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The Principles Rules Debate is ongoing and addressed in this section of the text:

"Rules-based systems encourage creativity (and not the good kind) in financial reporting. They allow some to stretch the limits of what is permissible under the law, even though it may not be ethically or morally acceptable. A principles-based system requires companies to report and auditors to audit the substance of the transaction; not merely whether they can qualify as acceptable under incredibly complex or overly technical rules … a rules based system allows managers to ignore the substance and instead ask, 'Where in the rules does it say that I can't do this?" Full Page Advertisement, PriceWaterhouseCoopers, Wall Street Journal April 2003.

Discuss your views on this.

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Question 2