Lars Östman towards a general theory of financial control

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Lars Östman 

 

                       TOWARDS A GENERAL THEORY OF FINANCIAL CONTROL  

                       FOR ORGANISATIONS 

            

Abstract  

 

In this paper, a theory of accounting, control and accounting-related areas is outlined. It is a 

general approach to financial control for all types of organisations. It is based on a number of 

previous research-oriented books published over several decades and the author´s specific 

own experiences from internal and external processes with organisations in focus. 

Consistency and integrative power of the ideas have been tested in relation to certain books 

in various fields outside the core of the subject: theatre, sociology, applied systems theory, 

economic history, institutional theory and economics. The general approach can be described 

in simple terms as follows. There are global value chains, from resources to output that are in 

use. These chains change with time. Uncertainty and unpredictability prevail for the present 

state and for possible changes; to some extent it is possible to estimate risks of the future. At 

any moment, each organisation has taken some limited position on a chain. Each 

organisation has a hierarchy which lies above operations. Over time, chains, organisations, 

hierarchies, output and personal functions vary. According to the approach, insights into 

control problems for every organisation and system can be gained by analysing relationships 

between global value chains and a hierarchy of one or several organisations. Time is crucial.  

 

 

Key words:  financial control; management control; public administration; financial entities; 

financial reporting; dependencies; function-driven organisations; pay-driven organisations; 

transfer-driven organisations; supervisory boards; mass media; auditors; natural systems; 

panarchy;  pseudo-commercial units; inter-organisational control; long-term control; short-

term effects; hierarchies; global value chains; vertical control; horizontal control; corporate 

governance; remote control; controllability; transparency; values-in-use; values-in-exchange; 

fair values; historical costing; opportunity costs; product costing; transfer pricing; local 

optimization; time-bound optimization; longitudinal relationships.   

 

 

                       SSE/EFI Working Paper Series in Business Administration 

                                                             No 2009:9 

                                                            April, 2009