Contemporary Issues in Accounting and Finance

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Contemporary Issues in Accounting and Finance

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Existing regulatory system of accounting boasts the introduction of a socially responsible accountancy framework that is designed specifically to cater the much talked about ‘’Public Interest’’. Acting in the public interest can be a difficult concept to understand at times and all the conceptual frameworks that have been devised regarding Accountancy and the profession in general, have tried to address the issue.

Public and Public Interest

The foremost issue tends to be the identification of who the Public is in this particular context and what precisely are their interests. Public includes the widest possible scope of society and one of the most complete definitions came out recently from International Federation of Accountants (IFAC) which states the public interest as:

‘’The net benefits derived for, and procedural rigor employed on behalf of, all society in relation to any action, decision or policy (IFAC, 2012)’’

The two widely acceptable Accountancy frameworks in Practice are GAAP (Generally Accepted Accountancy Principles) and IFRS (International Financial Reporting Standards) and both have outlined significant amount of criteria for accountants in practice of how to behave ethically and in the best possible public interest.

Both Regulatory frameworks have found common ground in the following dilemmas/threats that prohibit accountants behave in socially responsible manner include:

Self Interest: is the threat that arises from a financial incentive potentially influencing the unbiased judgement.

Self-Review: is about not evaluating the judgement earlier passed, out of the fear of substandard service provided.

Advocacy: which arises when an individual promotes or facilitates a particular position or statement?

Familiarity: a threat that comes from knowing someone closely and the relationship hinders the ability of an accountant to act in the public interest.

Intimidation: happens when deliberately a biased judgement is passed out of the actual or perceived pressures (Consultative Committee of Accountancy Bodies, 2011).

Role of the Regulatory Framework regarding Transparency of the financial Information

Production and the subsequent distribution of the financial information is one of the key areas where both ethics and public interest have to be considered by the accountants.

IFRS has played the most pivotal and relevant role so far in this dimension to underline how a regulatory framework should behave when it comes to the financial information and its transparency (Epstein & Jermakowicz, 2008). It addresses:

  • The objective/scope of the financial reporting.
  • The qualitative nature of the relevant information.
  • The entity presenting such information
  • The definition, recognition and evaluation of the factors from which financial statements are produced.
  • Concepts of Equity and Capital Maintenance


Further recommendation for the greater transparency in financial information may include.

  1. Enhancing the disclosure regarding off-balance sheet items particularly assets. Assets are commonly excluded from the financial statements citing the loopholes in the conceptual framework and committees like International Auditing Standards board (IASB) must act to introduce a uniform structure to address such complex items.
  2. Valuing certain complicated financial instruments like derivatives can be a difficult task and the Accounting bodies should act responsibly to simplify the concept. Also special attention needs to be paid to valuing financial instruments when markets are not operational.
  3. Provisions are a critical area and a lot of modern day businesses tend to exploit them. More transparency is needed in this respect and a specific report should be devised by the large corporations detailing the treatment of all the provision created for the fiscal year (Tweedie, 2008).

Current Regulations

  1. Tax Avoidance:

Right now the Accountancy profession and legislation in general are much more integrated than ever before. Close Parliamentary support is available to most recognized Accountancy bodies and issues can be sorted more promptly with close coordinative support from relevant institutions.

Tax is considered the backbone of a nation’s economy and collecting the all the due taxes have often proved to be challenging task for tax authorities.

Tax avoidance has been reduced significantly through proper law enforcement and a lot of recent examples can be cited to support the fact. The authorities in UK for example, are no more prone to the technical language used in the legislation to be used against them.

Complicated legal matters are also fast tracked nowadays and Revenue and Customs Commissioners v. Limitgood Ltd is a perfect example of this. The facts of the case state that Limitgood and Prizedome Ltd were sold to a series of companies with £113.9m of losses reporting on their financial statements. The acquiring companies later on tried to set off these losses against the gains of their un-connected subsidiaries which was overruled in a fast-tracked case showing how keen the constitution is solve such well-wrapped bogus claims (Bowler, 2009).

UK’s anti-avoidance legislation is designed specifically to reduce the tax evasion and its detrimental effects on its economy. Great efforts have been made to raise awareness among the accountants and relevant personnel to reduce the Tax pap. Tax gap is defined by Her Majesty’s Revenues & Customs (HMRC) as the difference between the tax that is actually collected and the tax that is due in total (HMRC, 2014).

It depends a lot on the Accountancy professionals and the advice they provide to their clients regarding their taxation. From the figures provided by the HMRC it is evident that Tax accountants are behaving more ethically than ever and are helping towards reducing the Tax gap.

The above figure shows 8.1% decrease in tap gap over the period of 8 years from 37bn pounds to 34bn pounds.


  1. The legislators must outline a plan showing how they are going to tackle the concept of advice being given by the large accountancy firms to their multi-national clients. Multi-national organization tends to take the advantage of their global presence and try to shift their profits to tax heavens like Luxembourg and Cyprus. Accountancy firms shouldn’t advertise tax products of tax reduction schemes and must act ethically in the public interest by strengthening the economy through enhanced tax collection.
  2. Being a majestic topic, Tax cannot be completely regulated through legislation and there is an ever increasing need for accountancy firms to develop an internal code of conduct. Regulators must go in depth to determine what to be included in this code and how it should be implemented. Instead of adopting the code as moral obligation it should be compulsory to stay within the limits defined by the ethical code of conduct.
  3. Taxpayers have always been targeted in case of a discrepancy and that doesn’t always mean that the taxpayer is at fault. Governments must make stringent steps towards the tax advisers and financial sanctions should be introduced in the case of non-compliance.

Accounting over the Internet

Accountants all over the world a connected through different databases online with organizations focusing more and more focus on the online resources. Internet accounting makes the life much easier as the data is more easily accessible, with accountants still playing an integral part.

Closely related professions like Banking and taxation are all being modernized and are following the E-commerce boom. Introduction of internet banking and online tax returns are helping the accountancy professionals a great deal to not only do their work efficiently but also they are able to dedicate more of their time to locate any discrepancies to act in the public interest.

Comparatively less statutory framework is in existence when it comes down to Cyber accounting. Cross-border implementation of such structures is a massive roadblock and it’s extremely difficult to track down all the perpetrators and their wrong doings. However significant developments have been made in this area that includes World Intellectual Property Organization (WIPO) and Wassenaar Arrangement, trying to prevent the cybercrime (Jiow, 2013).


  1. More initiatives like Joint Cybercrime Action Taskforce (J-CAT) are needed. J-CAT is launched to tackle cybercriminals specially those concerned with the Financial Frauds etc. throughout the European Union but looking at the intensity of the matter; jurisdiction must be increased up to the worldwide level (Europol, 2014).
  2. Accountants and auditors often lack the basic IT training which makes them vulnerable to the online security breaches and frauds. Appropriate training must form a part of the normal routine to let finance personnel know how to avoid the online pitfalls.

Accounting for Fair Value

Fair Value is another delicate matter and determining the value of Assets and liabilities in fluctuating circumstances has never been easy. Some might argue that fair value accounting was one of the reasons the 2008 financial crisis became almost impossible to handle. Market values are taken into accounting gains and losses arising from such valuations are reported in the income statement. But Excessive gains in the boom periods led to uncontrollable losses when the market wasn’t doing so good and the perception towards those losses created a void in a number of economies which even governments couldn’t fill (Laux & Leuz, 2010).


  1. Fair value principles and standards should be re-evaluated frequently and most realistic guidelines should be outlined regarding less liquid financial instruments and highly volatile markets. In addition all these guidelines must be distributed widely for accountants to be able to follow them and act in an ethical manner.
  2. The bodies overseeing the determination of fair value must act in a prudent manner and accountancy standards must be flexible enough to let such bodies be prudent in their decision making.
  3. Institutions using the fair value extensively must be regulated properly and should maintain adequate loss reserves sufficient to cover any expected losses in the near future. Full transparency is needed in how these reserves are created, maintained and allocated.


  1. Bowler, T., 2009. Countering Tax Avoidance in the UK? Which way forward. (Online). Available at: (Accessed: 06 April 2015)
  2. Consultative Committee of Accountancy Bodies, 2011. Ethical Dilemmas Case studies.
  3. Epstein, B., J. & Jermakowicz, E., K, 2008. Wiley IFRS 2008: Interpretation and Application of International Financial Reporting Standards. New Jersey: John Wiley and Sons.
  4. Europol, 2014. Expert international Cybercrime taskforce. (Online). Available at: (Accessed: 06.Apr.2014)
  5. HMRC, 2014. Measuring Tax gaps. (Online). Available at: (Accessed: 06 April 2015)
  6. IFAC, 2012. A definition of Public Interest. (Online). Available at: (Accessed: 06 April 2015)
  7. Jiow, H., J., 2013. Cyber Crime in Singapore. (Online). Available at: (Accessed: 06.Apr.2014)
  8. Laux, C. & Leuz, C. 2010. Did Fair value accounting contribute to financial crisis? (Online). Available at: (Accessed: 07. Apr.2014)
  9. Tweedie, D., 2008. Bringing Transparency to financial reporting. (Online). Available at: (Accessed: 06 April 2015)