Accountants who can non merely aid directors on cost control but besides provide the fiscal information which stockholders and the authorities demand could be the most of import function in information flow of houses. In the yesteryear, accounting information may merely be related to measure of the company ‘s capital. Accounting information, today, include more information which is requested by external users such as authorities. Berry and Jarvis ( 2006:6 ) reveal that ‘most of the information still relates to fiscal public presentation, one-year studies of organisations now contain information that is non fiscal and relates to other countries such as administration.
‘ This clearly shows that accounting information is no longer entirely used for doing determinations by directors. Therefore, duty of comptrollers such as transparence and honestness is of import. However, some fiscal dirts still go on in recent old ages. For illustration, Enron ‘s top degree direction ignored long term jobs in the accounting studies and so published intelligence about traveling insolvent within one month when they corrected it.
Therefore, this essay aims to discourse how comptrollers can act upon the information flow which is employed by internal directors and external users and, in add-on, seek to analyze advantages and disadvantages of issues when directors or external users trust the information without critical thought.
Duties of comptrollers
Boczko and Davies ( 2005:20 ) had defined comptrollers as: ‘the pattern of accounting. ‘ It has been known that fiscal and accounting studies such as balance sheet, hard currency flow statement and income statement are written by comptrollers. Accountants should supply honest and crystalline fiscal studies because people have right to cognize about the position of companies. For illustration, people who use fiscal studies for investing or direction may care about coloring material which is ruddy agencies fiscal loss or crisis of the Numberss in accounting study. In add-on, duty of comptrollers may non merely concentrate on the information in accounting studies but besides aid directors for doing determinations. Boczko and Davies ( 2005:629 ) concluded that “ comptrollers must non merely guarantee that information is accurate, dependable and timely but besides that it is relevant for the intent for which it is being provided, consistent for comparison, and easy understood. ”
How comptrollers consequence information flow
Berry and Jarvis ( 2006:7 ) identified that accounting information can be used by two groups of people: those inside the endeavor such as the directors ; those outside the endeavor such as stockholders, Bankss, revenue enhancement governments, and the authorities. Internal and external users could utilize accounting information for planning, determination devising and other demands. Boczko and Davies ( 2005:629 ) have shown that
The function of the comptroller can be seen to hold changed as IT systems have eliminated the demand for tasksaˆ¦ . Accountants are now more involved with analysis and rating of information, and the usage of techniques in support of concern decision-making.
In other words, comptrollers are one of factors act uponing information flow within houses. As the figure 1 illustrated, Sen ( 2007 ) demonstrated that main fiscal officer ( CFO ) who is professional comptroller could be the nucleus function within concern administration. This clearly shows that comptrollers are core function in companies and directors should cognize how of import comptrollers are. It is widely believed that information flow which is provided by comptrollers could deeply influence internal directors to do every determination. Berry and Jarvis ( 2006:14 ) stated that ‘financial accounting information relates to the yesteryear and the determinations that need to be taken relate to the hereafter. ‘ In my experience, for illustration, when a director wants to buy new equipment to better staff ‘s work efficiency, he or she ever has to inquire main fiscal officer ‘s sentiment because this determination may impact the informations in company ‘s fiscal studies.
As the figure 2 shows, Boczko and Davies ( 2005:28 ) revealed that fiscal information is of import to a broad scope of groups both internal and external to the administration. This clearly shows that many external users such as clients may utilize houses ‘ fiscal information. For illustration, the authorities can inquire company to pay more revenue enhancement depends on their fiscal information. Fiscal information is besides required by citizens who can utilize the information to measure companies ‘ issues such as societal duty, political state of affairs and environmental care.Moreover, external users may besides utilize fiscal studies for many grounds. Berry and Jarvis ( 2006:8 ) claimed that fiscal information such as balance sheets and hard currency flow statements can be used by loaners who lend money in order to gain a return on that money. I, as an investor, for illustration, ever check company ‘s fiscal information before I become its stakeholder. Furthermore, there are different fiscal studies and information which can be used in different and specific manner. Berry and Robertson ( 2002 ) cited in Berry and Jarvis ( 2006:11 ) pointed out that the hard currency flow statement was the most of import statement of the three primary fiscal statements. Cash flow statement could be portion of significance of fiscal information flow.
How comptrollers can lend to efficient information flow
Although fiscal information is really utile for internal and external users, there are still some restrictions of it. Berry and Jarvis ( 2006:14 ) argued that ‘financial studies are frequently hard to mensurate with any truth and the figures therefore go more subjectiveaˆ¦.certain points are hard to quantify in footings of value and are non easy included in fiscal studies. ‘ Company leaders may merely cognize the Numberss in their rivals ‘ fiscal studies. These can be used for leaders to guarantee their rivals are stronger or weaker than their ain companies. However, their rivals ‘ fiscal studies may conceal fiscal hazard such as income job which buyers may non pay the payment in clip. For case, Buondonno et Al ( 2005 ) reported that ‘Enron incurred a $ 638 million dollar loss for their 3rd one-fourth in 2001 and overstated their net incomes by $ 586 million over the past four old ages. ‘ This sort of event could act upon non merely the operation of houses but besides planetary economic sciences. The grounds suggests that comptrollers could use new information engineering to efficient information flow both within and outside concern administrations. Alves ( 2010 ) suggested that ‘Information engineering plays a critical function in modern concern, particularly sing the accounting map. ‘ It is widely accepted that comptroller should utilize information engineering to raise the degree of satisfaction which is felt by internal and external users. As the figure 3 below, Alves ( 2010 ) proposed that information engineering investing is related to the degree of satisfaction with accounting information. In my experience, for illustration, if a house uses high engineering system to describe their fiscal studies more detail even more complex, people may experience satisfied with the comptrollers and their studies.
There are many information engineerings in the universe. One of possible and acceptable system which is called enterprise resource planning ( ERP ) system should be implement in houses. Boczko and Davies ( 2005:612 ) described enterprise resource planning ( ERP ) system as: “ support processes external to the administration that may ease information flows and planetary operations between the administration and its trading spouses, providers, and clients. ” In add-on, ERP system is a existent clip system which can describe by monthly, hebdomadal and day-to-day. This map could be important for leaders for doing determination. Another advantage of ERP system is that informations can merely input one clip and so used in many ways. Boczko and Davies ( 2005:612 ) highlighted that “ this may supply benefits to the administration from altering its concern procedures in line with ‘best pattern ‘ instead than go oning with organizational methods that may be out of day of the month and no longer appropriate. ” Company leaders and comptrollers should utilize these advantages of ERP system for efficient information flow.
Alternatively, company ‘s fiscal studies should be audited by external professors who are certified by authorization administrations and have more experience about happening bugs in fiscal studies. Therefore, Certified Public Accountants ( CPA ) could be another possible solution for forestalling fiscal fraud. Fan et Al ( 2009 ) recommended that ‘CPAs should carry through ( sic ) their ain responsibility-auditing the accounting information provided by listed companies purely. ‘ If companies can supply existent information and certified public comptrollers can scrutinize fiscal studies more item, fiscal fraud or event may non go on or, in other words, it could possible be prevented. Wang ( 2010 ) suggested that ‘the external administration of CPA professions is more effectual to corporate governanceaˆ¦ and these internal and external elements have important influence on the quality control of audit studies. ‘ Therefore, houses should engage certified public comptrollers to scrutinize their ain fiscal studies and so they may give high quality of fiscal studies to external populace.
To reason, duty of comptrollers is that they should give existent measure of fiscal studies about houses ‘ capital and other information such as hard currency flow. Furthermore, fiscal information and studies may impact information flow to internal users in, for illustration, decision-making and external users in, for illustration, investing. In order to guarantee the informations in companies ‘ one-year fiscal studies are existent and valuable, comptrollers should utilize information engineering such as ERP system to efficient the information flow both within and outside concern administration. For illustration, comptrollers should utilize the existent clip map in ERP system to do certain the information is trusty. Furthermore, certified public comptrollers should fall in the procedure of doing fiscal studies or they may organize a group to scrutinize houses ‘ fiscal studies and fiscal information flow.
Cite this Responsibility Of Accountants Such As Transparency And Honesty Is Important Accounting
Responsibility Of Accountants Such As Transparency And Honesty Is Important Accounting. (2016, Nov 15). Retrieved from https://graduateway.com/responsibility-of-accountants-such-as-transparency-and-honesty-is-important-accounting/