Author(s)

Taochang Huang ¹

Affiliation(s)

¹ Shanxi University of Finance and Economics, Taiyuan, Shanxi, 030006, China

Corresponding Author

Taochang Huang

ABSTRACT

This paper provides an in-depth study of the application of the prudence principle in accounting practice, focusing on assessing its role in providing robustness and reliability in financial reporting. While analyzing the achievements in the current application of the prudence principle, it also explores the challenges and controversies, such as excessive prudence that may lead to distorted financial reporting. In the future, the article points out that the prudence principle may evolve towards a more flexible, digital and internationalized trend, incorporating new technologies and international accounting standards to better adapt to the changing business environment. Finally, recommendations are made to optimize the application of the prudence principle, including developing a more flexible application framework, enhancing transparency, promoting the widespread use of digital technologies, and providing professional training for accountants.

KEYWORDS

Prudence principle, accounting practice, financial repo rting

CITE THIS PAPER

Taochang Huang, Analysis of the application of the principle of prudence in accounting practice. Accounting, Auditing and Finance (2024) Vol. 5: 1-6. DOI: http://dx.doi.org/10.23977/accaf.2024.050101.

REFERENCES

[1] Huang D Z X. Environmental, social and governance factors and assessing firm value: Valuation, signalling and stakeholder perspectives [J]. Accounting & Finance, 2022, 62: 1983-2010.
[2] Kliestik T, Valaskova K, Lazaroiu G, et al. Remaining financially healthy and competitive: The role of financial predictors [J]. Journal of Competitiveness, 2020 (1).
[3] Atkins J, Doni F, Gasperini A, et al. Exploring the effectiveness of sustainability measurement: which ESG metrics will survive COVID-19? [J]. Journal of Business Ethics, 2023, 185(3): 629-646.
[4] Frizzo-Barker J, Chow-White P A, Adams P R, et al. Blockchain as a disruptive technology for business: A systematic review [J]. International Journal of Information Management, 2020, 51: 102029.
[5] Oreshkova H. The Challenge of Restoring Prudence to Accounting and Financial Reporting After Decades of Abandonment of Traditional Accounting Prudence [J]. International Business and Accounting Research Journal, 2023, 7(2): 194-212.
[6] Pelger C. The return of stewardship, reliability and prudence–a commentary on the IASB’s new conceptual framework [J]. Accounting in Europe, 2020, 17(1): 33-51.
[7] Alexander D, Fasiello R. Prudence and directive 34–reality and rhetoric in accounting regulation [J]. Accounting in Europe, 2021, 18(1): 26-42.
[8] Disemadi H S. Risk Management In The Provision Of People’s Business Credit As Implementation Of Prudential Principles [J]. Diponegoro Law Review, 2019, 4(2): 194-208.
[9] Settembre-Blundo D, González-Sánchez R, Medina-Salgado S, et al. Flexibility and resilience in corporate decision making: a new sustainability-based risk management system in uncertain times[J]. Global Journal of Flexible Systems Management, 2021, 22(Suppl 2): 107-132.
[10] Tuffour J K, Amoako A A, Amartey E O. Assessing the effect of financial literacy among managers on the performance of small-scale enterprises[J]. Global Business Review, 2022, 23(5): 1200-1217.
[11] Lugovskу D, Kuter M. Accounting policies, accounting estimates and its role in the preparation of fair financial statements in digital economy[C]//Integrated Science in Digital Age: ICIS 2019. Springer International Publishing, 2020: 165-176.
[12] Adam B, Heiling J, Meglitsch T. The principle of prudence in public sector accounting—a comparative analysis of cautious and asymmetric prudence[J]. Public Money & Management, 2022, 42(7): 521-529.
[13] Tuffour J K, Amoako A A, Amartey E O. Assessing the effect of financial literacy among managers on the performance of small-scale enterprises[J]. Global Business Review, 2022, 23(5): 1200-1217.
[14] Tuhari T. The impact of factors of accounting elements recognition and valuation on the corporate profit[J]. Journal of Research on Trade, Management and Economic Development, 2020, 14(2): 17-25.
[15] Feridun M, Güngör H. Climate-related prudential risks in the banking sector: A review of the emerging regulatory and supervisory practices[J]. Sustainability, 2020, 12(13): 5325.
[16] Khasanah U, Suryarini T. The Role of Prudence in Moderating the Effect of Bonus Mechanism, Intangible Assets, and Inventory Intensity Ratio on Transfer Pricing [J]. JASF, 2020, 3(2): 154-168.
[17] Shi J, Yu C, Li Y, et al. Does green financial policy affect debt-financing cost of heavy-polluting enterprises? An empirical evidence based on Chinese pilot zones for green finance reform and innovations[J]. Technological Forecasting and Social Change, 2022, 179: 121678. 

Sponsors, Associates, and Links

---

• Information Systems and Economics
  
  
• Industrial Engineering and Innovation Management
  
  
• Tourism Management and Technology Economy
  
  
• Journal of Computational and Financial Econometrics
  
  
• Financial Engineering and Risk Management
  
  
• Accounting and Corporate Management
  
  
• Social Security and Administration Management
  
  
• Population, Resources & Environmental Economics
  
  
• Statistics & Quantitative Economics
  
  
• Agricultural & Forestry Economics and Management
  
  
• Social Medicine and Health Management
  
  
• Land Resource Management
  
  
• Information, Library and Archival Science
  
  
• Journal of Human Resource Development
  
  
• Manufacturing and Service Operations Management
  
  
• Operational Research and Cybernetics