Question

What impact in your opinion cultural dimensions have on the accounting system of a country?

Answer 1

The influence of culture on behavior and social systems has been recognized and explored by a wide range of researchers, especially by anthropologists, sociologists and psychologists (Parsons, Shils, 1951; Kluckhohn, Strodtbeck, 1961, Douglas, 1977, Hofstede, 1980). Culture has been defined as “the collective programming of the mind which distinguishes the members of one human group from another”. (Hofstede, 1983). The term "culture" is reserved for companies viewed as a whole, for nations, while the "subculture" refers to the level of an organization, profession or family.

Hofstede's research focused on detecting structural elements of culture and especially those who had the biggest effect on organizations and institutions. In the largest study on several national cultures, psychologists have collected data on the "values" of a series of employees within multinational companies located in more than fifty countries. Statistical analysis of the data collected revealed four dimensions which could differentiate the states. These are: individualism, power distance, uncertainty avoidance and masculinity. These dimensions were assessed as elements of a common structure of cultural systems. Also, states participating in the study could be grouped into cultural areas or sectors based on the score obtained in the size above.

Individualism versus collectivism - refers to the extent to which a culture encourages independence and freedom of the individual to the group to which it belongs.

Distance versus low power distance - reflects the degree to which people perceive social inequality.

Safety versus uncertainty avoidance - is related to the ease with which culture handles new and take risks, the anxiety of that nation.

Cultural influences and accounting systems

In accounting literature, the importance of culture and its historical origins are in an early stage of recognition. In this respect Harrison and McKinnon (1986) have proposed a methodological framework in which culture was built with the purpose of analyzing identified changes in national accounting and on the existing accounting practices. They consider regulating financial reporting a social system, characterized by norms and values determined culturally. (Ristea, 2006) Culture is a key element of this framework, on which depends: (1) understanding changes in the rules and accounting systems, (2) the behavior of groups in interaction with others.

Complementing the study of Harrison and McKinnon, Gray (1988) proposes a methodological framework in which culture can be used to explain international differences in accounting systems and possible models in harmonizing international accounting. Furthermore, Gray aims to explore the extent to which cultural influences identified by Hofstede can explain international differences in accounting systems.

As a starting point, Gray's study is rooted in Hofstede's approach: if the values and culture are related to the development of accounting systems at subcultural level (organizations), there must be a close link between national culture and developing different accounting systems internationally. To explore connection cultural - accounting systems in an international context is necessary to identify the mechanism by which these values in society are related to organizational values of subculture accounting and the degree to which they directly affect the development of models of accounting practices.

The model proposed by Gray is an adaptation and extension of Hofstede model, the social values are determined by environmental influences, in turn modified by external factors such as: investment, international trade etc.. Instead, social values determine legislative and institutional changes on issues such as: the legal system, political system, professional associations etc. The model extension proposes social that are the expression of accounting values at subculture level. Thus, the system of values and attitudes of accountants is supposed to be bound and derived from the social system, especially work- related values. Therefore, the values of accountants will have a significant impact on accounting systems.

Being defined social values is possible to identify the corresponding values in the accounting subculture? A series of values, treated by literature and accounting practice, can be considered:

· Professionalism versus state control - this value reflects a preference for professional reasons and rules imposed by the profession, unlike legal regulations and monitoring conducted by state institutions.

· Uniformity versus flexibility - this value refers to the preference for common accounting practices in companies, unlike flexibility according to the circumstances of each company.

· Conservatism versus optimism - cautious preference to deal with unforeseen events, in contrast to a more optimistic, permissive view, which involves more risks.

· Secret versus transparent - Privacy preference for financial information to be disclosed to a limited number of interested users, in contrast to the transparent approach, the same information is disseminated to a wide range of users.

External influences

Institutional consequences

Environmental influences

Social values

Accounting systems

Accounting values

The link between Hofstede's study and research of Gray can be summarized as follows:

1) Professionalism is strongly related to a high degree of individualism, given the reliance on individual judgment of accountant and "disgust" for control law, while uncertainty avoidance is low, given the unavoidable acceptance of variety in their professional judgment. More like a touch, professionalism is related to masculinity and low power distance, taking into account the need for mutual trust within the accounting profession.

2) Uniformity is particularly correlated to strong uncertainty avoidance and a low degree of individualism. Uniformity is also aligned with high power distance, where the imposition of rules is more easily accepted.

3) Conservatism is linked specifically with strong uncertainty avoidance. There is also a link between a low individualism and high masculinity.

4) The secret is closely linked to a strong uncertainty avoidance and high power distance.

Doupnik and Salter (1995) have analyzed four cultural dimensions identified by Hofstede adding other six factors to explain differences in national accounting. Factors included in the study were:

legal system;

relationship between business enterprises and capital providers;

· tax laws;

· inflation levels;

· education levels;

· economic development.

Then they analyzed accounting practices from 50 countries and subsidiaries of the same multinational in different countries. The factors with the greatest explanatory power for the analyzed states were:

· legal system;

· inflation;

· uncertainty avoidance;

masculinity;

· market capitalization;

· level of economic development.