The Institutional and Cultural Influences on Accounting Essay

The Institutional and Cultural Influences on Accounting - Essay Example Code law legal systems are common in continental Europe, Latin America and much of Asia. (Roberts et al, 2005). In these countries, laws are generally codified (often using a similar framework to that of the French Napoleonic codes of 1804-11). (Roberts et al, 2005). Commercial organisation as well as accounting regulation is governed by commercial codes. Common law on the other hand adopts a philosophy where the role of law is to prohibit undesirable behaviour rather than to prescribe or codify desirable behaviour. Commercial law stems from England where it was exported to the United states and the Common Wealth. (Roberts et al, 2005). The legal/judicial institutions can influence incentives to produce conservative accounting numbers through a series of channels. (Bushman and Piotrosky, 2006). ii. Business Organisation and Ownership. There is also a considerable difference in ownership structure and business organisation across countries. (Nobes, 1992). For example, capital contributed by the government and banks in france is very significant as are small businesses. (Nobes, 1992). Companies in Germany are owned by banks and a majority of shares in public companies are owned and controlled by banks, especially the Deutsche, Dresdner and Commerz Banks. (Nobes, 1992). One would therefore expect accounting methods in Germany to be influenced by these banks since most of the information produced will be done in accordance to their needs. On the other hand, shares in the UK and the USA are owned by institutional investors.