According on that, there are facing dilemma of truth in accounting between justification of standard setting and justification of auditing. Difference researcher, have a difference opinion. According to Macintosh (2002), decision usefulness as defined by FASB is myth and truthfulness as defined by AICPA is a reality. Another researcher, Moore (2009) characterized the economic reality the FASB set out to show a myth. Other than that, Williams and Ravenscroft (2010) argue that decision usefulness as defined by FASB is since there is no way to any standard actually improves the prediction of cash flows. That is no empirical means is available to standard-setters to prove predictive ability either for any individual decision makers or for any mechanical method of economic prediction. Unlike standard-setting, auditing is the act of attesting to the veracity of something, an evidentiary process analogous to the legal process of gathering evidence to establish the ‘‘facts of the case.’’
Some countries use the term “truth” in their auditors’ reports. According to Myddelton (1995), under UK Companies Act, United Kingdom used “true and correct” from 1879 to 1947 and they changed to “true and fair view” after that. According to Chastney (1975), for Australia, they have used “true and fair” since issuance of the Financial Corporation Act of 1974. After a detailed comparison between many countries, a report shows that many problems occurred in implementing a term whether they should use “fairly present” or “true and correct”. So many efforts have been made to promote truthfulness but it still cannot eliminate the belief of others where fraud is still considered exist in financial reporting. According to Shaub and Fischer (2008), one of the values central to accounting ethics education is a commitment to tell the truth. Other than that, FASB (1980) has stated that accounting should not mislead and should faithfully represent an economic reality. Under SFAS #2 clearly shows that truthfulness is more to reliability, neutrality and representational faithfulness. It is too complex and problematic to ensure the truthfulness of something but it can give something basic that all participants can understand by doing so.
Decision usefulness is related with the future where the information provided is forecasting relevant outcomes of future phenomena. The usefulness of information will be classified into two categories of information which are the information that is useful for accountability purposes and the information that is useful for decision making purposes, for example in making resource allocation and social decisions. In other word, the information in financial reporting should be useful to present to users such as investors and creditors so that they can make a decision to invest, credit and so on. With the usefulness of that information, users can generate a predictive ability where they can predict and make a decision by assess the amounts, timing, and whatsoever in financial reporting. Ijiri (1975) commented that they are interpreting accounting methods rather than change the fundamental principle of accounting. The interpretation of accounting method will be more to user-oriented viewpoint.
If we look closer about the nature of truth, it is quite difficult to understand from some philosophers. Here are some arguments from researchers how they interpret about truthfulness. According to Kirkham (1997), the concept of justification is the same with concept of truth. Therefore, they do not need a theory of truth but them distinct from a theory of justification. Besides that, some accounting researchers consider the problem of truth complex but solvable. Briloff (1972, 1981, 1990, and 2001), Macintosh and Shearer (2000) said that complaint that such accounting signs as income and capital no longer represent transparently any objective or profound reality. According to Hapwood (2007), accounting is a practice, not a social science. For example, the authorization and control aspects of bookkeeping are self-evident.
In this article, we describe the conflict by relying on McCumber’s (2005) work which he provides a reformulation of the philosophical problem of truth that is more sympathetic with accounting practice’s traditional role. Understanding accounting’s possibilities of objectivity is more useful and a better regulative ideal of truth compare to current standard-setter’s fixation on the coherence to an ideological construct. In McCumber’s (2005) work, he produces six-way interplay between our pasts and our futures. The crucial of situating for accounting is how it helps to situate accounting as a human activity. As a human being, we cannot predict what are going to happen in future, even we cannot know everything what has occurred in past. In my opinion, decision usefulness and truthfulness are related from each other. Decision usefulness is based on conceptual framework whereas truthfulness is based on perception from auditors. Let say, an accountant record the transaction which is not useful for user, therefore the usefulness will not meet the objective of the transaction.
To relate between ethics and truth we use McCumber’s argue that it need to focus on rightness and wrongness of actions that is state in accounting ethics. McCumber’s viewing is to act ethically; we must defined what the situation we are in and must satisfied ourselves what is happening. A question from ancient Greek “How is it necessary to live?” The answer is based on vertical and horizontal dimension. Based on vertical, the relationship between the multi-level of human world such as individual, community, society and biosphere and based on horizontal, financial accounting professions code of conduct prescribe the proper behavior. In order to support the argument McCumber’s state that ethics then comprises the general principals in particular how individuals and communities should make their way through human world. Other than that McCumber state that exchange among the edges are ethically more significant than action occurring on each level separately. Other than using McCumber ideas, the article also using ideas from May that describes the notion of the responsibility that focuses on edges in terms of sharing responsibility. Bunge adds that, thou shall search for the truth, pursue it wherever it may lead, and communicate it to whoever may interest in it. A few standard relating to its core ethical principles of honesty. First, IMA with four standards of conduct that is competence, confidentiality, integrity and credibility. Second, AICPA code professional conduct is mandates CPA independence in fact and appearance conducting audits. And lastly, GOA with their core values are accountability, integrity and reliability. According to McCumber’s, what salient facts are omitted by accountants in the narratives they provide about entities will depend on how much accountant devotes to focusing on edges of ethics. It is related to Enron; certainly the accounting narrative about Enron omitted important facts and was the organization itself.
A real problem for accounting raised by truth where it cannot easily finessed by appeals to decision usefulness. McCumber (2005) also shows how truth and ethics are interconnected from the concepts of truths. Accountants’ relationship to management is engaged in conflict, not as an enabler. The dilemma of independent auditor or corporate management involves two powers which are the management’s financial temptation to encourage the auditor to allow defective and the integrity of auditor to against the temptation. Actually the dilemma comes from the standard because the standard is quite general so there are many different perceptions about the standard. Accounting standard setters have replaced an accountability of truth with decision usefulness to escape from this dilemma. By let the decision usefulness still vague, it can release them from being accountable for the consequences of their actions. The relationship between truthfulness and ethic in accounting are more to people action has been focus on. Have a few standards for accountant to make an account but that entire are depends on their ethic to follow it or not.