Accounting Theory in Availing Information to Different Stakeholders - Assignment Example

ACCOUNTING THEORY ASSESSMENT: SHORT ANSWERS & CASE STUDY Student’s Name Course (Due Date) Section A Accounting theory and analysis is unit that is focused on identifying the relevant theories that are deemed useful in executing accounting tasks. It is focused on a given set of principles under which a given subject is formulated from in order to expound on given facts or events1. The two areas discussed within this unit that are deemed important and, which would effectively relate to the business operations of the company are corporate governance as well as the accounting regulation and the standard setting process for business operating in Australia and the world over. First, it would be beneficial to comprehend the information pertaining to accounting regulation and standard setting processes in order for an entity to fairly familiarize itself with such aspects as rules and principle based standards that are deemed necessary in the course of preparing and analyzing financial statements. It is important that an entity is fully engaged in regulation processes given that it enhances the efficiency levels in regards to allocation of capital items, it offers cheaper levels of production, enhances the level of public confidence at any given moment in time and also, it facilitates the element of standardization. Given that the firm is fully engaged in providing external auditing services, the element of public confidence is deemed imperative 2. Subsequently, this important area of accounting theory provides imminent information pertaining to the underlying regulatory framework for reporting environments where four distinctive environmental settings are identified as being; legal, economic, political and social settings. Auditors are required to adhere to the aforementioned regulatory frameworks since it allows for statutory and self-regulation concepts that aid in heightening public confidence. As an auditor, it is important to understand the facets behind standard setting and accounting framework regulation in order to ascertain the benefits of harmonization of accounting information. For instance, iharmonization, which is a concept that is brought about by aspect of accounting regulation, facilitates international comparability, it reduces the underlying cost of capital and also, reduces the conflicting account reporting requirements. Significantly, the area stipulates distinctive auditing standards that are practiced internationally, a level of information that would be deemed useful in case the firm opts to venture operations in international auditing and financial consultancy markets 3. Information that is availed through corporate governance; an important area of Accounting Theory and Analysis 308, is likely to aid with the comprehension of such aspects as a company stewardship, the level of shareholder’s confidence, composition of board of directors , aspects of risk management and remuneration of executives within a given potential client firm. Given that the firm is majorly focused on providing external auditing services to medium sized businesses, it is thus imperative to understand such notions as problems that arise due to mishandled management, which also happens to be discussed in detail within the discipline. For instance, it is ascertained that problems attributed to management corporations are likely to be caused by such self-interest aspect as fraud and perquisites, anti-social behavior and also, capacity to hide or falsify important information. This information will likely help an auditor in formulating the red flags of possible fraudulent activities within an organization. It is noted that poor level of corporate governance is directly linked to such aspects as poorer firm performances, tremendous level of regulation for most companies, decreased level of consumer confidence towards certain goods or services availed to the market as well as a reduced economic growth level of the business environment upon which the entity operates. With this set of information, an accountant would likely to provide relevant recommendations to an ailing firm in order to assist it with regaining enjoyed financial stability. Distinctive elements of corporate governance provides relevant information that pertains to such aspects as the controlling and directing capacities for directors in order to ensure that they fundamental management levels made reliable decisions , it avails information that pertains to the role of shareholders so that it is ascertained whether these stakeholders enjoy the capacity to protect their interests within a corporation as well as provision of information that relates to the aspect of transparency and accountability4. It is crucial for any accountant to have access to this kind of information given that it expounds on the different levels of relationships that exists within a functional corporation. In conclusion, it can be seen that accounting theory and analysis is a unit that avails information to different stakeholders of a given firm in regards to such aspects as corporate governance and accounting regulation and standard setting. It is important that an accountant is fully aware of the information given that it aids with the scrutiny of operations and identify such vices as fraud on the part of management. An accountant with the company can also use the information pertaining to accounting regulation and standard setting to understand international auditing in cases of international clients. Read More