Analysis of Theories of Accounting: Effect of Misconduct on Bank Profits

This report analyses the positive accounting theory and its application in protecting banks from customer misconduct and investing in innovation. The report is based on the article on the effect of misconduct on bank profits.

Running head: ANALYSIS OF THEORY OF ACCOUNTING
ANALYSIS OF THEORIES OF ACCOUNTING
Article5: the price of misconduct: Bank profits fall $1.7 billion in royal commission’ wake
Name of the Student
Name of the University
Author’s note
Total words: 677

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Executive summary
The aim of the report is to analyse the theory of accounting based on the article on the effect
of the misconduct of royal commission on the banking sector. The report contains the
detailed analysis of the accounting theory of the bank to protect the economy from the effect
of the misconduct of the customers.

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Table of Contents
Introduction................................................................................................................................3
Accounting theory......................................................................................................................3
Analysis......................................................................................................................................3
Conclusion..................................................................................................................................4
Reference....................................................................................................................................5

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Article5: the price of misconduct: Bank profits fall $1.7 billion in royal commission’
wake
https://thenewdaily.com.au/money/finance-news/2018/11/05/bank-profits-fall-royal-
commission/?utm_source=Adestra&utm_medium=email&utm_campaign=PM%20Update
%2020181105
Introduction
Australia’s big four banks have seen their profit dip after the royal commission issue
crop up nmany cases of misconduct and the return to higher profits can be a while off. ANZ
NAB Westpac and commonwealth bank faces drop in the profit percentage that amount to 5.5
percent in the past financial year, that amount is down to 29.49 billion, and the directors of
the ocenia banking said that their profit would remain in pressure during this period. In the
past years, it is found that the banks has made good amount of provisions for customer
remediation programs. Moreover it is required to make more provision is required and for
that reason the profit growth will be hampered in the near future.
Words : 122
Positive accounting theory (debt hypothesis method)
The institutional isomorphism naturally evolved from its competitiveness. The banks
used to provide housing loans at cheap rate as a part of its corporate social responsibility
programs. The banks used to provide loan so that the individuals can make their house at
cheap rate. However, it came to the knowledge of the banks that misconducts of individuals
is responsible for the fall in the profit percentage of the banks. Therefore making some

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appropriate modification model by the political and corporate elite to make the initial
governance practices have a distribution effect and benefits the interest of the group .on the
other hand the banks based on the social responsibility, corporate disclosure has become a
component of business for a long time. Therefore, it is required to resolve whether the
company uses the disclosure of CSR information to the different stakeholders (Hayne 2018,
1-15).
Words :142
Analysis
The business environment of the banks is changing very rapidly and many new and
strict laws are made to support the competition in the banking sector. There are many new
innovative business enter in the market which will keep the banking business in pressure.the
introduction of the open banking that will make it easier for the customers of the banks to
transfer there fincila data from one financial products to another product is bringing more
challenges for the banks. The banks has to face such challenges and try to sustain in the long
run. The occurrence of this type of business has become a real challenge for the banks and
that effect there operations. The changing desire of the customers forcing the banks to move
from there contemporary style of doing business and to accept new technology in order to
increase their margin of profit (Casonato Farneti & Dumay 2019 20(1), 144-164).
The consultancy firms like KPMG states that the banks will need to balance their
remediation and compliance costs with investment in to new techniques of business which
most of the banks are failing to do.at present. The banks are not able adapt with the changing
circumstances of the business world ad for that reason they are not able to attract new

5ANALYSIS OF THEORIES OF ACCOUNTING
customers for which there revenue earning capacity is falling rapidly (Wishart & Wardrop
2018 43(2), 81-88).
It is further state by KPMG that the banks are currently focusing on the compensation
of the misconducts of the customers and new compliances to stop the misconduct of the
customers in future. This action of the bank is preventing them from investment in innovation
and that led to the losing of profit percentage (McIlroy 2018 (1173), 8).The big four banks
aggregate result after the royal commission case are given below
 Common wealth bank’s profit fall by 4 percent
 The performance of Westpac bank remain unchanged
 The profit of ANZ bank fall by 5
 Only national Australia bank managed to earn profit there profit increased by
5 percent.
The biggest challenge for the banks is not just to balance the expenses but also to bult
up a reliable relationship with the customers by giving them advanced and efficient banking
services.
Words: 356
Conclusion
The recognised theory makes the comparable characteristic from a fashion in a field
so that banks can get reward from this isomorphic change. The accounting theory that is
applicable for this news article is the positive accounting theory which enables the banks to
prevent the misconducts of the customers and help the banks to invest in innovations.

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Words: 57
Reference
Casonato, F., Farneti, F., & Dumay, J. (2019). Social capital and integrated reporting: losing
legitimacy when reporting talk is not supported by actions. Journal of Intellectual
Capital, 20(1), 144-164.
Hayne, D. M. (2018). Submission in response to the Interim Report of the Royal Commission
into Misconduct in the Banking, Superannuation and Financial Services Industry, 1-
15.
McIlroy, J. (2018). Royal commission hears bankers' took bribes'. Green Left Weekly, (1173),
8.
Wishart, D., & Wardrop, A. (2018). What can the Banking Royal Commission achieve:
Regulating for good corporate culture?. Alternative Law Journal, 43(2), 81-88.

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