The Bookkeeping Industry in Australia - Case Study Example

A Report on the Bookkeeping Industry in Australia (Name) Submitted in Partial Fulfilment of the Requirement of the ...........................Course. (Student Number) (Date) Executive Summary Since the introduction of the Tax Agent Services Act of 2009 in March 2010, it became mandatory for Bookkeepers who prepare Business Activity Statements (BAS) to be registered; it has become imperative for businesses to ensure that they hire qualified and professional bookkeepers. Businesses may perceive the cost of hiring a professional bookkeeper as an unnecessary cost. This is true with those businesses which make low profits and are struggling with their cash flow. Contrary to this view, professional bookkeepers enable a business to be ahead in terms of financial information reporting, and in the long run, the cost of bookkeeping is offset. This is because bookkeepers enable a business to avoid penalties pertaining to breach of tax laws. Also, bookkeepers help businesses to reduce their tax liability. This report explains the role and responsibility of the Bookkeeping Industry and why it is important in Australia. The report also evaluates external forces such as political and economic activities which impact on the Bookkeeping industry in Australia. The Bookkeeping industry in Australia is affected by law. Taking that into consideration, this report evaluates and describes legislation affecting the Bookkeeping sector such as the Tax Agent Services Act 2009, which came into effect in March 2010. The report describes the main BAS agent associations and what the law requires about them. Finally, the report outlines the TPB Code of Professional Conduct for BAS Agents in Australia as per legislation. The overall purpose of this report is to evaluate the bookkeeping industry in Australia and the legal and external forces affecting the sector. Introduction Bookkeeping is the recording phase of accounting. Therefore, bookkeeping involves a systematic recording of business transactions (Mejorada). Bookkeeping is a vital sector that keeps businesses up to date as far as tax issues are concerned. This report carries out an in depth analysis of the Bookkeeping industry in Australia. The Role, Responsibility and Importance of the Bookkeeping Industry in Australia The Bookkeeping Industry is charged with the responsibility of recording of financial transactions in Australian organisations. Secondly, Bookkeeping aids in the processing purchase orders and the reconciliation of such documents against supplier invoices. In addition, bookkeepers make follow ups of any information that the business should have been issued with, and makes sure purchase orders that are due are paid. Bookkeeping performs the role of bank reconciliations. Through Bookkeeping, a business entity is updated about the changes in regulations so as to reduce company’s tax liabilities by ensuring that business entities are compliant with current tax legislation. It is the role of the Bookkeeping industry to ensure preparation of monthly, quarterly, and annual financial statements, which should be submitted to authorities as per the law. The bookkeeping industry ensures that businesses meet their BAS obligations and cope with their GST obligations. Bookkeeping is responsible for record and payroll processing for businesses. In summary, Bookkeeping performs data processing, filing, recording and accounting roles to any business in Australia. Bookkeepers use and provide knowledge about the latest bookkeeping software and update the business. They keep the software up to date. The significance of Bookkeeping Industry in Australia is rooted in ensuring survival of a business entity. It ensures that business entities comply with the Australian law. It enables business entities to avoid some costly mistakes such as late lodgement of BAS and PAYG, incorrect invoicing, failure of keeping back up records and incorrect payments for superannuation contributions. Also, business entities benefit from the Bookkeeping industry in that there is no incorrect coding of GST which might lead to under or over claiming of GST credits. Through excellent bookkeeping, business entities are able to submit their financial records in time. This relieves business enterprises the burden of paying heavy fines to tax authorities because of late submission of documents. External Forces that impact on the Bookkeeping Industry in Australia Bookkeeping is affected by factors such as political and economic effects. The role of Bookkeeping is to communicate economic information to permit informed decisions and judgements. Australia’s growing economy and increasing use of energy and other resources have affected its economic activities. Therefore, economic activities and consumption patterns pose environmental effects and hence affect book keeping. The behaviour of customers in terms of whether they purchase in cash, by credit card or on credit affects bookkeeping. Bookkeeping is also affected by the customer behaviour, in terms of the period at which they buy most. In addition, the introduction of online purchasing has led to the outsourcing of bookkeeping services (IBIS World). This has affected bookkeeping significantly. The competition atmosphere in the Australian market has forced bookkeeping organisations to be keen in noting what other bookkeeping entities are doing. The competitors could include bookkeeping software companies and accounting firms. As most bookkeepers evaluate the vulnerability of one’s competition to change marketing conditions, such as handling of tax laws changes and legal actions, bookkeeping is affected. Political movements may affect bookkeeping through government interference. Government legislation may require the inclusion of new laws that may affect bookkeeping. Finally, economic events in Australia affect bookkeeping. Issues such as inflation affect the approaches in bookkeeping such that bookkeepers have to use LIFO method in recording inventory values during inflation to match the latest prices. The Role of Bookkeeping Industry Regulators Industry regulators such the Taxation Practitioner’s Board play various roles as far as bookkeeping is concerned. For instance, TPB regulates tax and Business Activity Statement (BAS) agents to ensure they meet required qualifications so as to protect consumers. It ensures that BAS agents have the required standards in terms of ethics and professionalism. TPB takes appropriate measures when Tax Agent Services Act of 2009 is breached, and suing unregistered agents. It also provides information, guidance and assistance to agents about registration, professional ethic and practice requirements (Commonwealth of Australia). Accounting professional associations ensure that high standards of professionalism have been met by their members who are registered BAS agents (Bookkeeping Institute of Australia). This is done by ensuring that members have undergone postgraduate training in accounting on top of holding an accounting degree (Marsden). Once accounting professional bodies are assured that their members meet the required experience criteria, they assist their bookkeeper members to lodge BAS returns in accordance with the law. These associations ensure that practitioners act ethically (Rodgers and Lucas). Registration of GST and PAYG for organisations withholding tax amounts. ATO is responsible for collecting taxation amounts remitted by organisations (Caldwell). It also ensures that organisations report their tax obligations on activity statements. The body issues organisations that have registered for GST with BAS (Rodgers and Lucas). Legislation affecting the Bookkeeping Sector in Australia The Bookkeeping Sector in Australia is affected by legislation such as the Tax Agent Services Act 2009. The Tax Agent Services Act 2009 requires that bookkeepers should provide bookkeeping services for a fee. These services include providing BAS advice and lodging BASs with the ATO on their clients’ behalf. The Tax Agent Services Act 2009 also requires that bookkeepers must be registered with the Taxation Practitioner’s Board as BAS agents, and that they should comply with a code of professional conduct (Marsden). The Tax Agent Services Act 2009 provides that registered BAS services and agents should have Professional Indemnity (PI) insurance. The body monitors and enforces compliance of the BAS agents with standards. BAS Agent Associations in Australia Various Tax Agent Associations and BAS agent associations are recognised in Australia. It is the role of the Tax Practitioners Board to accredit professional associations so that these associations’ qualifications and experiences and those of their members are recognised for registration. Some of the Associations for Bookkeepers in Australia include ICB, BIA, AAT and ABN. The Bookkeeping association of Australia is a free for service association that does not charge any annual fee, while Australian Bookkeepers Network charges some fee, though it is a free for service association. Association of Accounting Technicians and Institute of Certified Bookkeepers are not for profit organisations that charge some fee. For one to be a member of BIA, he or she should be a certificate IV holder in Bookkeeping by BIA. ABN assists bookkeepers to build superior businesses through the provision of the right support and resources such as the Bookkeepers-Client Connect (Bookkeeping Institute of Australia). ICB avails bookkeepers with a co-operative forum to enable them become the best they can make. AAT ensures that there are high levels of commitment and professionalism among accounting technicians who include self employed bookkeepers. BAS agent organisations are those organisations that are non-profit, practice professional and ethical standards for their members and have sufficient corporate governance to enhance proper management. These organisations should also be capable of addressing complaints, paying their debts when they are due and ensuring that their voting members who must be equivalent to at least one thousand have the required certificate qualification. Among the recognised BAS agent associations in Australia is the CPA Australia, Institute of Chartered Accountants in Australia, Association of Accounting Technicians, National Institute of Accountants, Association of Chartered Certified Accountants Australia and New Zealand and the Institute of Certified Bookkeepers (Commonwealth of Australia). The TPB Code of Professional Conduct for BAS Agents In Australia the TPD code of Professional Conduct for BAS agents is aimed at regulating the personal and professional conduct among registered BAS and tax agents. The Tax Practitioners Board requires that BAS and tax agents should be honest and that they have high levels of integrity (Commonwealth of Australia). The tax agents should demonstrate independence in their actions. This means that they should not be manipulated while they are carrying out their roles by their clients or other parties. The TPD code of Professional Conduct for BAS agents also requires bookkeepers to ensure confidentiality. This means that they should respect and keep private client information, which should not be disclosed to third parties unnecessarily without clients’ consent. According to the TPD code of Professional Conduct for BAS agents, bookkeepers should demonstrate competence. They should carry out their duties with professionalism and ethical standards, adhering to the professional conduct. The TPD code of Professional Conduct for BAS agents also requires bookkeepers to perform other responsibilities besides bookkeeping (Commonwealth of Australia). Works Cited Bookkeeping Institute of Australia. "Professional Bookkeeper Associations." 2012. 15 March 2013 . Caldwell, Rod. Learn Small Business Accounting in 7 Days. Melbourne: John Wiley & Sons Press, 2011. Commonwealth of Australia. "Tax Practitioners Board." 2012. 15 March 2013 . Commonwealth of Australia. "Code of Professional Conduct (Code)." 2012. 15 March 2013 . IBIS World. "Australian industries outsource Payroll and Bookkeeping Services More." 2013. 12 March 2013 . Marsden, Stephen J. Australian Master Bookkeepers Guide. Sidney: Wolters Kluwer Press, 2010. Mejorada, Nenita D. Bookkeeping . Manila: Katha Publishing Co. Ltd, 2007. Rodgers, Robert and Peter Lucas. Bookkeeping and Accounting Essentials. South Melbourne: Cengage Learning Press, Australia, 2011. Read More