BUSINESS

LANGUAGE OF BUSINESS

ACCOUNTING
WHAT IS ACCOUNTING?

Accounting is the accurate RECORDING, REPORTING, and INTERPRETING of financial data on business
transactions in accordance with widely accepted procedures.

Accountancy
Practice of Accountancy, Defined
Practice of accountancy shall constitute in a person, be it in his individual capacity, or as a partner or staff
member in an accounting or auditing firm, holding out himself as one skilled in the knowledge, science, and
practice of accounting, and as qualified to render professional services as a certified public accountant; or offering
or rendering, or both, to more than one client on a fee basis or otherwise, services such as the audit or verification
of financial transactions and accounting records;.

The preparation, signing, or certification for clients of reports of audit, balance sheets, and other financial
accounting and related schedules, exhibits, statements, or reports which are to be used for publication or for credit
purposes, or to be filed with a court or government agency, or to be used for any other purpose; the installation
and revision of accounting system, the preparation of income tax returns when related to accounting procedures;
or when he represents clients before government agencies on tax matters related to accounting or renders
professional assistance in matters relating to accounting procedures and the recording and presentation of
financial facts or data.

A Certified Public Accountant shall be considered in the practice of his profession, if the nature and
character of his employment whether as an officer or employee in a private enterprise or educational institution
involves decision-making requiring professional knowledge in the science of accounting or when he represents his
private employer before any government agency on tax matters related to accounting, and such employment or
position requires that the holder thereof must be a Certified Public Accountant; or if he holds or is appointed to a
position in the accounting occupational group in the government or in government-owned or controlled
corporations, including those performing proprietary functions, where a civil service eligibility as a Certified Public
Accountant is a prerequisite.

Role of Accountant
Accountant is doing functions related to the collection, accuracy, recording, analysis, and presentation
of a business, company or organization's financial operations. He also holds a number of
administrative functions in the company.

Accounting Profession in the Philippines

The profession in the Philippines has been formally put in place way back about 94 years ago with the
enactment of the Accountancy Act of 1923, when the Board of Accountancy (BOA) was created and the first set of
Certified Public Accountants (CPA) licensure examinations were given.

Ethics in the Accounting Profession

Accountants have the unique responsibility to provide clients with professional services while presenting a
truthful and accurate assessment of a company's financial health to the general public

The Importance of Integrity

Integrity is an important fundamental element of the accounting profession. Integrity requires
accountants to be honest, candid and forthright with a client's financial information. Accountants should restrict
themselves from personal gain or advantage using confidential information. While errors or differences in opinion
regarding the applicability of accounting laws do exist, professional accountants should avoid the intentional
opportunity to deceive and manipulate financial information.

Public accounting firms or private companies often develop a code of ethics or conduct for accountants.
These ethics and conduct rules ensure all accountants act in a consistent manner. In the absence of specific rules
or standards, accountants should review their actions to ensure they are following commonly accepted principles.

Objectivity and Independence

Objectivity and independence are important ethical values in the accounting profession. Accountants
must remain free from conflicts of interest and other questionable business relationships when conducting
accounting services. Failure to remain objective and independent may hamper an accountant's ability to provide
an honest opinion about a company's financial information. Objectivity and independence are also important
ethical values for auditors.

The accounting industry usually limits the number of services public accounting firms or individual
certified public accountants (CPA) can offer clients. Accounting services include general accounting, auditing, tax
and management advisory services. Accountants who perform more than one of these services for a client may
compromise their objectivity and independence.
 For example, individuals who handle general accounting functions and then audit this information are
essentially reviewing their own work. This situation may allow an accountant to hide a company's negative
financial information

Due Care and Competence

Due care is the ethical value requiring accountants to observe all technical or ethical accounting
standards. Professional accountants are often required to review generally accepted accounting principles (GAAP)
and apply this framework to a company's specific financial information. Due care requires accountants to exercise
competence, diligence and a proper understanding of financial information.

Competence is usually based on individual's education and experience. Thus, due care may require senior
accountants to supervise and direct other accountants with less experience in the accounting profession

Why Accountants Should Care about High Frequency Trading?

 System Complexity
For the accounting profession, the implosion of Enron in 2001 was a cataclysmic event that shook the
profession's confidence in its ability and competence. In the early 1970s the accounting profession went through
one of its periodic soul-searching episodes. The product of the soul searching was a conceptual framework that
was supposed to provide a theoretical underpinning for technical accounting standards. The most important
feature of the conceptual framework was the notion that the purpose of accounting information is to provide
investors with useful information for decision making (FASB, 2010).

One reason Enron's management was able to pull off such an elaborate hoax (it was at one time number 7
on the Fortune500) was the inordinate complexity that has crept into balance sheets (Fortune, 2001). The Enron
debacle indicated the general opacity and complexity that has gradually crept into financial statements. This is
particularly true for companies that carry large amounts of off-balance sheet items (FASB. 2006).

In his 60 Minutes interview, Michael Lewis made the following statements about HFT: “If it wasn't
complicated, it wouldn't be allowed to happen. The complexity disguises what is happening. If it's so complicated
you can't understand it, then you can't question it.”

Financial statements, particularly those of financial services companies, are so complex that investors and
regulators fail to flag accounting practices that would never be allowed for simple retail businesses. For example,
banks are allowed to net their derivative assets and against derivative liabilities outstanding with the same
counterparties (Fischer, 2013a). This makes bank balance sheets look less leveraged than they would look if such
netting were not allowed. As for bank regulators, they have attempted to introduce a simple leverage ratio, but
banks protested so vigorously that the Basel Committee watered down the proposed requirements (Basel
Committee, 2013, 2014; Ember, 2014; Fischer, 2013b)

Sarbanes-Oxley Act
In 2002, the Sarbanes-Oxley Act (commonly referred to as SOX) went into effect. This law, one of the
most extensive pieces of business legislation passed by Congress, was designed to address the investing public’s
lack of trust in corporate America. It redefines the public corporation–auditor relationship and restricts the types
of services auditors can provide to clients. The Act clarifies auditor-independence issues, places increased
accountability on a company’s senior executives and management, strengthens disclosure of insider transactions
(an employee selling stock based on information not known by the public), and prohibits loans to executives.

Laws, Codes, Standards, and Guidelines

Security Guidelines and Standards
“It is also generally recognized that the security field does not have what might be classified as ‘generally
accepted security practices’ comparable to the ‘generally accepted accounting practices’ that guide the accounting
profession.”21 However, since the late 1990s, particularly since September 11, 2001, this situation has changed.
Today, in many countries throughout the world, there is an increasing movement toward developing societal
guidelines and standards for security.

In particular, ASIS International (ASIS), ♦through its Commission on Standards and Guidelines, is strongly
supporting global efforts in the development and promulgation of security standards via the International
Organization for Standardization (ISO). ♦♦ASIS has been recognized by ISO as an international organization and
granted liaison status on several technical committees. “As a non-governmental organization, ISO has no legal
authority to enforce standards implementation. Although ISO standards are voluntary, they may become
recognized as an industry best practice and a market requirement. For this reason, the liaison status with ISO
affords ASIS and its membership the unique opportunity to play a leading role in shaping the development of
standards that affect security.”

Is Your Financial Information Accurate and Reliable?

Few documents are more crucial to lending than good old-fashioned financial statements. In today’s tight
and selective lending environment, the significance of your auditor’s work, that is, the usefulness and credibility of
financial statements, cannot be overstated. Through standards adopted by the accounting profession, as well as
those imposed both by government and by private business, the accounting profession continues to maintain high
standards and improve both the reliability and usefulness of audits.

And because properly conducted audits are percussive to credit, and breathe life into the art and science
of lending, credit and financial reporting operate as sides of the same coin, like pharmaceuticals research and
medical research. Smart lenders do not view financial statements as inanimate, repetitive, or detached objects.
After all, financial reports are dynamic.

Why the IFRS are work with the accounting profession?

The accountancy profession promotes, develops and supports accountants worldwide. Their role is crucial in
protecting the quality and integrity of accountants who are core to the rigorous application of the Standards.

The IFRS benefit from working with the profession in a number of ways:
1. the education of accountants in the application of the Standards
2. receiving feedback at all stages during the standard-setting process; and
3. organizing joint conferences and other events.

The profession benefits from working with the IFRS through:

1. access to materials and resources about the Standards;
2. input to the standard-setting process; and
3. conferences and events – and by having speakers from the IFRS Foundation participate at their own
events to educate members.

Resources for the accounting profession

Publications
  for IFRS® Standards, IFRIC® Interpretations, the IFRS Taxonomy, other authoritative guidance,
illustrative examples, bases for conclusions and official translations
 to Purchase the Red, Green and Blue books—three different compilations of IFRS Standards

Stay up-to-date
 to receive news and alerts, including the IASB Update and the IFRIC Update, published after each
Board and IFRS Interpretations Committee meeting
 Work plan of the Board

Events and conferences

 Upcoming events
 Speakers— request a speaker from the IFRS Foundation/Board for events

Consultations
 Open consultations

 Watch video explaining the standard-setting process 

Other materials
 Implementation materials—materials developed to support implementation of new IFRS
Standards, including articles, webinars etc.

 The  IFRS for SMEs® Standard about resources for small or medium-sized entities 

 Snapshots—these summaries prepared for each new Standard are useful, for example, when
briefing audit committees and CEOs

 A Pocket Guide to IFRS Standards—this useful summary for briefing members of Boards of
Directors or Managing Committees.

Millennial Accounting Professionals & 3 Trends Changing the Profession

Accounting as a Profession
Accounting as a profession has been continuously evolving. After the global financial crisis, businesses
across the globe have taken a step back to evaluate their financial strategies and accounting practices. In addition,
technological advancements and the increasing number of millennial accounting professionals drive disruptions in
terms of how businesses operate and how their workforces are structured.

The Professions top issues today

Three major developments that are shaping the accounting industry
1. The Rise of Smart Technologies and Sophisticated Accounting Systems
The trend toward the adoption of smart software systems and cloud computing will promote
increased collaboration, greater efficiency and transparency, and better relationships with stakeholders
and the community. Furthermore, social media will continue to produce greater amounts of data that will
be useful to businesses across all industries. In this regard, hiring digital natives such as millennials to join
your workforce will prove to be beneficial to any business.

2. Opportunities Brought by Continued Globalizations

Despite recent political events, globalization has yet to show signs of slowing down. As such, the
decades-old framework that allows for the free flow of capital from market to market will not likely abate
in the coming years. Accounting and financial services from developed countries will continue to be
outsourced to developing countries such as the Philippines to minimize cost and improve a firm’s
efficiency. Millennial accounting professionals will have a significant role to play in this scheme of things
3. Increase in Regulation
Owing to the recent scandals that we have observed in the news, such as money laundering,
transfer pricing, and tax evasion, governments will inevitably impose more stringent regulations. The
resulting tax actions will have the greatest impact on the accounting profession.
Apart from these three items, the volatile global political climate, as well as other social and
environmental issues, will have a major impact on the finance and accounting profession. With the
accelerating speed by which businesses operate, firms will have to learn how to adapt, harness the talent
of millennial accounting professionals, and enact timely changes to survive in the coming decades.

Top Eight (8) Challenges Faced by Accountants in Public Practice in the Philippines today
When the accountants have the experience, knowledge and the right level of confidence to deal with
clients, public practice is undoubtedly right for them.  In the ever demanding world of business, accountants play
vital roles and this opens an opportunity to make business.

Accountants are aware of the fact that the profession is regulated and, therefore, they need to meet
certain qualifications before they can do public practice but that isn’t the biggest challenge they face. Yes, they are
like chosen from pool of professionals from the time they graduated to eventually passing the CPA exam, gaining
some meaningful experiences (as their code describes) and eventually having the guts to practice. Making it to
public practice is way farther, but great challenges are always there to bug them.

1. Maintaining independence and integrity

You propose this, in accordance with the standards, but your client want that since that has more
business sense. Your client wants to pay less taxes. Your client wants to report more profit to
stakeholders. Your client believes so much in you and asked you to bookkeep the company you are
auditing. You enjoy the gift given by your client – a new car!
Keep in mind that you are bound by the code of ethics for professional accountants and you
should be doing away with anything that will discredit the profession. Weigh things. We are here to
provide professional services and we should always consider public interest. Violation may cause the
revocation of our license, our worst, can even put us behind bars.
These challenges are always present and will test us, on how strong our stands are when it
comes to doing the right thing. These will test us how can we prove ourselves and show our clients how
we can provide them exceptional client service without compromising our integrity and the quality of our
work. If we address these challenges appropriately, we will be the professional accountants our clients
can never afford to lose.

2. Keeping self updated with changes

I know everything today! What about tomorrow? I really don’t understand why regulators keep
changing the basics and making us pay for noncompliance. There is no year wherein SEC, BIR, and
accounting and audit promulgating bodies didn’t make amendments, revisions, improvements and the
likes on laws, rules and regulations and standards. They keep changing and you should always be
updated! It is our personal and professional responsibility to be updated.
Even CPA candidates are bothered because what they know when they graduated may not be
the same thing they should know if they fail to pass the first try

3. Tight made tighter deadlines

Deadlines are agreed, great! Yes, you can do it if all planned activities will be
done as schedules. Then they fail to provide you the schedules on time. What about
that, regulatory deadlines can’t be adjusted (except for fortuitous event). Now you
should be the one to adjust. Work overtime and even overnight but it is just not enough.
Coffee?
4. Difficult-to-deal-with client officers and personnel
Clients, sometimes, assume that they know more than you do.  They think that the “Accounting
101” subject included in their business course give them thorough understanding of all the accounting
matters and decides even before you recommend.  They speak of “there’s no business sense on that”
without thinking “what about accounting sense?”.  As they assume to know everything, they would make
it difficult for you to negotiate higher fee.
There are also client who looks at auditors as police, ready to make a painful arrest when
anything fraudulent is discovered. They’re defensive, but not necessarily guilty.  And as a return, they’d
make it hard for you to complete your work, delay everything you need, until you will be the one pending.
5. Complex accounting and reporting requirements
Regulators have been very strict nowadays.  They have been very active in finding ways to collect
more taxes and to protect public interests.  SEC have been issuing dramatically high number of letter of
comments to financial statements as BIR issues tax assessments left and right.  The before used to be
 financial statements and income tax returns for filing should now be accompanied by supplementary
schedules and reports.
Even accounting standards have been continuously updating to the point that, what you’ve
known before are no longer applicable. Standards are amended left and right and some are even revised
that tend to disorient us.
6. Recruiting competent staffs
According to statistics, millions of Filipino are jobless. They don’t have the experience yet, they
demand a managerial-level salary you barely can afford. Are these inexperienced guys competent enough
to demand? Quality is one of the most sought-after aspect of our work and we need to balance the cost
and quality of the staffs we are recruiting.  Even if they claim they have the experience we need, we still
have to train them to fit our standards.
7. Increasing fees
You have a client for five (5) years now but your fee never increased since day one. Regulators
are very demanding and require new types of reports to be issued aside from the normal assurance report
but your client allows you to bill with an increase only equal to the inflation rate.
8. Growing your clientele
This is for those starting up. Depending on few clients with high fees couldn’t last. What if you
lost them? You have to compete with the current players and you need to show how excellent you are in
providing client service. It isn’t that easy.

The profession’s biggest challenges

Staffing, succession planning, tax reform, cybersecurity, merger mania, commoditization of core services,
the demand for more CPAs, and the search for relevance — as important as all these issues are to accountants,
they pale in comparison to two overarching concerns in the minds of the profession’s leaders: the impact of new
technologies, and accounting’s ability to adapt to the rapid pace of change.

In a recent Accounting Today survey of a wide range of practitioners, firm leaders, association heads,

regulators, consultants and other thought leaders, those two concerns were most frequently cited as the biggest
challenges facing the profession, raising a host of subsidiary issues that accountants will need to address in the
coming months and year

Future outlook of Accountants

Employment of accountants and auditors is projected to grow 10 percent from 2016 to 2026, faster than
the average for all occupation

Will accountants become obsolete?

Times, they are a-changing, and tech is emerging. The rise of the robot is causing many accountants to
toss and turn with worry and distress. Thanks to Artificial Intelligence (AI), accountants are concerned
about being replaced by high tech.

Robotic Accounting
Is Artificial Intelligence Set to Replace Accountants in the Future?

Not that long ago artificial intelligence (AI), robots and machine learning (ML) were thought to be things
only found in science fiction films. Today, this type of technology is taking center stage in workplaces across the
globe. Industries, including manufacturing, retail, agriculture, and customer service have already had AI replace
some job positions that left workers scrambling to find new career options.
 This AI revolution is not expected to slow down anytime soon. In fact, experts anticipate that as many
as 800 million jobs could be replaced with AI technology by the year 2030. Initially, AI technology and automation
in the workplace seemed to only affect pink and blue-collar workers. As this technology advances and becomes
more powerful, professional, white-collar workers, including accountants, are starting to worry about what the
future holds for their career and if AI will make their job obsolete.

AI in Accounting
In basic terms, AI technology is intelligent machines that are able to complete repetitive, mundane tasks
at a fraction of the time it takes humans and with greater accuracy. The emergence of Machine Learning now
allows AI platforms to observe, analyze and self-learn data and processes to improve its performance and accuracy
over time.

AI technology is already able to handle many accounting functions, such as tax preparation, payroll, and
audits. Many of the leading accounting software providers, including Xero, Intuit and Sage have incorporated AI
technology into their software to handle basic accounting tasks, such as bank reconciliations, invoice
categorization, risk assessment, and audit processes, like expense submissions and invoice payments.

Many of these standard tasks are extremely time-consuming, which has many accountants across the
country worried about how the emerging AI technology will affect their billable hours. An even bigger concern is
that AI technologies will replace the need for companies to work with accountants at all.

AI Will Transform not Replace Accountants

While there is no doubt that AI technology is capable of handling many standard accounting tasks faster
and more efficiently or that these capabilities will only increase over time, it doesn't mean the end for accountants.
There always will be a need for that human element - human intelligence - at the other end of AI technology. In
fact, according to leading research firm, Gartner, AI is set to create more jobs than it will replace, leaving workers,
including accountants with options.

Accountants don’t have to worry about their job being replaced by AI any time in the near future.
Companies will always need accountants that can analyze and interpret AI data, as well as provide consulting
services. Rather than replacing the role of an accountant, AI technology will transform the duties an accountant
performs.

With AI technology and machine learning handling many of the mundane, repetitive tasks, accountants
will have more time to focus on other aspects of the job, such as consulting and data analysis. This is good news for
many accountants. Rather than spending hours completing menial tasks, accountants of the future will be able to
use and analyze AI data to provide their clients with sound business solutions.

In many ways, AI will help accountants improve their services. AI technology will improve data entry
accuracy and lower the liability risk for accountants. In addition, emerging technology is more efficient at fraud
detection, adding an extra layer of protection for accountants and their clients. It also provides real-time data,
which allows accountants to provide real-time solutions. Even more impressive is the ability of machine learning to
analyze large amounts of data instantly, evaluate past successes and failures in an effort to accurately predict
future outcomes.

Preparing for the Future

There is no way to escape the use of AI technology, at least not if you hope to remain competitive in the
upcoming years. The speed, efficiency and accuracy of AI technology just cannot be beat. The only thing
accountants can do is to embrace this new technology and learn how to maximize its use. The better equipped you
are to help your clients integrate and utilize AI technology in their accounting processes the more valuable you will
be.

Many universities today are already incorporating IT and database management courses into their
accounting program. This means that graduating students are coming into the workforce with the skills they need
for future accounting work. Accountants already in the workforce must find ways to acquire these skills in order to
remain relevant to their employers and/or their clients.

Accountants can obtain the IT skills they need by attending seminars, using self-learning online programs
or attending college-level courses. It is equally important for accountants to stay up-to-date on the latest
accounting trends, emerging technologies and industry news. This will allows accountants to not only keep their
jobs but to also provide more efficient services to their clients.

Rather than worry about AI taking over their jobs, accountants should embrace this technology as a
powerful solution to enhance customer services. Finally, accountants will be able to use all their training and
experience to provide customer will real and effective business solutions, whether it’s in reference to tax
consulting, real estate deals, mergers, growth options, or any other business practice.

Technology is advancing at record rates so now is the time to obtain the IT and database management
skills you need to advance into the future. With the right skills and training, accountants are guaranteed a lucrative
career that will last well into the future.

Accountants can obtain the IT skills they need by attending seminars, using self-learning online programs
or attending college-level courses. It is equally important for accountants to stay up-to-date on the latest
accounting trends, emerging technologies and industry news. This will allows accountants to not only keep their
jobs but to also provide more efficient services to their clients.

Rather than worry about AI taking over their jobs, accountants should embrace this technology as a
powerful solution to enhance customer services. Finally, accountants will be able to use all their training and
experience to provide customer will real and effective business solutions, whether it’s in reference to tax
consulting, real estate deals, mergers, growth options, or any other business practice.

Technology is advancing at record rates so now is the time to obtain the IT and database management
skills you need to advance into the future. With the right skills and training, accountants are guaranteed a lucrative
career that will last well into the future .

The Future of Accounting

The future of accounting is bright and here are just a few reasons why: ... Accounting is much like the
legal profession, where interpretation is frequently needed around the application of tax law, especially for new
laws. It's difficult for a computer to do this kind of work effective

The Future of Accounting: Will it Still Exist in 2040?

1. The role of the accountant is about giving business owners the peace of mind that they’re not making
a horrible mistake somewhere and ending up with an unexpectedly large tax bill, fines, or even a
prison sentence. Having an outside third party (human) perspective on how the books are being run is
such a valuable asset that we can’t imagine that need will ever go away, no matter how automated
things become.
2. Accounting is much like the legal profession, where interpretation is frequently needed around the
application of tax law, especially for new laws. It’s difficult for a computer to do this kind of work
effectively.
 3. There is still so much more value that accountants and bookkeepers can add.
Automation doesn’t rule out the value-add, it just allows for more efficiency which is
actually a growth opportunity. If billed correctly, consultancy and advisory work
should be much more profitable than compliance work

IN YOUR OPINION, WHAT DO YOU THINK?

The Role of Accounting in Business | Chron.com

https://smallbusiness.chron.com › ... › Accounting & Business