World of I, you and it;

              The World of
by YUJI IJIRI/Carnegie-Mellon University
Some time ago, my 10-year-old daughter asked me what I taught at school. I said, "accounting." Her response was: "I know 'counting. That's one, two, three, four."
Suddenly it struck me how fundamentally different ac-counting is from counting.
Counting is intrapersonal. One counts the objects all by oneself. Accounting, on the other hand, is inter-personal. Its primary function is not to count but to account for one's activities (on the part of the "accoun-tor") and their consequences to someone else (the "accountee"). The "accountant" enters as a third party so that the accountability relationship between the first two parties functions smoothly.
Our society is founded upon a complex network of accountability. Corporations are accountable to share-holders and creditors for the use of their funds, to consumers for their products, to the public in general for the use of the public goods. Department heads are accountable to division managers, who are in turn accountable to headquarters. People are accountable to various governmental agencies in many areas of life, and in turn the government is accountable to the people for its activities.
Based on the accountability relationship, the accountee is entitled to receive information on the accountor's present status, including the degree to which he has achieved the goal assigned to him. Financial statements are an example of such information supplied to the accountee.
The accountant's role is to assure the "fairness" of the information supplied to the accountee. Thus, the auditors in an annual report emphasize that "the above financial statements present fairly the financial position and the operating results of the corporation."
The question is: "What is the ultimate basis by which the accountant can judge what is fair!"
To answer this question, we must note that the accountability relationship between, say, a You and an l, is quite different from the relationship between an I and an It^even if the I receives the same information concerning the You and the It. Why? Because the It does not complain that the performance score the accountant supplied to the 1 was unfair. The It does not complain that the information the accountant supplied to the 1 infringed upon its privacy. But the You does.
In the world of I and It, fairness is judged only from the standpoint of the I, since the It is merely a tool of the 1. Fair-ness is nothing more than an accurate presentation of the behavior of the It. Therefore, a highly structured account-ing system based on a hierarchy of objectives, postulates, principles, and procedures can easily be implemented.
In the world of I and You, however, there is often a great discrepancy between what the 1 considers to be fair and what the You considers to be fair. Somehow the accountant must decide between the two conflicting views. In some instances, in fact, applying a universal rule is alleged to be unfair, and so it is chopped down to a set of local rules. A highly logical system is thus crushed during the conceptual fight between the two parties.
Nevertheless, most people do not think of the accoun-tant in terms of the world of I and You. Most accounting theories today discuss accounting only in terms of the world of I and it. The standard definition of accounting is: a system for supplying information to a decision maker, the 1, about his economic environment, the It. These theories almost never treat, as part of the economic environment, humans claiming their own rights.
Unless people consider accounting in terms of the world of I and You, they can never understand the problems that the accounting profession must face up to.
For example, naive observers often accuse the accoun-tant of adding apples and oranges, and of allocating the result arbitrarily. The reason why the accountant must add
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