Unfortunately, the CEO and CFO have received much of the blame for the erosion in financial statement quality. Financial shenanigans of many types are cited as the main issue. For some, there is a prevailing belief that the management team is responsible.

The problem is certainly getting worse, and yet it is not because of a few unscrupulous management teams. The global financial reporting problem rests squarely with the rule-making process of the governing accounting bodies over time.

The financial reporting authorities have established a set of standards that have been argued, debated, and then established over decades and decades. The result is a set of accounting rules with inconsistent policies that reflect a mixture of differing objectives for the financial statements.

The accounting rule-making discussions do not occur in a vacuum of accounting theory and practice. Instead, these rules have been established inside very influential and changing environments.

Among a long list of accounting-influencing environments, these include varying economic climates, changing political regimes, waxing and waning trends in globalization versus nationalism, and trends in the influence of various stakeholders such as equity, credit, or the general public.