Artificial memories and accounting theory: myth and orthodoxy in accounting
Artificial memories and accounting theory: myth and orthodoxy in accounting

Summary/Abstract: The greater part of the accounting process is completed before any observable transactions have occurred. This unconscious interior accounting is part of the managerial expertise of those who run an organisation, or the socio-psychological processes of the market economy. There is also a need for a cognitive exterior accounting which is built from the observable transactions of the reporting entity, for concerned non-experts – non-active investors, other stake-holders in the organisation, the State and the general public interest. This cannot make its interior accounting accessible to them – but the exterior accounts substitute a representation of a plausible virtual reality, which provides assurance of the orthodox status of the entity. In the absence of intuitive expertise, any representation is only meaningful if it conforms to a widely-accepted artificial memory – in this case the Generally Accepted Accounting Principles, or GAAP. This is based upon classical economic theory, and does not consider the possibility of organisational failure. „Going concern” is axiomatic in historical cost accounting. The GAAP has evolved over the last 250 years to accommodate the development of new business methods. More recently these have involved sophisticated manipulation of the risk of failure, which has required the single „bottom line” of historical cost accounting to be supplemented by narrative notes and reports. The result is clumsy, but this has not led to any demand for a catastrophic change in the GAAP. This may be due to the increasing significance of „institutional investors”, who engage directly with managers and market-makers, share in their interior accounting processes, and become less dependent on the exterior accounts for their decision-making. This has reduced the attention paid to those accounts overall, and to that extent there is less monitoring of orthodox corporate behaviour in the public interest than in the past. However there is evidence that society itself has evolved, and the monitoring process has been taken over by a variety of general information-services and pressuregroups, often operating across national borders, and through the internet.

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