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The accountancy profession has continued to undergo various developments due to the changing needs of the industry. Initially the accountant’s role in an organization was known to be the carrying out of book keeping duties and producing figures which were later interpreted by the management. But due to the changing requirements of the industry the role of the accountant has evolved and now encompasses management and giving prediction on key management variables like inflation, liquidity and profitability. They have also been actively involved in determining the risk levels the company may be exposed to. This information forms a main basis in the decision making process for the company. Many users of the accounting information are relying on the accountant’s advice to make their investment decisions on areas like stocks, property and general business. However, the profession faces a lot of challenges that continuously emerge as more and more continue relying on the information.
The statement is very true based on the role the accountant has continued to play in the corporate sector. The accountant as mentioned has continued being relied upon to produce figures that will form the basis of major decisions in the global business scene. The periodic reports given by the accountant to the management should be taken seriously because they indicate the direction the company is taking in terms of performance. But in the performance of their tasks they come across many challenges that come about due to the nature of their job. Some of these challenges may lead to disastrous results which among others include the collapse of companies and the loss of trust by the majority (Article 2).
Some of these challenges include the setting of standards in the accounting profession that are universal. This has remained one of the main challenges because some jurisdictions have been very conservative on the acceptance of new accounting standards. Countries like Tunisia have great respect for their cultures and despite seeing the importance of adopting these standards they have been slow (Zahra, 2011). The result of this will be non accuracy of the information produced because it will not meet the global standards. The profession has also failed to identify clear measurement yardsticks for key financial variables like inflation. This makes the reports generated by the accountants to be unreliable and not factual. These reports may be only valid at the time of producing because immediately, the rate of inflation may change and affect the actual value of almost all the balance sheet items like assets, liabilities and equity. Any investor who relies on such information to make a decision will be using the wrong basis. The industry must therefore continue investing in more research to make sure they find a lasting solution to the problem that lies in the accounting for changing prices (Holzer, 2010). This has made accountants be blamed for their role in preparing financial statements but the mistake is in the industry because it has not set any known methods of computing a variable like inflation.
The accounting profession has also met challenges in the way the private sector implements the set standards. Most of the private sector players adopt their own standards which are not in tandem with the industry. They will always claim that their other subsidiaries in other jurisdictions do that and they have to follow suit. This is usually common to many multinationals. The local accountancy regulatory bodies have no control over the reporting standards(Parker, 2010) in such firms and if there is any impropriety the investors of such firms normally suffer a lot of losses.
The accountant has evolved to being a risk manager for the business. He has all the details and guides the decision makers on the best moves to take. His evidence will be the facts revealed by the figures he has computed and other reliable information from the markets, competitors and even other business partners like suppliers and distributors. This information is analyzed and used to assess the degree of exposure of the company to risk.
This information is then made public and the investors are supposed to use it in their decision making. However not all the investors have the knowledge to make the correct interpretations of such information, and majority disregard it and then cry foul in the future. Therefore the accounting profession must devise clear standards on reporting to make sure the information flows from the top management levels to the very low levels of the prospective investor.
The profession should also establish the actual scope of the auditor (Maher, 2005). The disclosures he makes are sometimes treated with a lot of subjectivity by the management and his proposals are sometimes never implemented. This has been the cause of the collapse of many companies who only raise the red flag when matters have gone completely out of hand. The role of the auditor should be reviewed where he should alert even the government when they notice any unfair trade practices in their organizations. Those auditors who collude in the manipulation of reports to create bad illusions on the minds of investors should be severely reprimanded including being banned from the profession. This will involve the industry introducing very clear policy guidelines on best practices and imposing hefty fines on any defaulters. This is only achievable if the companies will also come up with strict code of ethics governing financial reporting. Failure to do this will lead to continued blame to the profession by stakeholders who will question the qualifications and independence of those in the profession. The companies will also be required to embrace innovation through installing efficient management accounting innovations. This will lead to improvement of the decision making process because the reports will become more reliable since the procedures used to collect data and make forecasts will be accurate.
The accountancy profession has come a long way and is continually being relied upon by many firms in executing their management decision roles. This therefore indicates the urgent need by the industry to come up with a universally acceptable code of conduct in the execution of the various duties in the profession. They must give assurance to the professional that his role should be independent and give grounds for recourse in case of any victimization. This is to protect those who may give in to their bosses’ demands for compromise in the tabulation of figures in order to protect their jobs. This will require the involvement of the government, the private sector and the general public to join hands in the denunciation of cultures and trends that may hinder the implementation of these best practices. Unless this is done the profession will remain behind the expectations of many.
Holzer, M (2010) International Auditing Standards. London. Addison Publishers Ltd, P.23
Maher, J (2005) Advances in the Accounting Profession. London. Hart Publishing Company, P.4
Parker, C (2010) Standards in Accounting. Berlin. Wintzel Publishers Ltd, P.18
Zahra, D (2011) “Tunisia trade reports” (Online). Available from http://www.doingbusiness.org/data/exploreeconomies/tunisia/ (Accessed on 26th April 2012)
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