Accounting is an essential process that can be used by the firms to record, summarize, evaluate, and control the various transactions that is done on a regular course of operation. This project intends to deliver vital information regarding the current accounting regulation that is applied within Australian. However, it could also analyze different type of regulatory framework that is applied to make financial statements by the large entity.
Accounting is an essential process that can be used by the firms to record, summarize, evaluate, and control the various transactions that is done on a regular course of operation. This project intends to deliver vital information regarding the current accounting regulation that is applied within Australian. However, it could also analyze different type of regulatory framework that is applied to make financial statements by the large entity. It has been determined that the chosen rules and legislation AASB, IFRS, and AAS has accurately taken into account to provide strength to the financial firms in respect to manage different reporting system. Regulation and standards have become a reliable source that could guide me as well as investors to make a positive investment decision into some profitable business project of an organization. Henceforth, the rules and accounting standards must be followed effectively so that the chances of mistakes could be overcome in the future reporting process. Apart from this, this report intends to deliver potential ideas regarding the use of inefficient accounting system could lead to certain accounting mistakes and fraud. It can lead to an impact on the overall growth and profitability position of the company. Therefore, by using specific recommendation this complication could be managed accordingly to maintain accuracy and integrity in the financial reporting. The entire report has provided positive knowledge to the entire team members as well as the investors to enhance the confidence and trust while reporting the financial statements in the future.
In the present business scenario, most of the business organizations, whether small or large are facing accounting issues. It happens because of not having reliable accounting standards that can help them to manage, report, and interpreted different financial transactions that are incurred by the entity. The firm needs to make use of specific accounting rules and regulations that can best fit the classification of the economic data in a valuable manner. It has been analyzed that all country’s is having their accounting principle and regulation (Henderson and et.al., 2015). Similarly, Australian financial reporting regulations are also playing an important role in managing the firm reporting system effectively. Therefore, this project report intends to highlight specific facts and legislation that are followed within Australia. Apart from this, critical evaluation of the financial reporting laws and the relevance of positive accounting theory (PAT) in the case of any accounting fraud is done accurately.
In any country, an organization needs to have an efficient accounting system that can assist them to record their key financial transaction accurately without facing reporting issues. But in a couple of years, it has been analyzed that most firms in Australia are facing difficultly with its reporting process because of not following specific accounting rules while preparing the financial statements. However, the primary motive of using accounting rules and legislation is to ensure bookkeeping transparency, reliability, accountability, and comparability of its financial statements (Pellegrino and Lodhia, 2012). It can only be possible by using systematic accounting policies and standards of Australia so that each transaction would be recorded accurately into its respective reports. The regulatory framework that is used by the organization within Australia for preparing its financial statements is controlled and managed by AASB. It is responsible for identifying the specific needs of the clients or entity that is using this to report different financial transaction with the concern information. It can help in increasing confidence among the entity while the financial reporting process. AASB is an Australian regulatory agency that is created with the motive to manage and develop financial reporting standards rules for the small or large entity. It consists of a conceptual framework that is taken into account to create laws and accounting legislation. The board operations and duties are set out in the concern of ASIC (Australian Securities and investments Commission) Act 2001.
The AASB standards are well-organized with the AAS that consists of particular norms of IFRSs. It has been seen that the complied framework applies to the yearly reporting tenure that starts on or after 1 July 2014. However, the framework for the formulation of financial statements is amended incorporates the concept of financial reporting that is issued by IASB. Moreover, this particular conceptual framework has been set out with the underlying preparation of the financial statements to the external parties (Chua, Cheong and Gould, 2012). The primary objective is to assist the AASB in the creation of future AAS as well as review the existing AAS that consists of proposed IASB rules. Apart from this, it would also help the AASB in promoting standardizations of rules and accounting laws as well as the process that is associated with the presentation of the financial statements. It will also provide a primary reduction in the total number of alternatives that are used for the accounting treatments that are applicable under the AAS guidelines. Furthermore, the AASB tends to recognize that under the limited cases it might be the change of conflict among the framework as well as the AAS. Accounting policies and standards must be adhering to the technical aspects of the accounting procedure (Van Mourik and Walton, 2013). The managers, as well as auditors, are liable for implementing an effective policy that can reduce the chances of fraud while reporting.
It has been identified that the financial statements are generally prepared on a certain assumption or principle of going concerned. An entity will continue its operation for a longer period, thus it is important to have specific standards procedure that could be useful for reporting its transaction accurately in the different statements. Thus, it is also assumed that the organization has not having the intention of either the required to liquidate. If such type of situation occurs, the entity needs to use other ways to prepare the financial statements for the period.
According to the AAS regulation, an asset could be recognized within the balance sheet in the case of probability that future economic advantage would be flow to the firm. The reliability of the assets could be made on the fair value. It could not be considered when the expenses have been generated for the improbable situation to the entity ahead of the present accounting period (Romney and et.al., 2012).
Following the debt, it has been recorded in the balance sheet when there is the possibility that the outflow of resources represents the economic advantage those are results from the settlement of current obligations. For examples, debt for stock orders, but not yet been retained by the entity.
In respect to the income, it has been recognized within the profit and loss statements at the time of increment within the economic benefits those are related to the growth of assets or decrease in debt. For example, the total net growth in assets occurs on a sale of products or services or reduction in debt arises from the waiver of a payable. Similarly, the expense is analyzed with the decline in the future economic advantage those are results in a reduction in assets or growth in debt which occur during the time. For example, the accrual concepts of staff entitlement as well as the depreciation of machinery are taken into account.
According to the section 101 of AASB, the purpose of financial statements preparation is to disclose each financial position, performance and cash flows of an organization that can be used by the person in building economic decision. Therefore, accounting information must be present accurately and fairly with the recognition of AAS standards (Christ, Burritt and Varsei, 2016). However, it is often determined as a minor amendment because of the flow-on effects that are related to the change in different reporting standards or policies prepared by the AAS or IAS. Thus, an entity needs to make use of various accounting standards that are prescribed by the different reporting agencies so that the chances of accuracy with the financial reports could be increased in the future.
In my viewpoints, I can clearly say that the accounting regulations of Australia are quite effectively working for large or small organizations. It can help them to maintain their accounting accuracy and control its implication on the overall financial performance of the company. The purpose of the AASB agency is to prescribe the primary presentation of the common goal of financial statements to ensure accountability either with the financial reports of last year with some other entities (Van Akkeren and Tarr, 2014. ). The accounting rules and standards made by AAS and AASB has effectively useful for the entity to identify its financial position, performance, and cash flow that can help the client in making a profitable decision as per the current market demand. As per the AAS 25 which is related to the financial reporting rules those are used by the entity to manage their financial reports. AASB 1004 is associated with the contribution, 1039 is used to manage the financial reports, 1049 deal with the entire legal government's sectors financial reporting, as well as 1051 or 1052 is related to disaggregated accounting disclosures. The regulatory framework that is used by the organization within Australia for preparing its financial statements is controlled and managed by AASB. It is responsible for identifying the specific needs of the clients or entity that is using this to report different financial transaction with the concern information. It can help in increasing confidence among the entity while the financial reporting process.
In the viewpoint of AASB, (2013), the certain announcement might be made by the Australian government with reliable rules and a policy has assisted the entity in regular its financial reporting system accuracy without any bias. However, CPA Australia has a well-organized relationship with the accounting regulators that allows it to deliver reviews on a particular range of accounting standards or rules issues with the motive to maintain transparency in the financial reporting system. Moreover, by the use of new standards laws within ASA 540 the operative for financial reporting is commencing effectively as well as help to analyze the implication faced by the SMSs while reporting period. The AASB agency tend to offer wide range accounting disclosures rules under which the firms reporting requirements are set with the motive provide maximum accuracy and integrity to the auditors while making financial statements.
According to the AAS report, the Australian organization needs to obey all the accounting theory and practices while making financial statements with the appropriate accounting standards so that changes of rigidity could not occur. Moreover, the accounting legislation has been associated with the extremely tough provision that can provide transparency in financial reporting. Perhaps, the growth of the AASB provision entirely relies on maintaining security and regulation tend to provide better sustainability to the reporting system. All the AAS provision those are framed with the AASB has been a concern with the motive increase the performance of an organization those are operating at large scale in Australia. Hence, it is an essential decision for the entity to provide maximum authority to the auditors at the time of analyzing the financial reports of the various firms. It has been examined that some different steps and rules are required to be followed accurately so that future chances of mistake or fraud could be avoided in the future.
Guthrie and Pang, (2013), state that financial reporting is generally one of the primary sources of financial information to the auditors and other key stakeholders that are used with the motive to make a formal decision regarding investments. The purpose of this AAS standards and legislation is to maintain the reliability of accounting information for the users that are needed to have an interest in the shares of the company. Investors tend to get vital information regarding the income statements, cash flow, final statements and changes in the equity to examine the current financial position of the entity. While reporting process, the Australian standards, and laws are strictly followed so that each transaction could be recorded into the statements respectively. However, the accounting regulation tends to prescribed under the company's act 2013, therefore it happens to be mandatory for the partnership concern (Baker, 2017). The guide to environmental accounting tends to provide a powerful way for the Australian to make a better aspect of the country's unique contribution to its well-being into effective accounting decisions. However, certain complex challenges could provide maximum advantage from the accounting perspective which will be used to reduce the risk as well as increase confidence among the auditors. Thus, it has been analyzed that the Accounting system has displayed great revenue growth in the last couple of years, due to the increasing adoption of a more advanced accounting system as per the demand of the firm. Similarly, the audit services have remained a reliable source of income for the industry firms because auditors are using current standards and regulations to make a potential report for the investors. The Australian companies tend to provide a better accounting service that consists of auditing accounting standards, preparing final statements, tax returns, and bookkeeping need accurately.
In the present business scenario, most business firms tend to face various accounting issues that can create a negative impact on the performance of financial reporting. The accounting fraud tends to impact the entire country as well as the organization overall performance. In this global era, the reporting that could assist them to develop an effective aspect for international reporting growth (Ball, 2013). It could lead to an impact on the stakeholders that are entirely based on the financial report of the company. Therefore, the entity needs to manage its accounting related implication closely. For example, the Enron Scandal (2001) is one of the most controversial accounting scandals that have occurred in the last decade. The AASB agency tend to offer wide range accounting disclosures rules under which the firms reporting requirements are set with the motive provide maximum accuracy and integrity to the auditors while making financial statements.
Enron Corporation was generally known as the US energy, products, and services industry that is located out of Houston, Taxes. It was discovered in the year 2001 that the firm had been using accounting loopholes to hide millions of dollars of bad debts, while simultaneously inflating the economic growth and earnings. This accounting fraud has resulted in investors losing over $74 billion as Enron’s share price decline from $90 to under $1 within an accounting period (WILLIAM THOMAS, 2002). After the fact, the scandal was in a great controversy as an organization had been shocking, as the prosecutors Andrew Weissman intend to indicate not just a single, but the entire accounting entity. However, it was a consolation to the around 20000 employees that had lost its job at the time conviction was later overruled. Henceforth, it has been examined that they were related with the purpose to impact the brand value of the company by misleading the accounting reports.
In an organization, it has been analyzed that they are always having some kind of accounting implication that can create serious complication to its financial position in the Australian market. Therefore, they need to make use of an effective accounting theory that can help them to record and manage their financial records accurately. Thus, PAT intends to examine the selection of financial rules and legislation across different entities. It has been determined that the economical aspects needed to be developed effectively so that accounting-related fraud could be avoided in the future (Dorminey and et.al., 2012). The theory used to attempt with the motive to explain as well as make positive estimations of specific aspects that are applied at the time of reporting purpose. The PAT relies on a huge aspect of an overall activity that is undertaken in economic as well as positively reliant on the efficient market situation, capital assets, and agency theory. However, the Enron Scandal (2001) is not followed by any specific accounting rules or theory while recording its financial data. That could lead to creating such a type of scandal for the Australia economy. According to the section 101 of AASB, the purpose of financial statements preparation is to disclose each financial position, performance and cash flows of an organization that can be used by the person in building economic decision. Therefore, accounting information must be present accurately and fairly with the recognition of AAS standards (Christ, Burritt and Varsei, 2016).
In the context with the capitalization of the Raptor firm, Enron tends to issue common stock in exchange for a note receivable of $1.2billion. The Enron growth notes used to retain and investor’s equity to show this transaction effectively that appears to violate GAAP principles. The company has failed to consolidate the LJM and SPEs into its financial reporting system with the subsequent data revealed they would not have consolidated accurately. On October 17, the Enron Company has announced the SEC was searching into the associated party transaction among Enron and its close partners which are owned by Fastow (Thomas, 2012). The restatements of financial statements result in $591 million losses over the last couple of years at the end of 2000. Furthermore, it has also noticed that the company has not followed the accounting rules and standards as prescribed by the IAS and IFRS while reporting its financial statements.
Throughout the entire case analysis, it has been examined that accounting fraud has been provided reliable data along with the financial standards and rules that will lead to implication on the reporting system. It has been analyzed that a reliable standard can help the Enron Company to manage its accounting system accuracy. Due to not having appropriate standards and rules, it can lead to such types of complications that can impact the entire growth and performance of the industry in the country. It has helped me to increase confidence among me to make use of various financial rules and regulations that are required to manage the accounting transaction accurately within creating any mistakes. This case has to increase great trust and flexibility to use correct rules and legislation that can help in controlling the financial impacts while reporting.
The above analysis, it has been examined that various organization is continuously involved in resolving accounting fraud and other misleading activities. Therefore, it is important to determine the negative implication that is lead to affect the overall performance of the company in the future. Thus, below-mentioned are some key points that can help the firm to improve its accounting fraud such as:
• Accounting policies and standards must be adhering to the technical aspects of the accounting procedure (Van Mourik and Walton, 2013). The managers, as well as auditors, are liable for implementing an effective policy that can reduce the chances of fraud while reporting.
• Anti-fraud collaboration rules are required to be followed accurately so that financial complications while internal auditing can be managed accurately.
Throughout the entire project report, it has been summaries that accounting rules and policies are most importantly useful for the entity to manage its financial statements effectively. It is vital to have specific information or knowledge regarding the rules, standards, and legislation of accounting that are used by the accountant while recording financial transactions during the time. However, the current regulation of AASB and AAS standards tends to be applied accurately so that financial transparency could be maintained for the long-term process. Moreover, the current conceptual framework of Australia has been providing a great platform for the Australian entity to manage its business operation effectively. Furthermore, it has been seen that most entity intends to face accounting fraud or challenges that can impact its financial potion badly. Thus, with the use of accurate standards and laws accounting fraud could be controlled in the future.
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