Homework for Week 17 - The Institute of Chartered Accountants Australia The role of professional accounting in business

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1 Homework for Week 17 - The Institute of Chartered Accountants Australia The role of professional accounting in business Accountability, transparency and ethics in business and financial reporting have become more important than ever in the wake of the global financial crisis. Professional accountants are crucial business advisors, helping protect the interests of stakeholders in every industry. The Institute of Chartered Accountants is at the forefront of promoting and ensuring ethical business practice, with Chartered Accountants working in every industry and sector. As a result of reading the Case Study, students should be able to: Explain the various roles of Chartered Accountants in business and how they contribute to business Understand different types of financial reports and how they are used Discuss the importance of professional ethics and accountability and how Chartered Introduction Accountants and the Institute contribute to this. The Institute is the professional body for Chartered Accountants in Australia and represents 70,000 current and future business leaders working both here and overseas. It has around 57,000 members and almost 13,000 graduates undertaking the Chartered Accountants Program while they work. The Institute has an important role in promoting financial integrity in society, through its leadership of the profession and its advocacy work in influencing policy and regulatory frameworks in Australia and abroad. Chartered Accountants serve the public interest through their obligation to uphold the profession s high standards of duty and service in every area of business and the economy, including finance, commerce, public practice, government, academia and the not-for-profit sector. The Institute is part of the Global Accounting Alliance, giving members access to an 800,000-strong network of professionals and leaders worldwide.

2 Professional accounting in business Chartered Accountants are in high demand in every type of business, and also within a variety of different roles. They are business leaders, decision-makers, technical analysts and influential advisors in industry and commerce. What do Chartered Accountants do? Chartered Accountants specialise in many different fields and industries. These include: Advisory and Consultancy Helping clients improve and manage risk to maintain and develop the performance of the business. It can include advising on mergers and acquisitions, or assessing operational and strategic risks. Audit The external analysis of an organisation s financial information and accounts to test that controls are in place to prevent fraud and errors. Business Services Assisting organisations with all their accounting requirements to achieve financial goals, and developing strategies for business growth. Corporate Recovery Working with organisations suffering financial hardship to identify problems and implement solutions to restore profitability. Financial Planning Providing clients with a detailed and tailored strategy to enable them to meet their financial goals. Forensic Accountancy Identifying and tracking fraud by utilising accounting, auditing and investigative skills. Insolvency Managing the receivership process including the liquidation of assets of an organisation or individual due to financial hardship and bankruptcy. Management Accountancy Using accounting information to make business decisions within an organisation, in order to develop and improve overall business performance. Stockbroking Buying and selling shares and other securities through market makers on behalf of investors. Tax Preparing corporate and personal income tax statements, and providing strategies for minimising risks through the understanding of tax law.

3 Where can you work as a Chartered Accountant? International professional services These are global accounting firms made up of offices and networks around the world, including the 4 largest, Deloitte, Ernst & Young, KPMG and PwC. These firms work in multiple disciplines. Mid-tier accounting organisations Mid-tier firms typically have six or more partners and can offer the opportunity to specialise in specific industry areas. Careers in these firms are well defined, with great development opportunities both in Australia and overseas. Small-to-medium accounting organisations Firms with one to six partners and a more local sphere of work, offering a wide variety of industry areas, promotion opportunities and the ability to build strong, lasting client relationships. Large corporates Chartered Accountants can be found in all areas of business, working for companies as varied as Sony Music, Vodafone and Macquarie Bank. Public sector The public sector offers interesting and rewarding career opportunities, ranging from large federal government departments and agencies to state level public sector organisations. Not-for-profit Chartered Accountants are also essential to the not-forprofit/ charity sector. Accountants work in organisations such as Oxfam, Unicef and RSPCA to make a difference in today s world.

4 Effective financial reporting Financial reports are used by relevant stakeholders, e.g. owners, managers, investors, or analysts, to find the information they need to understand and manage the business, e.g. some may be used to accompany a tax return, to lodge on a public register such as the stock exchange, for banks, or to help with effective management of the business. The following tables look at four major financial statements (reports) that may be of use:

5 Creating accountability in business Ethics are the cornerstone of a Chartered Accountant s profession. Clear, visible and honest reporting allows company stakeholders to make informed decisions about the business and ensures businesses are meeting relevant legal and regulatory standards. Public confidence in business was severely dented by the effects of the global financial crisis (GFC), leading to increased scrutiny of companies governance and decisions. As a result, professional

6 accounting is more than ever seen as important to business, with accountants operating as trusted advisors who champion financial integrity and sound financial management. The Accounting Professional & Ethical Standards Board (APESB) is an independent national body that sets the code of ethics and professional standards for Australia s three professional accounting bodies (including the Institute). The Code of Ethics is based on fundamental principles of integrity, objectivity, professional competence, due care, confidentiality and professional behaviour. It provides guidance to accountants in the event of an ethical dilemma, and encourages ethical behaviour as a priority of the profession. Under the provisions of the Code, Chartered Accountants are obliged to always act in the public interest. The professional standards also require members to adhere to technical standards on financial reporting and auditing set by the Australian Accounting Standards Board and the Auditing and Assurance Standards Board. The Institute consults with all three national standard setting bodies on developing and reviewing standards, to ensure they meet with best practice globally and keep up with regulatory and legal developments. The Institute has a dedicated disciplinary division, Professional Conduct, which is responsible for upholding the ethical, professional and technical standards of the Chartered Accounting profession. The Institute can take disciplinary action against members who contravene the Code of Ethics or professional or technical standards. Institute members take a module on ethics and their application in business, as the final part of their professional Chartered Accountants qualification. This module is essential in helping candidates develop their ability to deliver sound professional judgment in business. Conclusion Chartered Accounting offers a varied and exciting career, with opportunities available throughout the world of business. Accountants are essential to the success and sustainability of modern business, and of public confidence in the markets. Ethics lie at the heart of business sustainability with clear and transparent accountability of financial reporting crucial to a company s success and stakeholder confidence. The Institute is at the forefront of ensuring professional standards are developed in line with the changing business world, and promoting best practice and the highest standards among its members. ETHICS CASE STUDY QUESTIONS 1. How do Chartered Accountants serve the public interest? 2. List three users of accounting information. 3. Outline the purpose of preparing financial reports. 4. Explain three limitations of financial reports.