Table of Contents
The rules of the game 2
Social responsibility of business 4
Reference List 7
This report discusses the accounting perspective of the “rules of the game” that businesses must follow as referred to by economist Milton Friedman in his statement; “There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profit so long as it stays within the rules of the game…” (Friedman, 1970). Further, this report will consider whether Friedman’s statement is as relevant in 2013 as it may have been in 1970.
The rules of the game
Friedman believed that an organisation’s only purpose was to make a profit. However, he purports that organisations must first ensure they are within the “rules of the game”. At the time Friedman stated this, he was referring not only to the legislation and regulations related to accounting and auditing practice, but also to ethical behaviour, as he continues by saying “which is to say, engages in open and free competition without deception or fraud.” (Friedman, 1970). Whilst fraud is a criminal act, deception is not necessarily illegal. Hence, Friedman alluded to the fact that, whilst making profit is paramount, the means to get to that end must be legal and ethical.
There are a number of sources of regulation for accounting practice that businesses must adhere to. This includes legislation as well as standards and listing rules and is developed, disseminated and enforced by a spectrum of parties.
The overarching legislation in regards to business in Australia is the Corporations Act 2001 (Cth) which is administered and enforced by Australian Securities & Investment Commission (ASIC) (ASIC, 2012). The Act includes requirements for companies to keep accounting records to accurately record all transactions, retain these...