Role of an

Accountant in
Organisation and
Society
Presentation Structure
O Introduction
O Accounting as a Communication
Tool
O Accounting Information System
O Global Financial Crisis
O Accounting Ethical Crisis
O A Time for Change
O The Future of Accounting
Practice
 Introduction

Have a think about what

you think accounting is?

What does it look like in a business?

What does it look like in society?

 Introduction
O "the process of identifying, measuring and communicating economic
information to permit informed judgements and decisions by users of the
information”.
American Accounting Association

O Accounting is essentially a system for communicating what the financial

state of a business is at any one time.

O Accounting and financial information allows users to:

O Monitor business performance
O Review aspects of the workplace for continuous improvement
O Control an organisation’s money
O Plan for the future
Accounting as a Communication
Tool
O Accounting can act as a form of communication

O You can think of accounting as a form of language

between organisations and their various stakeholders

O This is not an alphabetical language but instead it is

a language expressed in monetary terms

O How can accountants communicate information to

those who need it the most?
How can Accountants
Communicate?
• Annual Report
• Financial Statements
• Internal Management
Accounting Reports
• Cost Volume Profit Analysis
• Business Plans
• Budgets
• Forecasted Financial
Statements
• Audit Reports
• Web disclosures
 Accounting can Supply
Information for Decision Making
O Decisions are made at all levels
of management

O Suitable information will

reduce the uncertainty decision
makers may face

O Accounting can aid users of

information to make accurate
decisions
Accounting can Assist a Manager
Plan Business Activity
O Incorporates decision making
about the best alternative

O Planning essential for business

success and requires regular
revision in order to respond to
change

O Planning is a management
responsibility that is supported by
accounting information
Accounting can act as a Control
Device
O Accounting information assists managers
to have the ability to control their operations

O Accounting also ensures that accurate

information is provided

O Control involves ensuring events happen

as planned

O Comparison of actual results with planned

O Corrective action and revision of plans

 Accounting Information System

General/ Trial
General
Special Balance
Ledger
Journal

Source
Documents Accounting Equation

Financial Financial Financial

Annual
Management Analysis Statements
Report
 Global Financial Crisis
O Financial crises have attracted public
attention with shocking news since the
early 19th Century:
O Wall street, NYC, 29 Oct 1929
O Germany, July 1931

O …. Global Financial Crisis 2008

O “Managers loose sleep over recession”
O “Bank of England say UK in ‘deep’
recession”
O “Germany economy in record decline”
O … and at present we are facing the
onset of another more critical crisis
 Accounting Ethical Crisis

Corporate Collapses
• Enron Corporation 2001
• WorldCom 2002
• American International Group (AIG)
2004
• Lehman Brothers 2010

Decline of the Accounting Profession

• Arthur Anderson 2002

Corporate Governance Actions

• Sarbanes-Oxley Act 2002 (US)
• Corporate Law Economic Reform
Program (Audit Reform & Corporate
Disclosure) Act (CLERP 9) 2004 (AUS)
 What does this mean for the
Profession?

O A heightened level of regulation – a shift away

from self regulation.

O A renewal of the debate between rules vs principle-

based standards.

O A reputational risk for accountants and the

profession through lost trust and independence.
 A Time for Change
O “Every company in the country is
fiddling its profits. Every set of published
accounts is based on books which have
been gently cooked or completely
roasted. The figures which are fed twice a
year to the investing public have all been
changed in order to protect the guilty. It is
the biggest con trick since the Trojan
horse. ... In fact this deception is all in
perfectly good taste. It is totally
legitimate. It is creative accounting.”
— Ian Griffiths (1986) Creative Accounting, London: Sidgwick &
Jackson Ltd.
 A Time for Change
O Financial crises provides evidence that capital markets do
not operate rationally.

O Yet mainstream accounting and finance research

continues to portray an image of efficient capital markets
in which investors make rational decisions by evaluating
all risks and returns of different investments.

O In order to make these informed decisions investors are

said to interpret unbiased information.
A Time for Change
O In recent years, international accounting
convergence a key advance in the development of
accounting (Whittington, 2005)

O IASB a private body standard setter based in

London, develops such a set of globally accepted
accounting standards.

O IASB have been highly successful in gaining

close to universal acceptance of IFRS (Wild,
2009)

O This becomes part of our conceptual framework

in which we use to prepare financial statements
 A Time for Change
O Accounting standard setting is not an automatic process – members
of IASB are humans who may be biased and overconfident in their
opinion about specific accounting principles or standards

O IFRS are principle based and require the extensive application of

professional judgements.

O Auditors are applying their professional judgement in order to

verify the financial statements of a company.

O Users of financial statements interpret and apply information

Integrated Reporting - The Evolution of Corporate Reporting
 What does this mean for the
Accounting Profession?

O Integrated reporting means developing an integrated

way of thinking
O A perceptual shift
O A need to embrace all levels/departments in the
organisation
O Perhaps a need exists for the profession to step
outside itself and act in collaboration with other
professions
 The Future of the Accounting Profession?

O Stakeholders need to move away from narrow approaches

such as the “economic man” and develop new frameworks in
accounting, which focus on people and their behaviour.

O The GFC has highlighted the broader social role that

accounting plays within society.
O Social contract that binds corporations and their responsibility
O Sustainability reporting and assurance
O Integrated reporting

O The world is becoming more complex and simple accounting

solutions are not suitable anymore
… the journey begins today, right here at Monash
So what is in Accounting for Me?
O An opportunity to work in a dynamic, exciting,
engaging and challenging environment.

O The chance to make a real impact within the

business world and society.

O Respect and $

O The opportunity to work in diverse industries

from banks to fashion!

O The ability to take control of your own

personal finances and manage these accordingly.
 So where can Accounting take Me?

O Strategic Advisor
O Investment Analyst
O Chief Financial Officer
O Sales Manager
O Entrepreneur
O Chief Executive Officer
O Strategic Change Manager
O All over the world!
 References
O Doupnik, T. S. and Richter, M. (2004) The impact of culture on the
interpretation of “in text” verbal probability expressions, Journal of
International Accounting Research, 3, p. 1-20.
O Griffiths, I. (1986) Creative Accounting, London: Sidgwick &
Jackson Ltd
O Hellman, A. and Domenico Scagnelli, S. (2011), Behavioural
Accounting: shifting away from techniques to people in Nelson, W.
D. Advances in Business and Management (3), Nova Science
Publishers, Inc, p. 153 – 156.
O Whittington, G. (2005) The adoption of international accounting
standards in the EU. European Accounting Review, 14, p. 127-153.
O Wild, K. (2009) Use of IFRSs by jurisdiction, London, Deloitte
Touche Tohmatsu.