What are the fundamental assumptions of Watts and Zimmerman (1978) and how do they relate to the free market approach on accounting regulation?

1. Why do the authors assert that knowing the accounting standard setting process is inferior to positive accounting theory? Discuss your response in light of Tinker, Merino, and Neimark's (1982) article, "The Normative Origins of Positive Theory: Ideology in Accounting Thought."
2. According to Watts and Zimmerman's (1978) model of management lobbying on accounting standards, managers have larger incentives to prefer accounting standards that reflect lower earnings than higher earnings. Why does this occur? Discuss your response in relation to the accounting "market for managers" argument.
3. Are there any inconsistencies in Watts and Zimmerman's (1978) assertions? What is the rationale, or why not? Utilize selected statements to bolster your response.
4. Describe and define the various international accounting definitions.
5. Describe the environmental elements that cause country variations in accounting
6. What are the two most prevalent legal systems worldwide? How might these factors impact accounting?
7. Countries that rely on capital markets for financing, as opposed to banks and governments, are more likely to demand greater public disclosure in their accounting systems. Evaluate and illustrate this argument.
8. Describe and discuss three cultural features that can vary between nations. How do these cultural variances relate to accounting system differences?
9. What is the meaning of accounting harmonisation? Distinguish between harmonisation and convergence or acceptance.

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The detailed answer for the above question is provided below The fundamental assumptions of Watts and Zimmerman 1978 are that managers act in their own selfinterest accounting standards affect reporte... View the full answer