Australian Government Regulation of Accounting and Accountants - Coursework Example

Introduction There has been a lot of debate on whether the government of Australia should regulate the accounting profession or not. Currently, the government has imposed a lot of regulation in the accounting system with increase in the amount of regulations which accountants and businesses in general should follow in the process of preparing accounting statements and in the running of the business as a whole. This has resulted in the increase in the amount of expenses which the business has to cater for in the process of preparing accounting books and in the running of the business. The increased number of regulations and laws which have been put in place have made businesses to find it hard for them to operate and therefore risk most of them grounding their operations for they are not able to comply with the rules. These regulations are viewed by most of the accountants as being a hindrance to operations of the business. This is however not the view of many other people. Some scholars see the regulation as an important part of the accounting profession and the business as a whole since without the regulation, there might be a lot of problems in the ensuring that greedy business men do not oppress the poor in the society. In addition, the issue of the economic crunch has made many people think twice about the accounting profession and the importance of government regulation of the profession. Some people believe that it is very important to control the accounting process and restrict the accountants in their operations by the use of the rules and laws governing what they do. This research focuses on the two different arguments and establishes the best view of the two. It compares the various advantages and disadvantages of regulation of the accounting profession and the impact of the government regulation on the accounting activities and business in general. The research begins with a literature review where a number of journals will be presented with their arguments and then these journals discussed further in the discussion section. Towards the end there is the conclusion summarizing the facts which have been brought about in the literature review and in the discussion. Literature Review Government has in the recent past imposed a lot of regulations in the issues of accounting and how accountants run their processes. This has attracted public attention especially in the accounting fraternity with some arguing that the regulation is good while others arguing that the regulation is bad. The following literature articles present these differing points of view and why each side feels that it is correct or wrong for the government to control the accounting. Hong in his journal has brought up the issue of regulation. It is clearly presented that the regulation of the accounting and accountants in Australia. He argues that the regulation is more of protecting the rich people and those who are the bosses and not considerate to the poor. He first presents the advantages of government regulating the accounting affairs and the entire business as a whole which is to prevent the consumers from exploitation of the poor by the rich capitalist men. This however he says causes a down fall in the economy of the country as was the case with China when the government planned to control everything including the consumer protection, company law and every aspect of life, intended to protect the innocent consumer from exploitation by the rich capitalist men. This idea did not materialize and the effects were a great downfall of the economy of China. Another point presented here is that the regulation of the markets makes the process of accounting very expensive and the businesses have to operate under very high expenses. The total expenses which are being realized by the business as it operates are quite high as compared to if there were no rules set to govern the process of accounting. The author appreciates the regulation as having some positive impact as having been introduced to curb incidences like the economic crunch of the 1929. He however disagrees with the regulation terming it very expensive and only followed by the junior staff. According to him, the senior members of the accounting fraternity are not affected by the laws and they even do not follow them. In his view, accounting and accountants should be left alone to operate on a free market (Hong, 2007). In the views of Statens, the government has a role to play in the accounting processes. This is important in the ensuring that consumers are not misused by the business men. In his research work, the important thing the regulation of the accounting profession and the accountants is to make responsible for their actions and therefore make it harder for the accountants who are selfish to benefit from the poor. In addition, the government should regulate the entry of accountants into the profession. The regulation ensures that accountants do not enter the profession without proper qualifications. The accountants are supposed to have a mentor who will help him or her to gain the proper experience. In his views, the accounting regulation is an important part of the government’s effort to curb the effects of the greedy business men who are likely to carry out various business activities and accounting activities to oppress the poor people in the society and to gain unfairly from the society. In addition, the accounting information is to be used by various parties including the government and other people who make it good for the government to establish good regulations which will government the presentation and processing of accounting information in the accounting profession. This is viewed by the author as a very important part of the accounting. According to the author, the regulation also avoids the effects of economic downfalls in which greedy men take advantage of the poor people in the country and exploit them (Statens, Kvalitets- och 2003). Tasman Asia Pacific on their part believe that the regulation of the accounting. The research article illustrates that most of the regulation is self regulation in which the profession governs itself as a professional body. This results in the increase in the credibility of the accounting systems. The author illustrates that the regulation of the accounting is necessary in the making the information more credible and people accept it more than they would have accepted it when it was not regulated. The regulation of the accounting process and accountants make the accounting profession acquire more professionalism in their processes. The clients can clearly identify the individuals and deal with them without any element of suspicion. This makes the accountants to be viewed as very responsible people in the society and the author illustrates that it is very essential in ensuring that the clients have no problem with having business dealings with the accountant. In addition, the author feels that the regulation of the accountants and the minimum qualifications imposed on the accountants makes them be more credible and employers will be more willing to give them a job. The author illustrates that employers will view the accountants as professional people who are able to carry out their functions properly. The regulation also improves the quality of service the accountant provides as the author puts it. Services which are obtained from the accounting professionals represent the highest degree of professionalism and the customer or the employer gets service which is of high quality. Lastly, the author feels that the use of regulations increases the confidence of the accountants since they are aware that there is a legal framework which is made up of codes of conduct and ethics which will govern the accounting process. Therefore, the accountant will be happy as he or she provides accounting services to the clients (Tasman Asia Pacifica, 2007). In my view, the government should play very little role in the running of the accounting activities. The government should not interfere with the business accounting process so that the business will run effectively without any increase in the expenses. Therefore, I agree with Hong that the government should let businesses run on their own without interfering with the internal processes of the business. The accountants should be allowed to perform their accounting duties guided by the spirit of best practice and therefore avoid fixing the accountants with laws and regulations to follow. Discussion The government of Australia has imposed a lot of regulations to the accountants which is to govern their conduct in time of duty. These regulations have been increasing over time and the business people and the traders are finding it hard for them to operate under such condition. Some businesses are feeling the effect of the increased regulations to comply with by adjusting operations to suit the increased demands by the authorities. The government and the governing bodies of the accounting profession are putting in place very strict legislation to curb the effects of selfish people and other capitalists who want to have a lot of returns from their capital without caring for the rest of the people. However, this regulation seems to be creating more problems than it would without such a regulation. This is presented in the paragraphs below. No adherence Although there are very good rules and regulations which are governing the accountants on the way to operate and to protect innocent people from exploitation, the laws have a lot of loopholes. The rich and the senior people in the government never follow these rules which have been set. The poor on the other hand are supposed to follow to the latter the set rules without going against any of them. This therefore creates a situation where the regulation is used to help the rich advance more while doing away with the poor or the people who are not in the high offices. There is a serious problem in the country when it comes to adherence and very few people will follow the set down rules and regulations in the business if they are very rich. With the failure of adherence by the senior people in the society and complete adherence by the people in the society who are not well off opens a window of exploitation by the boss. The workers will work hard to comply while the employer does not comply with all the rules. For example, the employee will make sure that he does the work very well as stipulated. On the other hand, the employer does not pay the employee or pays him at a later date. This will result in a situation where the law will be viewed as an instrument of the rich to oppress the poor and their employees. If it was possible to enforce the laws which have been laid down very effectively, the running of the businesses will be very smooth since most of the people will follow the law and the set regulations which will be of great benefit to a lot of people. This will however work when there is a good will between the accountant and the client or the employee. If the government wants the accounting profession to be strictly guided by the tight regulations, it should work on a mechanism which will make all the people to follow the laws without some people complying more than the rest of the people and therefore suffering from unfair expenses than the rest. The failure of some people to comply makes them more advantaged and have less expenses which will make them operate in a better environment than their counterparts. In the view of many Australians in the country, the laws are for the purpose of benefiting the already established accountants and their businesses. This does not make sense since the laws are supposed to protect the vulnerable from the exploitation. The breaking of the law interferes with the basic principle of the law for the protection of the individuals within the society and instead protects the rich and the capitalists making them exploit people more than they would have. Increase in operating expenses Accounting regulations and laws have significantly increased the cost of operating a business currently. There are very many laws which the business man is supposed to comply with but there are very expensive to comply with. Businesses are finding the cost of operation being very high and some of them opting to just close down their businesses since they will not get enough money to run their business. In other businesses, the cost of complying with the tight rules governing the accounting profession is directed to the consumers. As a result, the consumers are the ones to feel the impact of the increase in expenses due to increase in regulations. Since as stated above only the small business comply with the law, they are likely to operate under losses while the big businesses are not complying with the laws and therefore making it hard for the two to compete effectively. This makes the small business more disadvantaged and therefore can result in the grounding of the operations of the business, leaving the big organization to carry out their businesses without competition. In addition, since many of the small business transfer their expenses which they are realizing from the increase in the requirement by the government, the goods from the small business will be expensive compared to the rest of the goods in the society. Difficulty in Entering into the Profession The current regulations are making it hard for a new person to enter the profession. Accountants are put off by the many requirements which require them to go through a very long procedure before they are allowed to practice in the country as an accountant. A new accountant should be having a mentor who will teach him or her lot of issues. Although the main objective of the new requirement is to reduce the number of people who enter the accounting profession without clearly understanding the subject matter, there has been rise of some negative issues about the requirement in the accounting. Some accountants argue that this mentorship does not increase the ability of the new accountant to carry out the process of accounting without much difficulty (Skill Matching, 2007). This is because a person who wants to learn effectively will be able to learn this when in his or her environment. She or he will be able to establish a mentor or a person to act as a mentor of him in the job. On the other hand, a person who is not willing to learn from his or her mentor will either gain very little knowledge or never gain any knowledge resulting from his interaction with the mentor. This is as opposed to the other normal way where the new accounted is allowed to practice and then he or she will continue learning from that (World Trade Organization, 2002). The entry into the mentorship is a problem because it is only carried out two times a year. Therefore if a person has missed the mentorship, he or she will be supposed to wait for another six months before he or she can be allowed to get a mentor and learn from him. Therefore, the new accountant is left outside with nothing to do since he or she cannot be allowed to practice accounting without the person going through the process of mentoring. As a result, there will be many people who are qualified as accountants but are still jobless because they have not got the mentorship (Goodwin, 2001). Currently, the person who wants to become an accountant is supposed to go through the university education and then get a decree after which the person is supposed to take certified public accounts classes and do an exam in which they will either qualify or fail. As a result, people are forced to do a lot of reading, much of which is repetition. This makes many people get discouraged because of the long process involved in the training of an accepted accountant. As a result, the number of accountants keeps on decreasing making the cost of hiring an accountant very high. Since most of these two courses teach the same things, people who have taken the certified public accounts are supposed to be allowed to work without attaining a decree and those with a degree should be allowed to work without the diploma. Time Consuming The increased regulations to comply with have increased the problem of wastage of time. The accountant is supposed to waste a lot of time in the process of trying to comply with the set rules and regulations governing the process of accounting. The accountant may take time to understand what the law says before he or she starts the task. This makes him or her waste a lot of time which could have been used in other activities beneficial to the business. The wastage of time is a disadvantage in both the business and the accountant. For the accountant, he will be very much exhausted when he or she finishes the job. He will do a less amount of work than he used to do but will have a lot of job to do in the process of trying to accomplish what he was to accomplish. For the business, it will have to increase the number of accountants so that it can be possible for the accountants to accomplish what they are supposed to achieve since the amount of work they are supposed to do has been increased. There is also wastage of time by the law enforcement agencies as they try to establish if the various businesses are operating in the set up procedure. The inspectors will use a lot of resources and time to establish which businesses are not complying adequately with the regulations. This could have been used in doing other better business which would be more profitable. As a result there will be a decrease in the efficiency of the people in the country as the amount of work they used to perform will decrease and therefore decrease the total production. Poor Accounting Results Due to increase in the amount work to be done by the accountant, there is always a problem with the time management. The objective in the accounting process is fulfilling what the law says with very little desire for quality work. Most of the accountants will be interested in making records which will appear to comply with the law. They will only make sure that the accounting records are as per what they law says without emphasizing on the truth of the information. Putting regulations on the accountant will make him do the accounting job with a view of only fulfilling what the law says. This can have negative impacts on the business since the records do not reflect the real situation in the business as the main objective of preparing the records is not to show the real financial position of the business but to comply with the law (A S I C, 2001). There is also a high probability of the results being doctored so that they will fit in the regulations which have been set by the authority. This is very risky since it will reflect different financial status compared to the real financial status and therefore confuse the business. Most accountants would rather have accounts which are not honest but be according to what has been laid down by the law rather than having honest accounts but risk colluding with the law for the failure to comply. The attention of the process of accounting usually shifts from the production of accounting records and statements which reflect the real financial situation of the business to production of accounts which look good before the law enforcers (Daniel, 2002). Loss of Professionalism in Accounting Tight regulation of the accounting by the government is doing away with the judgment of the accountants as professionals in their fields. Accountants are not given the room to think and come up with solutions to various problems. There are clear guidelines on how most of the situations are supposed to be handled. This means that the accountant has very little role in the decision making on the issues of accounting. This is detrimental to the accounting profession since people in a certain profession are allowed to think and make decisions as per the situation and therefore be able to come up with solutions to different problems. Conclusions The current regulations of the accounting profession have had a lot of negative impacts in the accounting profession. It is true that the regulation has some positive impacts such as the prevention of the greedy business men and accountants from oppressing those people who have no power to defend themselves. In addition, some people argue that the regulation maintain the high standards of the profession and can be used to avoid things like the economic downfall which has been experienced in the past. This is however not true because the economic downfall could not have been controlled by just legislating some accounting laws. The people who are the managers and accountants of the companies which were collapsing are greedy and they can break the law so that they can earn more money. This is the example with the Wall Street companies who do not mind paying themselves large sums of money without considering that many Americans are suffering. These directors after being bailed out by the United States federal government, they still go back to the extravagant spending. The disadvantages of regulation of the accounting include the increase in the expenses of running a business in addition to wastage of time, loss of professionalism in accounting due to the increased regulations and therefore cannot use his or her professional judgment to decide on a particular issue. Other disadvantage is the problem with the entry of new accountants in to practice. There are a lot of procedures to be followed and therefore reduce the possibility of someone becoming a public accountant who can practice. References Australian Securities & Investments Commission, (A S I C)19th November 2001. The future of corporate regulation in Australia. Retrieved on 30th April 2010 from: http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/CSAConf_131101.pdf/$file/CSAConf_131101.pdf Daniel, Zoe, 2002. Accounting Regulation Up For Examination. Retrieved on 30th April 2010 from: http://www.abc.net.au/rn/talks/8.30/busrpt/stories/s538528.htm Goodwin, R. M. 29th September 2001. International Workshop on Accounting & Regulation. Retrieved on 30th April 2010 from: http://www.unisi.it/ricerca/dip/sas/convegni/PROGRAMME.htm Hong, 2007. Accounting Regulation: A Conversation between a Hippy and God. The Australasian Accounting Business & Finance Journal, 1 (1): 51-55. Retrieved on 30th April 2010 from: http://ro.uow.edu.au/cgi/viewcontent.cgi?article=1004&context=aabfj Skill Matching, 2007, the Accounting Profession in Australia. Retreived on 30th April 2010 from: http://www.skillmatching.com.au/node/16 Statens, Kvalitets- och, 2003. Accrual Accounting Regulation in Central Governments: A Comparative Study of Australia, Sweden and the United Kingdom, Retrieved on 30th April 2010 from: http://www.esv.se/download/18.8698810098c1192a8000750/Accrual+Accounting+Regulation+in+Central+Governments.pdf TASMAN ASIA PACIFICA, 2007. Analysis of market circumstances where industry self-regulation is likely to be most and least. Retrieved on 30th April 2010 from: http://www.treasury.gov.au/documents/1128/PDF/ch8.pdf World Trade Organization, 25th September 2002. Sound macroeconomic policies and far-reaching structural reforms, behind Australia's impressive economic performance, retrieved on 30th April 2010 from: http://www.wto.org/english/tratop_e/tpr_e/tp202_e.htm Read More