ACC100 | Accounting Issues Analysis

Introduction

The basic trait of any professional in the field of accounting is faithfulness to a rigorous set of ethical guidelines. Ethical codes are a path that accounting professionals like to pursue to expand their practice, improve public faith and trust and illustrate impartiality and equity. Accountants work with people and organizations’ personal financial details. Many have the ability to perform million-dollar transactions and others help to safeguard cab driver and social worker pension funds. To practice sound judgment, an accountant must remain up-to-date on developments which might affect the outcome of a decision.

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Environment in accounting industry

Ethics and Accounting Industry

Ethics in accounting are concerned with how to create good and moral decisions can be made involving the planning, analysis and dissemination of financial information. Ethics in the accounting industry is regarded primarily as applied ethics, which places great importance on human and business ethics, decisions, moral standards and their implementation in accounting (Jaijairam, 2017). The crucial ethical factors in the field of accounting are usually a reasonable preparation and a high standard of professionalism. Ethical responsibility throughout the business world is not comprehensive but deceit within the specific domain of ethical conduct (Micewski & Troy, 2007, cited in Jaijairam, 2017). Several companies around the world have found ethical issues in the accounting processes, which raises the potential for conflict of interest. Violation of ethical rules within the business finance procedure typically harms the credibility of an entity, the level of customer satisfaction and the faith of investors in the business (Jaijairam, 2017).

Ethics are therefore used it to analyze moral standards and principles, human interactions, and their effort to differentiate between good and bad. Developing ethical codes within organizations can protect the integrity and reliability of business transactions and financial processes which as a result, affect the company’s employee performance, relationship, and reputation. One of the practical usage of ethics in accounting is that the end users can take benefits. Business world expect that accounting professionals work accurately, timely and convey transparent information to all the users.

Corporate Governance and Accounting Industry

The contribution of corporate governance purely based on the organizational performance, financial reporting, and stakeholder satisfaction. According to Leventis, Dimitropoulos, and Owusu-Ansah (2013), as cited by Walker (2018) there is not as much contribution and effect of corporate governance in the accounting industry. Accounting companies has different type of corporate governance than other industrial companies. This is due to various reasons such as financial sector is more multifaceted and less apparent than other non-accounting companies (Leventis et al., 2013, as cited by Walker (2018). The accounting sector also fails to explain the presence of strong corporate governance. Whereas the accounting sector is portrayed by excessive precautionary measures and risk testing, but that does not imply strong corporate governance by accounting institutions (Walker, 2018).

Consequently, financial institutions continue to incorporate standard corporate governance models (Bokpin, 2013). Employee compensation may be used by government regulation as a tool for financial firms and the accounting industry (Bokpin, 2013). The accounting industry is subjected to various conflicts between agents that may reduce the usefulness of corporate governance programs, as management focuses on dispute mitigation (Leventis et al., 2013).

Say for instance, the family-owned businesses of the accounting industry are distinguished by conservatism. It is necessary to maintain conservatism while dealing with estimates and funds because this thing will confirm the reports and data on the topics of the possible problems. Hence, it is concluded that effective corporate governance will entail less conservatism in the accounting industry and vice versa. Moreover, precision and reliability are far more valuable in the accounting industry than an innovative development process.

Code of Ethics that may be threatened in the given case

APES 110 Code of Ethics for Professional Accountants involves five fundamental and basic principles of ethics, out of which two principles are threatened in the above case. These are:

• Objectivity

• Professional Competence and Due Care

In section 110, subsection 112 – OBJECTIVITY of Code of Ethics (APES 110) states that

• It is the duty of a member that one do not sacrifice the professional decisions based on certain biases, undue influence and lack of integrity.

• One must not engage in any activity that effect the decision making due to particular situation or relation

In section 110, subsection 113 – PROFESSIONAL COMPETENCE AND DUE CARE of Code of Ethics (APES 110) states that

• It is the duty of a member that one must acquire and sustain skills and expertise at the required level of concern employer that obtains as skilled professional based on existing analytical and technical standards; and

• Behave carefully and in line with appropriate formal and legal standards (R113.1)

• Where ever necessary, a member should inform the employer about the constraints that involve in the professional activities while doing proper planning and analyzing (R113.3)

 

 

Possible course of action

In the accounting profession, ethics and self-determination go hand in hand. A key aspect of assurance is the acceptance of unbiased choices and suggestions that help the client, in this case King’s Own Family (KOF) Pty Ltd. Conflicts of interest, for example, claim coverage according to guidelines for independence.

Maintaining objectivity and exercising due care refer as accepting your level of skills and do not recommend in the area that you do not have knowledge and experience. Professional behavior and consultation is a common practice that allows people to bind together and produce respect and dignity. In the same manner, many guidelines apply to accounting professionals and I as assistant accountant do concern with other colleagues of similar domain.

Required skills for assistant accountant

Accountants helps in financial reporting, taxation, auditing, insolvency, accounting information systems, budgeting, expense control, forecasting and decision-making services that organizations and individuals need; and advise on the relevant standards for enforcement and performance to safeguard legislative and strategic governance. A good accountant need to have skills such critical thinking, judgement and decision making, writing, complex problem solving, operations analysis etc.

An Accountant should have a proper and formal education with matches the standard qualification domain. The duties of an Accountant are as follows:

• Preparation of daily bank reconciliations

• General ledger maintenance and reconciliations

• Fixed asset register maintenance

• Processing month-end and year-end journals

• Assisting with year- end audit preparation and deliverables

• Process improvement initiative

• Ad hoc projects

• Reconciling data from source systems to the company’s general ledger

• Performing systems reconciliations.

• Analyzing the data to understand the type of reconciliation exception.

• Working collaboratively with business units to reduce the number of reconciliation exceptions and/or improve the time taken to clear reconciliation exceptions.

 

 

Fundamental financial statement analysis

Financial statement analysis tells the story of a company. It comprises of analysis of Income statement, Statement of change in equity and Balance sheet. It is the comprehensive view that how items of one financial statement relates to the items of other financial statement.

Figure. 1

Dupont Analysis is the best example of cross financial statement analysis. This analysis tells us about the operating performance of the company. It based on the return of equity.

Formula:

Net Income/Equity = Net Income/Revenue * Revenue/ Assets * Assets/ Equity

Return on Equity = Profit Margin * Asset Turnover * Financial Leverage

In the given case, the Dupont analysis is as follows:

78,400/88400 = 78400/88000 * 88000/111400 * 111400/88400

0.8868 = 0.8868

88.68%

The best measure or indicator of efficiency of the company is return on equity which tell us that how much net income is generate don the investment of shareholders.

Financial Values Analysis

By viewing the items of all three financial statements, it is visible that company is in good financial condition. Its total assets are 111,400, total equity is 88,400 and total liability is 23000. The liabilities of the company are around 21% of its total assets’ value which is not much whereas its own equity is around 79% of the total assets’ value.

Similarly, King’s Own Family (KOF) Pty Ltd had earned handsome amount of revenue for the year ended 30 June 2019. Its total income is 88,000 and net income is 78,400.

These values shows that King’s Own Family (KOF) Pty Ltd is in good condition and earn profits.

Conclusion

Accounting industry is a very emerging domain which make the roles and responsibilities of an accountant for strict and difficult in terms of accuracy, competency and due care. The role of ethic and corporate governance also has great importance in this field in terms of performances of moral obligations and duties. Therefore, the code of ethics and its basic five principles need to be followed by accountant and financial analyst in its real essence. As in the case of King’s Own Family (KOF) Pty Ltd, an Australian Proprietary Company, the concerned assistant accountant has some doubts but his supervisor is not in a mood to listen his concerns which may hurt the real value of King’s Own Family (KOF) Pty Ltd.

Recommendation

Following are few recommendations which we extract from the given scenario:

• The concern person, in this case is the assistant accountant, do not compromise any professional judgement because his supervisor is not giving him time or help him. In these situations, concern accountant needs to get proper guidance from the higher authority.

• Every profession required certain type of education, knowledge and skills; therefore, professional standards should also maintain in this regard.

References

APES 110. 2019, October 3. Retrieved January 15, 2020, from https://www.cpaaustralia.com.au/professional-resources/accounting-professional-and-ethical-standards/apes-110-code-of-ethics-for-professional-accountants

Assistant Accountant- Fox Studios Australia – Sydney NSW. Retrieved January 13, 2020, from https://au.indeed.com/viewjob?jk=020220d71fe23010&tk=1dukavdj581sr800&from=serp&vjs=3

Assistant Accountant Job in Adelaide. Retrieved January 13, 2020, from https://www.seek.com.au/job/40694921?type=standout#searchRequestToken=4f9a149c-2fcb-45b6-b116-a2c969df2b27 

Assistant Accountant Job in Sydney. Retrieved January 15, 2020, from https://www.seek.com.au/job/40737027?type=standard#searchRequestToken=4f9a149c-2fcb-45b6-b116-a2c969df2b27

Assistant Accountant. Retrieved January 15, 2020, from https://au.indeed.com/viewjob?jk=8db1a3b0fba95176&tk=1dukavdj581sr800&from=serp&vjs=3

Assistant Accountant – Sydney NSW. Retrieved January 13, 2020, from https://au.indeed.com/viewjob?jk=eb19b4a91f8fd153&tk=1dukavdj581sr800&from=serp&vjs=3

Bokpin, G.A., 2013. Ownership structure, corporate governance and bank efficiency: an empirical analysis of panel data from the banking industry in Ghana. Corporate Governance: The international journal of business in society, 13(3), pp.274-287.

Jaijairam, P., 2017. Ethics in Accounting. Journal of finance and accountancy, (172705), pp.1-13.

Leventis, S., Dimitropoulos, P. and Owusu‐Ansah, S., 2013. Corporate governance and accounting conservatism: Evidence from the banking industry. Corporate Governance: An International Review, 21(3), pp.264-286.

Micewski, E.R. and Troy, C., 2007. Business ethics–deontologically revisited. Journal of Business Ethics, 72(1), pp.17-25.

The Importance of Ethics in Accounting: UWF Online. 2017, January 30. Retrieved January 15, 2020, from https://getonline.uwf.edu/articles/business/ethics-in-accounting.aspx

Walker, A., 2018. Corporate Governance Strategies to Improve Organizational Performance in the Accounting Industry.