves understanding culture, being and belonging. It
involves understanding that the art of interpretation provides a different pathway
and offers a new way to think about what is accountability.

An important implication is that social and environmental standards must be

strengthened in international bodies (such as NAFTA and the EU). It is therefore
crucial that international economic agreements (for example, GATT) finally
include in their terms of reference clauses giving teeth to such standards. In order
14
Charles Taylor has observed: ‘[t]ake gender equality. It is astonishing how recently the
franchise was extended to women. In the 19th century, a great majority of both sexes
concurred in the idea that this was the order of things. Today, these arguments are
unrecoverable. Just as an argument held in some timeless empyrean, we can imagine
people going either way, being convinced that women were different in some way which
justified denying them the vote, or else being convinced to abandon this view. Again, as a
movement in history, we can imagine a reversal; should the Taliban offensive ever reach
Chicago, you’ll see.’ (Taylor, 1999, p. 162)

20
 Harmonising Accounting

for these standards to be effective, they will have to take a relatively cogent form.
Given the enormous power advantages enjoyed virtually everywhere by business
in relation to organised labour and environmentalists, we have to assume that the
business community generally is best poised to exploit legal ambiguities within
these agreements. As we saw in Kyoto, the biggest polluters prefer open-ended,
empty environmental law. Within the global economy, the biggest exploiters are
similarly likely to favour vague forms of private law and toothless social and
environmental regulations.

Arguments similar to these have been used by Bailey et al. (2000) in their
exploration of the effects of harmonisation on accounting and its relation with
market reforms. For example, one recent policy initiative is the proposed Multi-
Lateral Investment Agreement which would bind all signing nations to its free-
market manifesto. According to Bailey et al.’s (2000) analysis, this proposal
provides even more power for transnationals, which have the ability to weaken
community demands for accountable information. What is needed is a critical
analysis of the effects of accounting in a globalising world economy and its
impact on individuals’ cultural identity and context-specific relationships. In the
accounting literature, concerns have been expressed that harmonisation might
impact on local cultural norms and needs. This interpretation aims for an
accountability structure that distils the ‘common good’ not only to deconstruct,
but also to interpret the effects of corporate activities on communities.

While Kantian work provides an interesting point through which to compare the
processes of international harmonisation, it is important to consider whether
democracy can survive the processes of globalisation (see Barber, 1995; Arnold
and Sikka, 2001). This involves not only thinking about the limitations of
methodological individualism, decision-usefulness and voluntary international
accounting codes, but also reports on the material effects of accounting on
communities. While Foucaultian inspired arguments seemingly advocate continual
critique it is important to explore not only virtual notions of value, but also the

21
 Harmonising Accounting

material impacts of free-market liberalism on the natural environment and

people’s identity. The role of accounting, therefore, is to interpret and offer
different options so that local communities choose their own directions, where
subaltern voices are given opportunities to express their being in the world.
Accounting has the potential to provide and become a mechanism in broader
public space to consider the economic, environmental and social forces that
impact on people’s being in the world.

4. Globalising accountability: a dialectical cosmopolis

The effects of globalisation and international accounting on social and natural
environments are to assay a serious concern. The debates between reform
accountants and those inspired by Foucault usefully consider how accounting
techniques perpetuate a status quo. This is a status quo which allow transnationals
to exploit, alienate and submerge local values. It has been argued that harmonising
accounting structures between nation states perpetuates the market failures that
were observed by Cooper and Sherer (1984) in their exploration into the political
economy of accounting. Accounting and its internationalisation remain caught
within a fundamentally flawed global economic-liberal system that perpetuates
poverty, alienation and anomie. The concern is that international accounting
processes are part of a limited conception of civil society and a totalising
consumer society which appeal primarily to the economic appetite of consumers.

It was argued that globalisation was seen to rely on procedural accountability

mechanisms and support the processes of globalisation characterised by more
market competition. Yet it is unlikely that nation states and their accounting
bodies will take action to counter international capital’s preference for open-ended
accounting standards and environmental laws. This perpetuates the procedural
neo-liberal predilection for weak and open-ended environmental laws and
standards. The net effect of international accounting and its commitment to
procedural accountability is to colonise and destroy local cultures and their
relationships with the natural environment. The argument was built on Foucault’s
methodological response to Kantian liberal reforms where that debate provided a

22
 Harmonising Accounting

platform to expose the logic implicit in modern communities. This way of

thinking about accountability also explored how power structures shape
accountability within their historical and social contexts, and to explore how
accounting impacts on what it means to be a person.

It is more important than ever before that accountability and accounting must
explore different notions of the rule of law and how new institutions of global
governance can keep business as separate from politics as possible. Moderating
globalising capitalism, given that there are limited prospects for revolutionary
change, involves creating an appreciation of accountability as a democratic
mechanism to open space for citizens to express their cultural values. A counter-
factual model of accountability questioned liberal notions individual endeavour
that provided only a partial understanding of the human agent and significant
relationships. It will be remembered that these ideas have been discussed by
Immanuel Kant which suggested an ideal type where sovereignty can be effective
only if civic virtue, participation and the structures of power are theorised and
implemented. This involves not simply exploring processes of power but also
identifying the beneficiaries of global free trade and international accounting
reform.

Notwithstanding the importance of Foucault’s work and how it sheds light on

global reform a fully worked out international accounting model is now needed to
explore and explain the effects of international accounting reform on culture and
the natural environment. One obvious implication is that decision-making occurs
at the level of the global corporation while social and environmental effects are
felt at the macro, or global, level. It was argued that the accounting profession and
large transnational corporations prefer accounting policy to be determined at the
level of the corporation, thereby creating and freeing up the processes of self-
regulation. The net effect is that this way of thinking fails to capture the
international dimensions of global capitalism as it ignores some significant social
and environmental impacts of global capitalism at the level of the nation state.

23
 Harmonising Accounting

Having explored notions of decision-usefulness, globalisation, harmonisation and

accounting reform two interrelated premises have been developed. The first is that
globalisation impacts on the sovereignty of nation states. The second is that
managing the global commons involves democratising organisational
relationships and working to combat the adverse impacts of global capitalism.
These premises are based on a regime framework, which reflects strict individual
liberal assumptions to support private organisations as the most efficient and
effective motor of social change. This leads to privatisation and deregulation to
allow free markets to propel globalisation. But this ignores the genealogy of
modern conceptions of the human agent, and our understandings of the
communities to which that agent belongs. Accounting is a fiction which can help
in this regard, but it is something far easier to suggest than to effect.

24
 Harmonising Accounting

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