Speculations about the implications of the Pathways Vision for how we understand accounting

Eileen Z. Taylor, PhD, CPA, CFE, is an Associate Professor of Accounting at North Carolina State University’s Poole College of Management, researching whistleblowing, ethics, and accounting information systems. She has published in a wide range of journals, including Journal of Information Systems, Journal of Business Ethics, Behavioral Research in Accounting, Accounting Horizons, Accounting and Public Interest, and Journal of Accountancy. She serves on several editorial boards. She holds a BS, MAcc, and PhD from University of South Florida.

Paul F. Williams is a Professor of Accounting at the Poole College of Management at North Carolina State University. Paul earned a BSF from West Virginia University, and MBA and Ph.D. degrees from the University of North Carolina at Chapel Hill. He joined the N.C. State faculty in 1985 after spending 1977 to 1985 at Florida State University. His research interests include accounting ethics, theory, and critical perspectives in accounting. His publications have appeared in Critical Perspectives on Accounting, Accounting, Organizations and Society, The Accounting Review, Contemporary Accounting Research, Journal of Business Ethics, Accounting and the Public Interest, Accounting Horizons (for which he won the best paper award for 2014), among many other journals. He has served as chairperson of the Public Interest Section of the American Accounting Association and as editor of Accounting and the Public Interest. He received the Public Interest Section’s Accounting Exemplar Award in 2013.


The draft manuscript is available online at:



In the spirit that a picture is worth a thousand words, the Pathways Commission Vision’s “perception” of accounting is a simplistic caricature of a practice epitomized by bookkeeping and governed by a “black letter” tradition whereby hard-and-fast rules exist for distilling the vast number of data business generates into a meaningful narrative about the financial state and performance of a firm. The “Reality” Vision is a rather heroic self-perception the profession has for the role it will play in producing a prosperous society. The problematic ambiguity with the “Reality” obviously revolves around the concept of “prosperous society” and what implications different notions of “prosperous” have for accounting’s role in society, given accounting’s (and accountants’) limitations. We propose a vision for a prosperous society based on the 17 UN goals, specifically focusing on the two which relate to income distribution and sustainability. We consider how accounting can play a role in helping achieve this view of a prosperous society.

<1> For the benefit of our readers who didn’t attend our Symposium, how would you describe your interest in the topic?

We have long thought about how accounting could be used to better serve the public interest; by which we mean using accounting and its tools and concepts to promote (to the extent possible) the well being of a large and diverse set of individuals. We have unfortunately witnessed accounting practice become a profession, more aptly, an industry, that serves a narrow swath of stakeholders rather than a wide public interest.

At the same time, we have observed social changes wrought by questionable policies, unchecked private interests, and technological advances. While some individuals and organizations are better off, others have been disproportionately and negatively affected. Issues such as income inequality, declining natural resources, hunger, declining upward mobility, and access to education are challenges to our success and sustainability as a human race. The United Nations has identified 17 goals which address many of these global challenges, and in our paper we focus on income distribution as the one most closely tied to accounting, and to our role in society as experts in accountability, measurement, and safeguarding of resources.

<2> Do you think the Pathways Vision Model accurately represents accounting as it is; as it should be?

While we applaud the AAA and AICPA for considering a better way to represent accounting to the public, we do not believe that the Pathways Vision Model accurately represents accounting. While this vision may represent what the industry (and by this we mean corporate clients and audit firms) would like the public to believe, we believe it is lacking. And that concerns us as academics and as educators.

If accounting is to hold true to its origins as a function that helps maintain justice and accountability in our society, then this vision needs revision. The first part of our paper is a critical analysis of the model, while the second part of the paper proposes a new model and equation for accounting that works toward fulfilling our obligation to the public interest.

<3> What is your vision?

We start by considering the goal at the top of the model. If accounting, as a social function, is to lead us to a prosperous society (note, this is not a society with some prosperous individuals in it), we must first consider what contributes to (or detracts from) society’s prosperity. In our paper, we focus on reducing income (and wealth) inequality, noted by Stiglitz as a critical aspect of well being, and identified by the United Nations as one of the top 17 global challenges facing us today. We then consider how accounting, in particular accounting concepts, tools, and expertise, can help us achieve that goal.

The Pathways Vision Model would have us measure only economic activity narrowly understood, make critically important judgments with our existing accounting expertise, which by our own definition of our expertise would result in useful information, leading only to good economic decisions, and thus a prosperous society.

While we may want this model to be accurate, we don’t think the world works that way. So, we have thought about how we might change our accounting perspective to achieve the prosperous society goal, at least as it pertains to income inequality reduction.

In the second part of our paper, we examine the individualistic (corporate) centered equation, and consider how it might be rearranged to serve society.

The current accounting equation is: 
Assets = Liabilities + Net Assets (aka equity), and 
Net Income = Revenues – Expenses

However, if we look closer at the income equation (below), we begin to see the value laden nature of accounting, which prioritizes and denotes as good, gross income of owners, and denotes everything that reduces that shareholder income as bad. This very equation leads us to focus on creating a society with a few prosperous individuals, since the goal of an owner in this equation is to increase his own income, and minimize all others’ incomes.

Gross income of owners = Revenues – gross income of labor – gross income of suppliers – gross income of creditors – gross income of government – capital allowances – net externalities.

However, we could rearrange the equation to put any one of the arguments on the right as the focal argument because a corporation is a legal being whose purpose may be specified by the society that permits corporations to exist. Viewed in this way, the management of a corporation is not focused solely on shareholder income, but on what distribution of revenues is appropriate considering that all of the parties have status that deserves respect in the management process. In the sustainability literature, this notion is referred to as “integrated thinking.” Thus, rather than generate net negative externalities to maximize shareholder income, efforts to internalize such costs is a corporate end-in-itself and an object of managerial decision making.

<4> Is the Pathways vision just one in long line of initiatives and fads that have come and gone with little to no lasting effect?

With all due respect to the well intentioned individuals who worked on the committee and on the model, we are concerned about the narrow focus on economic measures and decisions. We have learned enough at this point to recognize that human behavior is much more complex than can be explained by the rational man and principal/agent theories so often put forth as legitimate reasons for our behavior.

In addition, we see an explicit bias toward financial accounting in this model, and find it difficult to apply the model to the many other areas of accounting (e.g., tax, systems, governmental, etc.) that all share an accounting mindset.

According to its creators, the model is a starting point. We can only hope that academics, educators, and students will question this vision as we have, and work towards creating a more accurate model, one that serves the public interest.