Copernican Journal of Finance & Accounting e-ISSN 2300-3065 p-ISSN 2300-12402018, volume 7, issue 4 Date of submission: February 26, 2019; date of acceptance: April 14, 2019. * Contact information: t.slyozko@ukr.net, Science and Research Institute of Social and Economic Development, Golosіїvskiy, 98/2, оf. 55, Kyiv, 03040, Ukraine, phone: +38 050 275 17 29; ORCID ID: https://orcid.org/0000-0002-1256-0692. ** Contact information: lyudmila.kurylo@gmail.com, National University of Kyiv- Mohyla Academy, Faculty of Economic Sciences, Department of Marketing and Business Management, Skovorody, 2, Kyiv, 04070, Ukraine, phone: +38 066 758 16 87; ORCID ID: https://orcid.org/0000-0002-1254-8271. *** Contact information: oleksandra.mazina@gmail.com, University of the State Fis- cal Service of Ukraine, Faculty of Economic, the Department of Accounting, Univer- sytetska, 31, Irpin, Kyivska obl, 08200, Kyiv, Ukraine, phone: +38 095 275 18 27; ORCID ID: https://orcid.org/0000-0003-1191-3940. Slyozko, T., Kurilo, L., & Mazina, O. (2018). The unique opportunities of accounting to promote transparency of economic processes. Copernican Journal of Finance & Accounting, 7(4), 115–125. http://dx.doi.org/10.12775/CJFA.2018.024 tetyana slyozko* Science and Research Institute of Social and Economic Development lyudmIla kurIlo** National University of Kyiv-Mohyla Academy oleksanDra Mazina*** University of the State Fiscal Service of Ukraine the unIque opportunItIes of accountIng to promote transparency of economIc processes Keywords: rules of the game, institutions, accounting, information, transparent eco- nomic processes. J E L Classification: D80, M41. Tetyana Slyozko, Lyudmila Kurilo, Oleksandra Mazina116 Abstract: The article is devoted an important role the Institute of Accounting in the modern economy. This role is supported by unique institutional and informational op- portunities determined by its specific characteristics. On the one hand, accounting is the legislative and normative institution through which the controlling and regula- ting institutions inf luence the economic processes occurring at each enterprise. On the other hand, the accounting system creates an information database on the actual eco- nomic activity of each enterprise required by users. Such a database is formed due to the fact that accounting is an exclusive registrar of business activities: documentation, inventory, assessment, calculation, accounts, double-entry bookkeeping, balance, re- porting. These methods have such a mathematical feature that has made it possible to fully them with the latest information technologies. All of these factors allow accoun- ting to provide transparent accounting information to any users and institutions.  Introduction There is such a sad fact that different types of managers (analysts, economists, financiers, etc.) are often skeptical of both accountants and accounting from which they take information to calculate certain indicators. And how wrong they are because accounting plays an important and irreplaceable role in the functioning of the economy. This is due to the fact that most of the data describ- ing the current economic activity of enterprises are formed in the accounting system. At the same time, this information allows institutions to regulate econ- omy by setting rules on the specific formats enterprises must provide them information. The rules are formalized in different types of reporting. Moreo- ver, this information is accumulated with the help of rules (techniques and pro- cedures) inherent to accounting only. These rules are now also incorporated into modern digital industry allowing to obtain clear and complete information about the activities of the enterprise any time. This means that accounting, has incorporated the rules for regulation of economy and the rules for creation of information and thus now has such special institutional and informational pos- sibilities as to be an indispensable tool for economy. This paper thus strives to elicit and to argument on this role. The research methodology and the course of the research process The research in theoretical part based on use book publications, papers and re- ports at scientific conferences, and in practical part of the article the Laws of Ukraine, Regulations, Instruction are used. Different research methods were applied: analysis of scientific literature, analysis of laws and regulations con- thE uniquE oPPortunitiEs of aCCounting to PromotE… 117 cerning accounting, made a graphical representation of the data in the form of pictures. The aim of the article is to prove that institutional and informational opportunities of Accounting make it an important tool for achieving transpar- ency of economic processes. Research context: accounting as an information system and as an institu- tion of the state. Theoretical Framework and their Implementation in practice Analysis of recent publications shows that some authors research the insti- tutional approach to the development of economy and Accounting: Burns and Scapens (2000), Dacin, Goodstein and Scott (2002), Campbell and Klaes (2005), Haidai (2006), Robalo (2014). Others authors are exploring study the question about the role accounting information has in economy, for example, papers: by Brandas, Megan and Didraga (2015), Marius, Denisa and Florina (2012), Trigo, Belfo and Estebanez (2016), Chapman and Kihn (2009), Papazov and Mihaylova (2015); some authors see a close relationship between the information which Accounting provides and requirements as to its institutions and individual us- ers, for instance Navarro-Garcіa and Madrid-Guijarro (2016); Banociova and Pavlikova (2014). However, none of them defines the special role of Accounting which combines in itself institutional and informational capacities, takes a piv- otal position in economy and can ensure transparency of its data. Because this area of research has not as yet formed, we will try to lay its first foundation and thus the research. To develop, modern economy requires such an openness of data, which would allow users to know the results of activity of enterprises and based on which various economic processes can be simulated. It should help analyze which management decisions to take and how these solutions would help to improve. It should also establish transparent communication between the par- ticipants to attract investors. It should be noted, that accounting system con- tain huge amounts of extremely important data not only for managers to make appropriate management decisions, but also to be used for regulation of activ- ity of enterprises by various state and non-state institutions, which set the so- called “rules of the game” or institutes. The notion of the “institute” is defined as limitations (the rules of the) formed by people that contribute to the forma- tion of relationships between individuals. Most of these rules are implemented Tetyana Slyozko, Lyudmila Kurilo, Oleksandra Mazina118 in the economic life of enterprises through accounting, its institutional and in- formational opportunities which make it a central regulator of economy. Institutional opportunities of Accounting The highest institution, which coordinating the activity of economy, is the State. It creates universal principles of conduct for most subjects and imple- ments them through State institutions: The Supreme Council, the Cabinet of Ministers, the National Bank of Ukraine, Ministries and Departments, Over- sight bodies, the Police, etc. Societal institutions in addition to state define this order. To mention a few, they are joint stock companies, political parties, non- profit organizations, educational institutions, etc. All these institutions regu- late economy by means of the capacities Accounting as an institute provide. These capacities are embodied in its regulatory framework and are split into several levels (figure 1). Figure 1. Model of institutional or regulatory-legal support (Regulation) of accounting and reporting institutions: The Supreme Council, the Cabinet of Ministers, the National Bank of Ukraine, Ministries and Departments, Oversight bodies, the Police, etc. Societal institutions in addition to state define this order. To mention a few, they are joint stock companies, political parties, non-profit organizations, educational institutions, etc. All these institutions regulate economy by means of the capacities Accounting as an institute provide. These capacities are embodied in its regulatory framework and are split into several levels (figure 1). Figure 1. Model of institutional or regulatory-legal support (Regulation) of accounting and reporting Source: own elaboration of author. As can be seen from fig. 1, at the first level (І) there are legislative acts (Laws), adopted by the Supreme Council. At the second (ІІ) level there are normative acts, for example the resolution of the Cabinet of Ministers, the National Bank, the Tax Department, etc. The third level (ІІІ) is the level of enterprises, where the regulating function is carried out through orders of company management. At the legislative level there are directly related to Accounting laws: The Law of Ukraine No. 996-XIV (1999) “On Accounting and Financial Reporting in Ukraine” and the Tax code of Ukraine (2010). These regulations defined in the Customs Code, the Budget and the Civil Code of the country. Cash flows are controlled by the National Bank. Its rules and principles are implemented through accounting. However, in addition to cash, enterprises have a variety of other assets. Possession and movement of these are also regulated by standardized rules, or in other words institutes, which are defined by different ministries and departments. All of these rules are implemented into the economic life also by means of accounting through the appropriate instructions. Alongside the governmental, there are a number of non-governmental institutions, which also set their requirements to information created in accounting system. S o u r c e : own elaboration of author. As can be seen from fig. 1, at the first level (І) there are legislative acts (Laws), adopted by the Supreme Council. At the second (ІІ) level there are nor- mative acts, for example the resolution of the Cabinet of Ministers, the National Bank, the Tax Department, etc. The third level (ІІІ) is the level of enterprises, where the regulating function is carried out through orders of company man- agement. At the legislative level there are directly related to Accounting laws: The Law of Ukraine No. 996-XIV (1999) “On Accounting and Financial Report- thE uniquE oPPortunitiEs of aCCounting to PromotE… 119 ing in Ukraine” and the Tax code of Ukraine (2010). These regulations defined in the Customs Code, the Budget and the Civil Code of the country. Cash f lows are controlled by the National Bank. Its rules and principles are implemented through accounting. However, in addition to cash, enterprises have a variety of other assets. Pos- session and movement of these are also regulated by standardized rules, or in other words institutes, which are defined by different ministries and depart- ments. All of these rules are implemented into the economic life also by means of accounting through the appropriate instructions. Alongside the governmen- tal, there are a number of non-governmental institutions, which also set their requirements to information created in accounting system. These are the In- ternational Accounting Standards Committee (IASC), the International Federa- tion of Accountants (IFAC), the International Organization of Securities Com- missions (IOSCO), the World Federation of Exchanges (WFE). IASC implements international standards of accounting and reporting (further on ISAR) through the interaction with the International Federation of Accountants (IFAC). The purpose of IFAC is to provide uniformity of ISAR financial reporting which would allow all the ISAR users to access information about the financial shape of potential partners in order to select the best. So, ISAR became a plat- form for the reduction of accounting differences, of significant deviations in the quantity and quality of information in financial reports as well as for transpar- ency of information internationally. All this indicates that institutional capaci- ties of Accounting are formed by means of its information capacities. Informational opportunities of the accounting It is through the informational capabilities of accounting that correct applica- tion by the entrepreneurs of the “rules of the game” can be checked, which are set by the institutions as a requirement for accounting. Based on these rules, it must provide accounting information compliance with the requirements, which established by institutions (financial, taxation) – in a various types of re- ports. This is due to the fact that only in the system of accounting is registered and accumulates all the information about the assets and liabilities of the en- terprise, business transactions with them every day in the mode of its continu- ous display in the calendar sequence with the help of special methods. There are eight or alternatively four binaries: Tetyana Slyozko, Lyudmila Kurilo, Oleksandra Mazina120 ■ (1–2) documentation and inventory, ■ (3–4) evaluation and calculation, ■ (5–6) accounts and double entry, ■ (7–8), balance summarizing and reporting. All of these methods connect into a single information system of accounting all assets, liabilities of an enterprise, their movement and balances on a certain date. Moreover, without this information existence of a company or enterprise is impossible. Thus, Accounting will always have the important place of a reg- istrar of transactions and objects at an enterprise. For this accounting has not only special methods, but also a set of special procedures. These are the procedures with the use of which a consistent display of ob- jects and business processes «from of a balance sheet and to a balance sheet» is affected. In general, it is this sequence that is called an accounting procedure or an accounting process. It is a sequential execution of the following procedures: (a) opening of accounts on the ledgers, automatically or manually; (b) regis- tration of transactions or business operations in them using the double entry method; (c) posting of these operations is done on synthetic and analytical ac- counts between which (d) double-entry control is carried out. Based on the above, we come up to approach the summing up, that is, drafting of a trial bal- ance sheet. Before this or parallel is carried out closing of individual accounts. Thus, accounting procedures end in drafting of a balance sheet and reporting. To launch the process of collection, registration and organization of informa- tion, all of these procedures should be organized. In this set of specific methods and procedures should be distinguished by special methods, on which are based the modern accounting system – these are accounts and double entry on them. These methods historically first appeared in 1494 when they were published in a treatise of Italian monk and mathema- tician Luke Pachioli. And these are the very methods, invented five hundred years ago, turned out to be so mathematical as to be easily computerized with the help of the newest information technologies, which help modern programs: “SAP”, “1С: Enterprise”; “Focus-accountancy”, “Intelligence Service”, “Sail – En- terprise”, “Best Report Plus”, “Info-accountant”, “IT-Enterprise” etc. Their technological capabilities allow accounting services of a company to work in the web client mode with the information base on the Internet from any place, with cloud-based technologies (Higgins & Smith, 2015) which consoli- date all the necessary information about counterparts, such as bank accounts, registration codes, etc., as well as the employees of the enterprise, for exam- thE uniquE oPPortunitiEs of aCCounting to PromotE… 121 ple their position, salary, passport data. The program can automatically create various forms of tax and accounting reports for users and institutions. Some of these institutions, such as tax authorities where companies are registered, can themselves control these operations. They can independently access computer networks of the enterprises to generate tax reports with the use of standard algorithmic procedures and simultaneously carry out operational control over the economic activity of enterprises. In addition, equipping the localities where business transactions run di- rectly allows to log these operations in the process of their implementation. If also in this case the legislative institutions introduce rules for all the legal and natural entities to conduct payments in non-cash, this will establish an even better framework and thus give more possibilities to ensure transparency of economic processes. Moreover, that almost all participants of the economy re- ceive wages, pensions and social allowances on the card. And when cards be- come the only medium for reimbursement, including in the retail trade, public catering establishments and services, then the reduction of cash payments will make information transparent both for the managerial personnel and the cor- respondent regulatory institutions. In this case not only the State in the person of tax authorities will be able to periodically get reports of companies and thus control their activities but these reports can be used by any other not only external but also internal recipients. And this is of utmost importance for any manager of the company with an in- tegrated database to be able to quickly filter out the necessary information for management reporting so that to timely make a management decision. How- ever, a counterargument or question arises here: how to deal with the issue of commercial secret of management accounting then? It should be noted that the idea of eliminating commercial secrets is not new at all. Even the former apologists of this doctrine have long been championing the change. They scream: “Managers, I beseech you to adopt the philosophy of complete openness – to disclose to the market information about all the param- eters and criteria which you use internally” (Eccles, Herz, Keegan & Phillips, 2002). Obviously, such changes are related to the revolution in corporate re- porting called value reporting. In essence, it is approximation to the new phi- losophy of result assessment which is based on integration of the main non-fi- nancial parameters with financial. Current financial reporting, for example, no longer satisfies the needs of transnational corporations and thus they require to disclose internal information publicly which destroys the long-established Tetyana Slyozko, Lyudmila Kurilo, Oleksandra Mazina122 rule of commercial secret of managerial accounting. In particular, experts sug- gest to use the model of value reporting, the key idea of which is to achieve greater transparency by reporting on internal performance. And, even more so, placing information on the Internet leads to its openness and accessibility, that is to the loss of trade secret. This approach was researched by Golov (2007), he singled out 12 models construction of information. In almost each of the mod- els it comes not to delimitation of the boundaries between administrative and financial information but on the contrary to them combination, unification of internal and external reporting. Construction of the model of generation of transparent accounting information Liquidation of commercial secrets is a new practice, but for accounting it does not make any difficulty. This is due to its of informational capabilities, because all of its methods and procedures are organized in such a way as to always pro- vide transparent information about economic activities of an enterprise. And if here would added institutional capabilities of Accounting and its full comput- erization, the model would allow generation of transparent information for us- ers and institutions as shown in figure 2. This model adds important factors needed to fight shadow economy as it: (a) allows central State institutions to autonomously control business opera- tions of enterprises which were registered with tax authorities, by accessing their computer networks; (b) gives the possibility to objectively estimate the existing financial risks of reporting entities on using IFAC Institute; (c) allows to compare the results of activity of enterprises not just in one area but even in economies of different countries, while providing data for an adequate assess- ment of its potential and for making of appropriate management decisions; (d) promotes modelling various economic processes as experts can easily over- view accounting data to take appropriate management decisions and to im- prove them; (e) allows to better attract investors as the model shows integrat- ed main non-financial and financial parameters, helps to make communication between the participants transparent; (f ) requires the users of the model to ac- quire fundamental knowledge not only about the algorithms of using it through the Internet, but also knowledge of accounting, which should have all the spe- cialists in the fields of economy, that somehow will be forced to use information of accounting. All this demonstrates the extremely important role of Account- thE uniquE oPPortunitiEs of aCCounting to PromotE… 123 ing as a tool indispensable for the economy to function in the contemporary en- vironment. Figure 2. A model of generation of transparent accounting information Accounting and its full computerization, the model would allow generation of transparent information for users and institutions as shown in figure 2. Figure 2. A model of generation of transparent accounting information Source: own elaboration of authors. This model adds important factors needed to fight shadow economy as it: (a) allows central State institutions to autonomously control business operations of enterprises which were registered with tax authorities, by accessing their computer networks; (b) gives the possibility to objectively estimate the existing financial risks of reporting entities on using IFAC Institute; (c) allows to compare the results of activity of enterprises not just in one area but even in economies of different countries, while providing data for an adequate assessment of its potential and for making of appropriate management decisions; (d) promotes modelling various economic processes as experts can easily overview accounting data to take appropriate management decisions and to improve them; (e) allows to better attract investors as the model shows integrated main non-financial and financial parameters, helps to make communication between the participants transparent; (f) requires the users of the model to acquire fundamental knowledge not only about the algorithms of using it through the Internet, but also knowledge of accounting, which should have all the specialists S o u r c e : own elaboration of authors.  Conclusions The research undertaken allowed to demonstrate, firstly, that only Accounting has the unique specifics of combining institutional and informational capaci- ties so that to be an important instrument for regulation of activities both of each individual enterprise and economy in general. It may even be an instru- ment of regulation of global economy. Secondly, based on the mentioned examples it was delineated how the insti- tutional capacities of Accounting are realized through legislative and norma- tive acts as entities have to carry out their economic activities within the insti- tutional framework. Thirdly, informational capacities of Accounting were singled out. These ca- pacities make Accounting the only registrar of business activities through the Tetyana Slyozko, Lyudmila Kurilo, Oleksandra Mazina124 use its techniques and procedures for continuous monitoring, estimation and registration of data about a certain entity in order to for internal and external users to obtain required information. Fourth, a model was built in which institutional and informational capaci- ties of Accounting due to their computerization and information technologies allow to generate and provide transparent information in order to meet infor- mation requirements of institutions and individual users. Obviously, there are other aspects which help to prepare transparent infor- mation for the economy by means of institutional and informational capacities of Accounting. Their identification and justification are only on the initial path of study, and therefore they need further deep research.  References Banociova, A., & Pavlikova, L. (2014). Accounting Plan – Information Base for Man- agement. Journal Procedia Economics and Finance, 15, 312–317. http://dx.doi. org/10.1016/S2212-5671(14)00513-9. Brandas, C., Megan, O., & Didraga, O. (2015). Global Perspectives on Accounting Infor- mation Systems: Mobile and Cloud Approach. 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