accounting theory

accounting theory

Evaluate the article in the context of an appropriate accounting theory, citing at least three scholarly sources about your article analysis. The aim is to identify the most appropriate accounting theory (from those studied in this course) to explain the behaviors and/or decisions of relevant parties indicated within each article. (Guide: 600 words).

These are the theories:

Political economy or systems-based theories

1. Legitimacy theory

2. Stakeholder theory (select one branch) – Ethical (moral) branch – Managerial branch

Economics or market-based theories

1. Efficient market hypothesis together with Capital market research

2. Agency theory

3. Positive accounting theory (plus select one hypothesis)

– Political cost hypothesis

– Bonus hypothesis

– Debt hypothesis

Article 3 – IT firm Atos’ shares slump 18% after accounting issues disclosed Reuters, April 1, 2021 PARIS,

April 1 (Reuters) – Shares in French IT consulting firm Atos fell sharply on Thursday after the company disclosed that auditors had found accounting errors at two of its U.S. units. Atos shares were down 18% in early trading on the Paris bourse, then recovered some ground and were trading down 13.8 % at 0805 GMT. Citi downgraded its outlook on the stock to neutral, citing the accounting issues. The entities affected were Atos IT Solutions and Services Inc., and Atos IT Outsourcing Services LLC, which between them represents about 11% of Atos’s consolidated turnover, Atos said in a statement. Atos said that as part of a regular audit of its accounts, its accountants had identified problems with financial reporting “leading to several accounting errors”.

It said it hired external firms to investigate whether those errors had led to a material misstatement of financial performance, but said there was not enough time to complete this work before the regular audit was published. “As of today, the Group has not identified misstatements on the two U.S. entities that are material for the consolidated financial statements,” the company statement said. “Atos is committed to the highest standards and the Group is strongly enhancing its preventive controls and processes through a comprehensive action plan.”

The French firm said in January it had approached to buy U.S. rival DXC Technology in what it called a “friendly transaction”. In February, they decided to end the talks. Atos shares have fallen since the deal talks were announced, with investors questioning the rationale for the acquisition, and have since languished near the bottom of France’s blue-chip CAC 40 share index. JPMorgan analysts wrote in a research note on Wednesday that Atos “dinged investors’ view of its ambitions when it announced that it was looking at a friendly takeover of DXC. Now accounting issues could set the company back a bit further.”


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