Module 1

Get reading 1.1 from ProQuest Objective 1. 2. 3. 4. 5. 6. 7. 8. Explain and contrast accounting as a technical practice and accounting as a social practice Explain the commonly stated attributes of a profession Explain the notion of professions as occupational groups seeking market control Portray accountants as business leaders and discuss the diversity of roles performed by accountants Explain and contrast the major accountant stereotypes Identify the diverse skills set required of accountants Discuss the reasons for the credibility issues facing the profession; and Explain the fundamental issues relations to ethical behaviour and professional judgement.

PART A Intro: Globalisation contributed to international harmonisation of accounting standard with view to creating a single set of accounting standard which is to standardise financial reporting practice worldwide.

Roles of accounting
Technical Practice: focuses on the preparation and audit of financial information and the analysis of that information. American Accounting Association (AAA) defines accounting as the process of identifying, measuring and communicating economic information to permit informed judgements and decisions by users of the information Under technical practice accounting is viewed as numerical computation with primary concern for reporting revenue, expenses, P&L, net assets costs, ratios etc. (acting is perceived as a neutral) Social Practice: Accounting is constitutive, accounting provides a means to enact, establish or create altered or new conditions for the conduct and evaluation of our work and life. (more to do with behaviour to enact ie) bonus or demotion for unacceptable performance) Decisions that are made base on the outputs of accountants, impact on organisational and social functioning and how people, behave and react to accounting measures of performance for incentive and disincentive purposes in business. This leads to changes sometimes subtle in organisational functioning. Accountants should be cognisant of the effects of accounting rather than just possess knowledge of its technical dimensions.

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Case Example 1.1 National Library of New Zealand Based on the monetary value of the collections in the National Library of New Zealand annual capital charge of 10% would be used. EG) if monetary value of its collection of artefacts were $522 million than $52.2m would have to be paid to the government in the following financial year based on the monetary value of the collections alone. Precipitating a redirection of resources away form the institutions primary function of fostering the educational and intellectual well-being of its community and acting as a repository(warehouse) for historical manuscripts and other artefacts. : thus having impact on the ability of the NLNZ to achieve its organisational mission. Thus transfer the accounts of the national government ensured that asset no longer appeared in the accounts of the NLNZ avoiding the need for the institution to pay the capital charge as initially proposed. Some times the payments would be made by disposing of parts of the collections that had been carefully assembled and preserved over the decades. Thus NLNZ was accounting for ht maintenance and use of collections but not the their disposal and potential loss from the public domain. (ie they were setting their assets and going against their primary function which was to foster educational and intellectual well-being of its community) Thus it shows that changes in accounting information may contribute to major organisational and social change.

Accounting and Effective Governance Role of accounting information within governance: manner in which power or authority is exercised in organisations in the allocation and management of scarce resources. Involves the enactment of policies and procedures for decision-making and control and directing or managing organisations for effectiveness. Enterprise governance has two components: corporate governance (which encompasses conformance/compliance and accountability/assurance) and business governance (which encompasses performance and value creation/resource utilisation) Business governance is related to value creation and resource allocation; performance dimension focuses on strategy and value creation. Its to help make strategic decisions understand its risks and its key drivers of performance. Maintaining effective corporate governance and business governance, a diversity of accounting information is prepared and relied on for assurance and accountability.

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PART B: Accounting as a profession Key attributes of a profession: A systematic body of theory and knowledge (thus no government regulation required as it can have self-regulatory power of the profession which allows a profession to manage its affairs efficiently and discreetly. An extensive education process for its members An ideal of service to the community A high degree of autonomy and independence A code of ethics for its members A distinctive ethos or culture The application of professional judgement The existence of a governing body.

There are traditional, or functional view of professionalism. Under this view the professions are recognised as offering important advantages to society by undertaking demanding tasks and obligations on its behalf.

Attributes of the profession The evolution of the profession

A systematic body of theory and knowledge Difference between profession and non-profession lies in the element of superior skill. Whole range of skills and expertise should be related to and supported by a well-founded body of knowledge Within these topics are included financial and management accounting theories and practices, auditing theories and practices, accounting or business information systems, and aspects of law, such as commercial, corporate and taxation law, economics and quantitative methods.

An Extensive education process Profession will have received a grounding in both the theory and practice of the profession. Professional duty o f care clients should expect the level of service and expertise to be as if he or she had studied and had achieved a high standard of competence in the same area. Professionalism also implies awareness that it is a gross misrepresentation to accept work if one lacks the requisite skills to undertake the commission competently. To act in such as way would be unethical and could also possibly result in legal action.

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An ideal of service to the community Notion of the public interest society grands the professions monopoly power over professional affairs and the power to use this monopoly power as they see fit, as long as the power is used in the public interest.

A High degree of autonomy and independence Profession is given autonomy and independence in running its affairs. This is to sanction its authority to control its own affairs. The member must be allowed to use his or her professional judgment free form the direction or influence of others and detached from the risk of financial gain (or loss) as a result of the advice provided by the member.

Code of ethics for members The need for members to act in the public interest. A code of ethics, therefore, guards against unacceptable behaviour becoming so prevalent that a professions reputation, autonomy and independence are placed in jeopardy Professions can censure and fine their own members. Code of Ethics for Professional Accountants

A distinctive ethos or culture Consists of its values, norms and symbols. CPA Australia member, ethos has ass its foundation stone, the word integrity

The existence of a governing body Should speak for the profession as a whole, those matters of public policy. Requisite standard of education and continue to keep professionals up to date with developments in accounting theory and practice Setting and monitoring of high standards Disciplinary sanction and discipline of its members.

actions speak louder than words test the community view about whether or not they deserve to be regarded as such is shaped to a significant extent by how they behave.

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Question 1.1 : Is accounting a profession? Discuss

Professions Seeking Market Control Professionalism seem as monopoly. power approach to an understanding of professions, professional bodies are collectively recognised as market dominating organisations that are concerned with maintaining market control.

The Profession under Challenge Credibility of the profession Corporate failures in 2001 and 2002- Enron, World Com, HIH Insurance, One.Tel and Harris Scarfe ASIC, lamented the outbreak of management greed, the failure of boards to put a break on excessive and structurally unsound remuneration practices, the focus on short-term pay offs, and the behaviour of analysts, and at least some auditors in foregoing their ethics in return for record-level fees and commissions. Corporate failures due to poor ethical standards

Greater Regulation From July 2006 auditing standard have had the force of law. Key acts summarised (1.19)

Resorting Credibility to financial reporting Actions taken by governments. The Sarbanes-oxley act 2002 in the US, Rmasy Reprot (2001) on auditor independence and the HIH Royal Commission followed by the CLERP 9 act 2004 in Australia. IFAC (International federation of accountants) replased a report titled Rebuilding Public Confidence in Financial Reporting. 1.20

PART C:Accountnats as Business Leaders

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