Accounting Organizations and Socie~y, Vol. 13, No. 5, pp. 477---485, 1988.

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A C C O U N T I N G AS R E A L I T Y C O N S T R U C T I O N :
A NEW EPISTEMOLOGY FOR ACCOUNTING PRACTICE*

GARETH MORGAN

York University, Toronto

Abstract

Accountants often see themselves as objective appraisers of reality,.representing reality "as is". This paper
takes a different view, arguing that accountants typically construct reality in limited and one-sided ways. It
shows that the idea of objectivity in accounting is largely a myth, and one which stands in the way of
interesting future developments in the discipline. The paper develops an alternative perspective on the
r~ture of the accounting process, building on insights regarding the interpretive and metaphorical nature
of accounting, and arguing that accounting should be approached as a form of "dialogue" through which
accountants can construct, "read" and probe situations in a variety of ways.

I'd like y o u to visualize a n Escher lithograph.

Perhaps it is H a n d With Reflecting Globe, w h i c h
features Escher l o o k i n g at h i m s e l f i n a crystal ball
(Fig. 1). T h e artist has c r e a t e d a n image of himself l o o k i n g at h i m s e l f w h i c h b i n d s the v i e w e r
i n t o the p i c t u r e as if h e o r she w e r e actually
s t a n d i n g i n Escher's shoes.
I n this l i t h o g r a p h the artist is m a k i n g a fundam e n t a l e p i s t e m o l o g i c a l point. It is that h e as an
artist, a n d w e as e v e r y d a y o b s e r v e r s a n d participants i n life, are active p r o d u c e r s of w h a t w e
see a n d e x p e r i e n c e . I n a b r o a d sense, all knowledge is a m a t t e r of p e r s p e c t i v e . Just as a n artist
makes a l i m i t e d r e p r e s e n t a t i o n of the "reality"
c a p t u r e d o n his o r h e r canvas, the k n o w l e d g e
g e n e r a t e d b y the n a t u r a l scientist, b y the social
scientist, or b y t h e l a y p e r s o n i n the c o u r s e of
e v e r y d a y e x p e r i e n c e , is always a limited, partial
k n o w l e d g e . W h i l e this k n o w l e d g e usually "says
something", it also leaves a great deal unsaid.
A n d w h a t is said o n l y rings true from the
s t a n d p o i n t of a l i m i t e d view: just as the laws of
physics o n l y apply w i t h i n clearly d e f i n e d
parameters, t

I a m e v o k i n g this i m a g e r y as a basis for the arg u m e n t that follows, since I w a n t to focus o n the
p r o b l e m s faced b y a c c o u n t a n t s i n r e p r e s e n t i n g
the reality of the situations t h e y wish to " a c c o u n t
for". A c c o u n t a n t s o f t e n see t h e m s e l v e s as engaged in an objective, value-free, t e c h n i c a l enterprise, r e p r e s e n t i n g reality "as is". But in fact,
they are s u b j e c t i v e " c o n s t r u c t o r s of reality": pres e n t i n g a n d r e p r e s e n t i n g the situations in lim i t e d a n d o n e - s i d e d ways. T h e y are n o t just
t e c h n i c i a n s p r a c t i s i n g a t e c h n i c a l craft. T h e y are
part of a m u c h b r o a d e r p r o c e s s of reality cons t r u c t i o n , p r o d u c i n g partial a n d r a t h e r onesided views of reality, exactly as a n artist is obliged to p r o d u c e a partial v i e w o f the reality he
o r she wishes to r e p r e s e n t .
By a p p r e c i a t i n g a n d e x p l o r i n g this d i m e n s i o n
o f the a c c o u n t i n g process, a c c o u n t a n t s have a
m e a n s of d e v e l o p i n g a n e w e p i s t e m o l o g y of acc o u n t i n g that will e m p h a s i z e the i n t e r p r e t i v e as
o p p o s e d to the s u p p o s e d l y "objective" aspects
o f the discipline, p e r h a p s in a w a y that will h e l p
b r o a d e n a n d d e e p e n the a c c o u n t a n t s ' c o n t r i b u tions to e c o n o m i c a n d social life.

*Based on an invited address to the Tenth Congress of the European Accounting Association,London, 25 March 1987. I am
indebted to Start Davis and Graham Morgan for their help in some of the research leading to this paper.
I have explored this theme at great length in Morgan (1983), showing how different approaches to social research capture
inherentlylimited aspects of the situations to which they are applied.
477

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GARETH MORGAN

Fig. 1. Hand with reflecting globe: self-portrait by M. C. Eschcr (lithograph, 1935).

Reprinted by permission of Haags Gemeentemuseum, The Hague, courtesy of Vopal Gallery, San Francisco and New York City, and by permission of the heirs ofM. C. Escher, c/o Cordon Arts-Baarn, Holland.

THE METAPHORICAL NATURE O F K N O W LEDGE

If o n e w i s h e s t o g e t a fresh v i e w o f o n e ' s discipline, it is o f t e n a g o o d i d e a to t r y a n d s e e it
f r o m t h e outside. So let's l o o k b e y o n d o u r im-

m e d i a t e c o n c e r n s as a c c o u n t a n t s a n d e x a m i n e
s o m e r e c e n t d e v e l o p m e n t s in t h e field o f organization theory, where the problems of perspective a n d i n t e r p r e t a t i o n p a r a l l e l t h o s e f a c e d in
a c c o u n t i n g a n d in t h e p r o d u c t i o n o f k n o w l e d g e
generaUy.

ACCOUNTINGASREALITYCONSTRUCTION
Elsewhere (Morgan, 1980, 1986), I have
suggested that organization theory is a
metaphorical enterprise, and that its history is
really a story of broadening metaphorical development. For example, early theories of organization built on the image that organizations
are machines. Interest focussed on understanding relations between structure, technology,
goals and efficiency, on the premise that organizations can be rationally designed as structures
of clearly defined parts, coordinated and controlled in pursuit of pre-specified goals. This
created an internally oriented view of organizations that made efficient organization a question
of good bureaucratic design. The theory had
strengths, but also limitations requiring new
metaphorical perspectives to put them aright.
Hence, mechanistic theorizing was quickly
supplemented by ideas generated through organic imagery focussing attention on the flexible
and adaptive properties of organisms. By developing the idea that organizations are more
like organisms than machines, theorists began to
emphasize that an organization's "environment"
was all important, and that the main task facing
organizations was that of survival. Like organisms, organizations became viewed as open
systems with sets of "needs" that must be satisfied. Looking towards the external environment,
it was observed that just as polar bears fare well
in cold climates, and camels in deserts, different
social, technical and economic environments
favour different forms of organization. A contingency theory of organization developed, emphasizing the importance of achieving a good fit
between organization and environment, noting
that while bureaucracies are able to survive
quite well in stable environments, under conditions of turbulence more organic forms are often
more appropriate. In the process, modified
forms of Darwinism began to replace the principles of engineering and mechanism as the
primary source of inspiration for ideas on organization and management.
Since the late 1970s other metaphors have
also exerted an increasing influence on organization theory. For example, m u c h credence is n o w
given to the idea that organizations are cultures:

479

mini-societies with their o w n systems of ideology, myth, ritual, c e r e m o n y and other forms of
symbolism. Under the influence of this
metaphor, corporate culture is being viewed as
the key factor influencing the success of organizations, and managers, particularly those at a
senior level, are encouraged to develop skills in
shaping the core values and beliefs that are to
guide organizational practice. As witnessed by
the success of books like In Search o f Excellence
(Peters & Waterman, 1982), the metaphor has
captured the thinking of many practising managers in a major way and, at least in North
America, is providing the basis for a new
orthodoxy.
Other metaphors have also been explored to
create important insights on the politics of organization, on the cybernetic properties of decision-making, on the ugly features associated
with exploitation and domination, and so on.
This short review is intended to be no more
than illustrative. The point is that our understanding of organization is based on the use of
metaphors which generate important insights
that always have clearly defined limitations. Different metaphors grasp and highlight different
aspects of organization but, in the process, tend
to hide or distort others. A full understanding of
organization thus requires that we find ways of
integrating the many and often paradoxical insights that our theories and explanations create.
My own solution to the problem has been to
argue that this can be achieved by explicitly
recognizing that organizations are many things
at once (Morgan, 1986). They are enterprises
that collectively have to engage in certain activities to survive. They provide the scene for individual careerism and interpersonal politics.
They are often reduced to battlegrounds between rival factions. They are arenas where
people construct meaning and engage in all
kinds of symbolically significant activities. And
so on. The way we understand these many dimensions, and judge their significance is a matter of perspective, shaped by all kinds of motivations and intentions. If we are charged with managing an organization we may find one perspective more helpful than another. If our purpose is

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GARETHMORGAN

to c r i t i q u e o r t o r e v o l u t i o n i z e e x i s t i n g social relations, w e are m o r e likely to favour a n d a d o p t

~?et another. Like artists, w e face t h e p r o b l e m
that w h a t e v e r p e r s p e c t i v e w e c h o o s e to a d o p t ,
o t h e r s a r e s q u e e z e d f r o m view.
An understanding of the metaphorical nature
o f k n o w l e d g e thus leads to a basic p r o b l e m o f
e p i s t e m o l o g y . It leads us to r e c o g n i z e that
human agency and the limitations imposed by
p e r s p e c t i v e are f u n d a m e n t a l in t h e g e n e r a t i o n o f
k n o w l e d g e , a n d that o u r k n o w l e d g e always falls
s h o r t in r e p r e s e n t i n g t h e full t e x t u r e o f reality.
O u r lot as h u m a n b e i n g s d e a l i n g w i t h a c o m p l e x ,
m u l t i - d i m e n s i o n a l a n d p a r a d o x i c a l w o r l d , is that
our knowledge can do no more than create a
weak and rather uni-dimensional representation
o f that w o r l d . T h o u g h a c h i e v e m e n t s in t e c h n o l o g y m a y c o n v i n c e us that w e are m u c h m o r e
k n o w l e d g e a b l e than w e actually a r e - - since t h e
ability to m a n i p u l a t e w i t h p r e d i c t a b l e results is
not a true measure of knowledge or understanding - - o u r k n o w l e d g e always falls s h o r t o f t h e
ideal state w h i c h p h i l o s o p h e r s f r o m Plato to
H e g e l h a v e e n c o u r a g e d us to achieve.

A C C O U N T I N G AS A METAPHORICAL
ENTERPRISE
It m a y s e e m that o u r d i s c u s s i o n has b r o u g h t us
a l o n g w a y f r o m t h e t o p i c o f a c c o u n t i n g . But w e
a r e right at its h e a r t b e c a u s e a c c o u n t i n g is ultim a t e l y c o n c e r n e d w i t h t h e p r o b l e m s o f repr e s e n t a t i o n a n d " a c c o u n t i n g for". Like organizat i o n theorists, a c c o u n t a n t s u l t i m a t e l y h a v e to
r e p r e s e n t c o m p l e x m u l t i - d i m e n s i o n a l realities
t h r o u g h m e t a p h o r i c a l c o n s t r u c t s that are always
limited and incomplete.
A c c o u n t i n g p r a c t i c e is f r a m e d b y an overarching metaphor encouraging a numerical view
o f reality. J u s t as early o r g a n i z a t i o n t h e o r i s t s attempted to represent organizations through

bureaucratic principles deriving from the image

that o r g a n i z a t i o n s a r e m a c h i n e s , a c c o u n t a n t s t r y
to r e p r e s e n t o r g a n i z a t i o n s and t h e i r activities in
t e r m s o f n u m b e r s . This is m e t a p h o r i c a l . A n d like
all use o f m e t a p h o r , it gives b u t a p a r t i a l a n d inc o m p l e t e r e p r e s e n t a t i o n o f t h e r e a l i t y to w h i c h
t h e n u m b e r s relate. T h e n u m e r i c a l v i e w highlights t h o s e a s p e c t s o f o r g a n i z a t i o n a l r e a l i t y that
are quantifiable and b u i l t into t h e a c c o u n t i n g
f r a m e w o r k (e.g. flows o f costs, r e v e n u e s a n d
o t h e r values), b u t i g n o r e s t h o s e a s p e c t s o f organizational r e a l i t y that a r e n o t quantifiable in
this way. Just as w e m i g h t a t t e m p t to rate t h e
quality o f last night's d i n n e r o n a scale o f 1 - 1 0 ,
a n d in giving it "a 9" c a p t u r e that it w a s i n d e e d a
v e r y g o o d meal, t h e a c c o u n t a n t ' s n u m e r i c a l
form o f r e p r e s e n t a t i o n p r o v i d e s a v e r y "thin"
a n d l i m i t e d c h a r a c t e r i z a t i o n . It leaves m u c h o f
t h e quality and over-all e x p e r i e n c e o f t h e m e a l
o u t o f a c c o u n t . T h e m e t a p h o r "it w a s a 9" rem a i n s silent o n so m a n y things.
W e are a d d r e s s i n g h e r e o n e o f t h e m a j o r p r o b l e m s in a c c o u n t i n g p r a c t i c e . A c c o u n t a n t s have
long recognized the limitations of numerical
m o d e s o f r e p r e s e n t a t i o n , b u t have b e e n
h a m s t r u n g in t h e i r a t t e m p t s to o v e r c o m e t h e m
b e c a u s e t h e n u m e r i c a l v i e w has b e e n e q u a t e d
w i t h an objective view. The i d e a that a c c o u n tants r e p r e s e n t reality "as is" t h r o u g h t h e m e a n s
o f n u m b e r s that are o b j e c t i v e a n d value free, has
c l o u d e d t h e m u c h m o r e i m p o r t a n t insight that
a c c o u n t a n t s are always e n g a g e d in interpreting
a c o m p l e x reality, partially, a n d in a w a y that is
h e a v i l y w e i g h t e d in favour o f w h a t t h e a c c o u n tant is able to m e a s u r e a n d chooses to m e a s u r e ,
t h r o u g h t h e p a r t i c u l a r s c h e m e s o f a c c o u n t i n g to
be adopted. 2
But that is b y n o m e a n s t h e e n d o f t h e m a t t e r ,
because within the framework of a numerical
v i e w o f reality, a c c o u n t i n g t h e o r y a n d a c c o u n t ing p r a c t i c e have b e e n s h a p e d b y o t h e r
m e t a p h o r s w h i c h offer c o m p e t i n g v i e w s as to

2The idea of objectivityand the choice of accounting measures has, of course, also been sustained by the fact that accounting
is designed to serve certain interests. There is an important political dimension to reality construction among accountants
that must always be examined in providing explanations of the history of the profession. My aim in this article is to focus on
epistemologicalaspects of the problem; i.e. my paper is framed and limited by the metaphor "accounting as realityconstruction", rather than "accounting as power", "accounting as domination", etc.

ACCOUNTING AS REALITY CONSTRUCTION

how numerical reality should be represented
and understood (Davis etaL, 1982). Accounting
as a d i s c i p l i n e h a s c o n s t r u c t e d a n d c h a n g e d its
identity over the years, in a manner that provides
a close parallel with that found in organization
t h e o r y . J u s t as o r g a n i z a t i o n t h e o r y h a s b e e n d e veloped and enriched by viewing organizations
as m a c h i n e s , o r g a n i s m s , c y b e r n e t i c b r a i n s , c u l tures, political systems, instruments of domination, and so on, accounting theory has been
shaped and formed by metaphorical interpretations that encourage accountants to construct
and interpret the significance and merit of
d i f f e r e n t a c c o u n t i n g s c h e m e s f r o m all k i n d s o f
vantage points.
F o r e x a m p l e , h e r e is a list o f s o m e o f t h e m a j o r
m e t a p h o r s t h a t h a v e e x e r t e d a n i m p a c t o n recent accounting theory:
A c c o u n t i n g as history: the view that accounting is con-

cerned with providing a faithful record of the transactions of an enterprise, and with reporting such transactions in a manner suited to the needs of users (e.g. Paton
& Littleton, 1940; Littleton, 1953).
A c c o u n t i n g as economicg, the view that accounting
should try to mirror current economic realities and reflect basic economic principles (see, for example, Davis
etaL, 1982).
A c c o u n t i n g as information~ the view that accounting
should form part of a wider MIS framework (e.g. Prakash
& Rappaport, 1977; Snowball, 1980).
A c c o u n t i n g as a language: the view that accounting provides concepts and fi'ameworks which structure thought,
conversation, perceptions and decision-making (e.g. Belkaoui, 1978), especially to support capitalism.
A c c o u n t i n g as rhetoric: the v i e w that accounting, and
the debate about different accounting systems, is largely
a question of argument and discourse where various
proponents attempt to convince others of the superiority
of one principle over another (e.g. Arrington, 1987).
A c c o u n t i n g aspoliticg, the view that accounting and accounting systems reflect and support the values and
needs of specillc interest groups, and that accounting information is constructed and used as a resource in shaping corporate politics, especially in decision-making and
impression management (e.g. BurcheU et aL , 1980 ).
A c c o u n t i n g as mythology: the view that accounting systems provide a societal resource to be used in sustaining
myths of rationality, and as a means of justifying.
rationalizing and legitimizing decisions that ultimately
serve other individual and social ends (e.g. Boland,
1982).
A c c o u n t i n g as magic: the view that underneath the veneer of rationality, accounting and the use of accounting

481

information forms part of a societal "rite" serving the

same functions for modern decision-makers as the entrails of chickens served for old witch doctors (e.g.
Gambling. 1977).
A c c o u n t i n g as disciplined control: the view that one of
the primary functions of accounting is to exercise surveillance by creating "visibility": just as prisons are often
designed to maximize the visibility and scrutiny of inmates, accounting systems are often designed to increase
the visibility and scrutiny exercised over employees,
even those working in remote locations without direct
forms of supervision (e.g. Burchell etaL, 1980).
A c c o u n t i n g as ideology: the view that accounting systems form part of the ideological apparatus that sustains
the ability of a society to produce and reproduce itself in
accordance with clearly defined principles. (e.g. Merino
& Neimark, 1982; Tinker etaL, 1982).
A c c o u n t i n g as d o m i n a t i o n a n d exploitatiom the view
that accounting provides techniques for the extraction of
wealth in support of elite interest groups, both at the expense of Mother Nature (in terms of natural resources
and the ecological balance of the planet), and of the
people employed in the service of others (e.g. Tinker,
1985).
All t h e s e m e t a p h o r s h a v e b e e n d e v e l o p e d t o
form competing interpretations regarding the
nature and significance of accounting, and how
accounting principles can or should be dev e l o p e d . I n t e r e s t i n g l y , t h e y all g r a s p s i g n i f i c a n t
e l e m e n t s o f w h a t a c c o u n t i n g is all a b o u t , a n d
often suggest interesting principles for accounting design. However, no one metaphor grasps
t h e t o t a l n a t u r e o f a c c o u n t i n g as a s o c i a l
phenomenon, for accounting, like other aspects
o f s o c i a l life, is i n h e r e n t l y c o m p l e x , m u l t i - d i mensional and paradoxical. The accountant and
accounting theorist stands in exactly the same
relationship to the reality he or she wishes to
r e p r e s e n t as d o e s t h e a r t i s t , o r g a n i z a t i o n t h e o r i s t
or any other person wishing to understand some
c o m p l e x a s p e c t o f t h e w o r l d a r o u n d us. I n r e c o g n i z i n g this, a c c o u n t a n t s c a n m o v e t o w a r d s a
new epistemology for understanding and cond u c t i n g t h e i r craft.

ACCOUNTING AND THE MYTH OF

OBJECTMTY
H i s t o r i c a l l y , t h e b e l i e f h a s d e v e l o p e d t h a t acc o u n t i n g is g r o u n d e d i n a q u e s t f o r o b j e c t i v i t y

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GARETHMORGAN

and, b y i m p l i c a t i o n , that it is p o s s i b l e for a c c o u n tants to b e o b j e c t i v e a n d to p r e s e n t t h e r e a l i t y o f

a s i t u a t i o n in a "true" m a n n e r . Clearly, this is an
i m p o s s i b l e ideal, for, as s h o w n above, a c c o u n tants are a b l e to d o n o m o r e t h a n grasp l i m i t e d
a s p e c t s o f t h e r e a l i t y to w h i c h t h e i r a c c o u n t i n g
s c h e m e s relate. A c c o u n t i n g c a n n e v e r b e t r u l y
o b j e c t i v e , for, as G e o r g e B e r k e l e y o b s e r v e d in
t h e s e v e n t e e n t h c e n t u r y , o b j e c t i v i t y is always as
m u c h a p a r t o f t h e o b s e r v e r as o f t h e o b j e c t observed. A c c o u n t a n t s are l i n k e d to t h e i r observations t h r o u g h a c c o u n t i n g p r i n c i p l e s a n d practices that are u l t i m a t e l y b a s e d o n m e t a p h o r s
c r e a t i n g partial a n d o n e - s i d e d w a y s o f v i e w i n g
the world.
T h e m y t h o f o b j e c t i v i t y disguises t h e t r u e
n a t u r e o f a c c o u n t i n g and c r e a t e s m a n y o p e r a tional p r o b l e m s b e c a u s e , as every practising acc o u n t a n t knows, it is p r e t t y w e l l i m p o s s i b l e to
defend one's objectivity under close attack from
people who have a detailed knowledge of the
situations to w h i c h t h e a c c o u n t a n t ' s s t a t e m e n t s
relate. In actual p r a c t i c e , m a n y p e o p l e k n o w that
t h e a c c o u n t a n t ' s w o r k is b a s e d o n s o m e w h a t arbitrary assumptions and conventions. They
k n o w that t h e a c c o u n t a n t is really in t h e business o f t r y i n g to p e r s u a d e o t h e r s that his o r h e r
c o n c e p t s , o r latest set o f figures, "give a t r u e a n d
fair view" o r have s u p e r i o r insight, w h e n in reality this view, w h a t e v e r t h e figures m i g h t say, is as
partial as any other. T h e a c c o u n t a n t ' s v i e w o f reality o f t e n c a r r i e s m o r e w e i g h t t h a n o t h e r views,
because of the power relations associated with
the allocation and control of scarce resources.
But this s h o u l d in n o w a y b e s e e n as d u e to t h e
a c c o u n t a n t ' s "objectivity".

A C C O U N T I N G AS AN INTERPRETIVE ART
T h e o n l y v i a b l e l o n g - t e r m s o l u t i o n to this
p r o b l e m rests in r e c o g n i z i n g a n d a c c e p t i n g t h e
basic s u b j e c t i v i t y o f a c c o u n t i n g , a n d in d e v e l o p ing a c o d e o f p r a c t i c e that will a l l o w t h e a c c o u n tant to r e c o g n i z e that h e o r s h e is n o t an "objective c o m m e n t a t o r " , b u t a p e r s o n e n g a g e d in a
c o m p l e x w e b o f r e a l i t y c o n s t r u c t i o n . T h e acc o u n t a n t r e p r e s e n t s c o m p l e x situations, s u c h as

t h e e c o n o m i c vitality o f an e n t e r p r i s e , t h e b e n e fits o f a p a r t i c u l a r i n v e s t m e n t d e c i s i o n o r t h e ope r a t i o n a l effectiveness o f a p r o d u c t i o n system, in

l i m i t e d a n d r a t h e r o n e - s i d e d ways. But t h e s e repr e s e n t a t i o n s b e c o m e p a r t o f t h e fabric t h r o u g h
w h i c h t h e situation " a c c o u n t e d for" is t h e n sust a i n e d o r c h a n g e d . A c c o u n t a n t s i n t e r p r e t reality.
But t h e i r i n t e r p r e t a t i o n s - - in t h e f o r m o f statem e n t s a b o u t g e n e r a l e c o n o m i c vitality, a capital
b u d g e t decision, o r c o s t o v e r - r u n r e p o r t - b e c a m e r e s o u r c e s in t h e o n g o i n g c o n s t r u c t i o n
a n d r e c o n s t r u c t i o n o f reality, as t h e s e a c c o u n t ing r e p o r t s are u s e d to s h a p e o r rationalize fut u r e decisions.
F o u r s h o r t e x a m p l e s will s e r v e to illustrate
h o w a c c o u n t a n t s p l a y an a c t i v e r o l e in this w e b
o f r e a l i t y c o n s t r u c t i o n , s h a p i n g a n d sustaining
o r g a n i z a t i o n a l realities t h r o u g h partial w a y s o f
seeing.

Accounting and corporate culture

A c c o u n t i n g s y s t e m s d o m o r e t h a n just
m o n i t o r o r m i r r o r reality; t h e y also s h a p e reality.
Consider, for e x a m p l e , h o w t h e i n t r o d u c t i o n o f
r i g o r o u s financial c o n t r o l s c a n r e s h a p e t h e cult u r e a n d g e n e r a l o r i e n t a t i o n o f an organization.
For e x a m p l e , in hospitals i n t r o d u c i n g s y s t e m s
that m a k e p a t i e n t s o r d e p a r t m e n t s profit o r c o s t
centres, n u r s e s a n d o t h e r staff often e n d u p as ext e n s i o n s o f t h e n e w financial systems, r e c o r d i n g
a n d allocating t h e i r t i m e a n d u s e o f m a t e r i a l s
m u c h m o r e r i g o r o u s l y t h a n u n d e r m o r e traditional Systems o f m a n a g e m e n t (Davis, 1986). In
t h e p r o c e s s , t h e nurses' r e l a t i o n s w i t h p a t i e n t s
on the one hand and doctors on the other,
change, as an o r i e n t a t i o n to c o n t r o l costs, o r
"stay w i t h i n budget", i n t r u d e s o n d e c i s i o n s that
u s e d to b e d o m i n a t e d b y c o n s i d e r a t i o n s o f
h e a l t h care. T h e p r o c e s s s e e m s to b e p a r t i c u l a r l y
e v i d e n t in r e l a t i o n to t h e m o r e qualitative asp e c t s o f nursing, e s p e c i a l l y in nonlife-threatening situations. U n d e r t h e r e q u i r e m e n t o f " m e e t ing b u d g e t " t h e w h o l e w o r k o r i e n t a t i o n o f nursing staff c a n c h a n g e t o w a r d s an a d m i n i s t r a t i v e
r a t h e r t h a n p a t i e n t - o r i e n t e d focus.
Financial c o n t r o l s c a n m a k e hospitals m o r e
efficient. But t h e y c a n also m a k e t h e m less
h u m a n e . A c c o u n t i n g s y s t e m s grasp a n d s h a p e

ACCOUNTINGASREALITYCONSTRUCTION
important aspects of the reality of running a hospital, especially the economic and financial aspects, but in the process, they also change the
nature and quality of other aspects.

Accounting and technological change

Most organizations n o w require that capital
expenditures in n e w technology be subjected to
some kind of rigorous financial appraisal. These
appraisals might often do an excellent job in determining the financial and economic viability of
a proposal, but leave other aspects, such as the
general social and human consequences, and
even the wider strategic impact, unaddressed. As
a result, decision-making is often c o n d u c t e d in a
way that promotes "cost consciousness", at the
expense of a broader understanding of the implications of a proposed technological change. The
existence of techniques and data for evaluating
projects in a uni-dimensional way tends to
encourage uni-dimensional decision-making.
Again, w e have an example of h o w accounting
practices that grasp an aspect of "the reality" of
organizational decision-making, can have a disturbing influence on others.

Accounting and economic and social policy

In the 1 9 8 4 - 8 5 coal miners strike in the U.K.
accounting practices and related cost and other
financial data were used to arrive at National
Coal Board (NCB) calculations as to what constitutes an economic coal-mine, with a view to
rationalizing which mines should remain open,
and which should be closed. The calculations
were based on many detailed accounting conventions, on assumptions with regard to the
price of coal, and on assumptions that it was
legitimate to conceptualize and restrict the
economics of pit closure to costs and revenues
directly associated with NCB operations (see
Berry et al., 1985). There were alternatives to
the accounting principles selected to calculate
profitability. The price of coal used to estimate
future revenues assumed social and political decisions that would result in nuclear energy providing the primary source of future power. Also,
the costs of unemployment benefits arising from
closure of selected mines, which would have

483

fallen on the British Government rather than

directly on the NCB, were excluded from the
calculations, even though the British Government, the ultimate paymaster for the NCB, ultimately had to foot the bill - - w h e t h e r in the form
of wages or unemployment benefits.
The point is that the decision regarding what
constitutes an economic pit is underpinned by
many social and political choices, and that the
accounting and economic principles used in
actual decision-making captured but a small aspect of the wider socio-political decisions being
faced.

Accounting and the "shareholder view" of

organization
Much accounting practice is geared to providing and sustaining a shareholder view of organization, but in recent years, the idea of viewing
organizations from a "stakeholder perspective"
has grown in importance. Increasingly, organizations are becoming viewed as being as much the
property and concern of employees, customers,
managers and the general public, as they are of
"owners", in the sense that each of these groups
has a deep stake, whether for better or worse, in
the existence of an organization. Those w h o provide capital may legally own an organization, but
employees and managers invest their working
lives, careers, creativity, energy and initiative.
Customers may be vitally dependent on the
quality of the organization's products for their
continued well-being. The public at large also
has a stake in ensuring that the organization is a
good citizen, and does not pollute the environment or engage in other socially irresponsible
practices.
Accountants typically work with the interests
of just one or two of these stake-holder groups in
mind, even though the health and well-being of
the organization may ultimately demand a
broader view.

IMPLICATIONSAND CONCLUSION
The point about these four examples of accounting in practice is that they all illustrate: (a)

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GARETHMORGAN

the perspective-based nature of accounting; and

( b ) h o w accounting is central to the process of
reality c o n s t r u c t i o n within an organization,
shaping decision-making in a c c o r d a n c e with the
values and perspectives u n d e r p i n n i n g the accounting principles used.
Accountants are e n m e s h e d in a process of
reality construction. They grasp and articulate
c o m p l e x realities in partial ways, and these
graspings and articulations help to sustain the
realities as perceived.
One of the major challenges facing the accounting profession is to c o m e to grips with
these essential limitations. Rather than cling to
an o u t d a t e d c o n c e p t of objectivity, they should
confront the basic subjectivity of their craft and
develop means of c o p i n g with these limitations.
In my view, this will lead them to adopt a m u c h
m o r e interpretive style of accounting, building
on the principles that: ( a ) accounting is an interpretive art and always perspective-based; and
( b ) "that the challenge facing accountants is to
d e v e l o p forms of practice that emphasize h o w
accounting statements and insights should be regarded and used as elements of a conversation.
or dialogue, rather than as foundational claims
asserting a particular kind of objectivity or
"truth".
A m o d e l for developing this interpretive view
of accounting is found in Morgan ( 1 9 8 6 ) , w h e r e
the view that effective managers and organizational analysts have to b e c o m e skilled in the art
of "reading" the situations that they are attempting to organize or manage is developed. 3 They
have to learn to see and understand the many
and paradoxical dimensions of organizations,
and find ways of blending them to p r o v i d e a critical understanding of the multiple meanings and
range of possible actions with which they are
faced. Skilled managers d e v e l o p the knack of
reading c o m p l e x situations with various
scenarios in mind, and of forging actions appropriate to the understandings obtained.
In a similar way, accountants n e e d to be sensitive to the many dimensions of the realities

which they are attempting to "account for".

They n e e d to learn h o w to p r o b e these dimensions so that multiple insights can emerge, to
p r o v i d e broad-based understandings and platforms for relevant actions. Rather than attempt
to r e p r e s e n t situations narrowly, through onesided accounting schemes, they should aim to
d e v e l o p broad-based schemes. But, perhaps
most importantly, w h a t e v e r s c h e m e they use
they should always be as sensitive to the elements of reality excluded by the scheme, as to
those elements that are included. They should
realize that in using schemes that highlight certain aspects of organizational reality, they always
tend to obliterate other aspects from view.
In essence, this approach requires a reflective
and critical understanding of the relationship bet w e e n the accountant and what is "accounted
for", and an ability to discern the h i d d e n or repressed dimensions of a particular set of accounts or approach to the interpretation of
those accounts. Accountants have long app r e c i a t e d the significance of "double-entry" accounting in the p r o d u c t i o n of accounts. What I
am advocating h e r e amounts to a kind of "double-view accounting" in the interpretation of accounts. The accountant must recognize the tension that exists b e t w e e n "the w o r l d as v i e w e d by
the accountant", and "the w o r l d in a w i d e r
sense".
In recognizing this tension, the accountant
will begin to interact and "dialogue" with situations in a m u c h m o r e o p e n - e n d e d interpretive
mode, than is the case w h e n they see themselves
as p r o d u c i n g objective or "true" statements.
They will see that their ultimate aim should be to
d e v e l o p the art of "reading" and p r o b i n g situations to create intelligent, actionable insights,
rather than to p r o d u c e rigid technical statements as ends in themselves. In the process, they
will be able to d e v e l o p an approach to accounting that is able to address many of the p r o b l e m s
and tensions that characterize relations b e t w e e n
accounting, organizations and society.

3A related view is also developed in Morgan( 1983), which describes how socialscience research can develop a "conversational" mode.

ACCOUNTING AS REALITYCONSTRUCTION
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