Conceptual Foundations Financial Accounting
Discuss About The Conceptual Foundations Financial Accounting.
Answer:
Introduction
In the ever growing accounting world, the changes are coming with every moment in terms of reporting and accounting. One such prominent issue over the past couple of years has been corporate governance which has gained momentum and is being practiced by most of the companies today (Alexander, 2016). It is nothing but a set of rules, procedures and guidelines by which the companies are controlled and directed. It aims at harmonising the interests of all th stakeholders including shareholders, government, employees, debtors, creditors, banks, financial institutions, etc.
Analysis
Overtime, companies have started a separate disclosure of corporate governance and how the same is being practiced in the organization because of the wide deal of accountability and responsibility that the company holds in respect of the stakeholders. Regulatory measures have come up, disclosure requirements have increased, there is an increased focus on the social and sustainable accounting, etc, all focused to get the improvement in quality of reporting and accounting so that the investors’ interest are being taken care of and that they are well informed (Choy, 2018).
All this came into existence as a lesson when some of the large multinationals and corporations collapsed as a result of the major accounting scandals and unethical practices in accounting. Enron scandal is one of them where the directors and employees of the company concealed the losses that can be foreseen and did not disclose the true status of the debt in the financial statements, which was disclosed as a result of the whistle blowing by one of the employees and then the share prices fell dramatically and investors lost all together $ 74 billion (Dichev, 2017). The auditors as well as the management of the company was heavily penalised and imprisoned. One another major scandal was Worldcom, a telecommunication giant in the marketing which had inflated its assets in the balance sheet by $ 11 Bn which was primarily attributable to internal audit discrepanicies, inflating revenues by fake accounting entries and under-reporting of the expenses, capitalisation of the expenses, etc. Like that there have been numerous other companies which went into wrong practices to show better financial position because of which Surbanes Oxley Act and thereby corporate governance was introduced (Bizfluent, 2017). This not ensures that the best accounting practices are being followed but improves the reputation of business increases investor confidence in business, reduces the quantum of fines, penalties and lawsuits, decreased conflicts and corporate frauds, etc. It also ensures continuity of business, lower capital cost, economic growth , positive impact on the share prices of the company, brand value formation and development of the company as a whole (Chron, 2017).
Conclusion
From the above discussion and analysis, it can be concluded that corporate governance has become inevitable for the growth, survival and sustainability of the organizations off late. It gives the required reliability and authenticity to the financial statements that the stakeholders require to believe on the same and take the decisions based on the same. It gives reasonable assurance that the financials are showing the true and fair view of the business as it is backed by the law and several regulatory measures.
References
Alexander, F. (2016). The Changing Face of Accounting. The Journal of Higher Education, 71(4), 411-431.
Bizfluent. (2017). Advantages & Disadvantages of Internal Control. Retrieved december 07, 2017, from https://bizfluent.com/info-8064250-advantages-disadvantages-internal-control.html
Choy, Y. K. (2018). Cost-benefit Analysis, Values, Wellbeing and Ethics: An Indigenous Worldview Analysis. Ecological Economics, 145. Retrieved from https://doi.org/10.1016/j.ecolecon.2017.08.005
Chron. (2017). five-common-features-internal-control-system-business. Retrieved december 07, 2017, from https://smallbusiness.chron.com/five-common-features-internal-control-system-business-430.html
Dichev, I. (2017). On the conceptual foundations of financial reporting. Accounting and Business Research, 47(6), 617-632. Retrieved from https://doi.org/10.1080/00014788.2017.1299620
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