Accounting Theory and Current Issues

Accounting
Theory and
Current Issues

Table of Content
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
TASK 2............................................................................................................................................2
TASK 3............................................................................................................................................3
A) Key Facts about chosen financial Fraud.................................................................................3
B) Positive Accounting Theory’s (PAT’s) hypotheses predicted the practice(s) of the parties
involved in your chosen accounting fraud...................................................................................4
C). Specific accounting regulations which were violated...........................................................5
D) What lessons have been learnt from your chosen accounting fraud?.....................................7
E) Recommendation....................................................................................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Accounting theory is a system of assertions, structures, and techniques which are used for study
and application of these principles of financial statements. Accounting theory research includes
analyzing both traditional principles of financial reporting along with updating and applying
accounting methods to legislative system regulating financial reporting and financial statements.
(Schroeder, Clark and Cathey, 2019) All Accounting Theories are constrained by accounting
conceptual structure. This structure is provided by Financial Accounting Standards Board
( FASB), an autonomous organisation which operates to define and set main goals of corporate,
both government and private, financial reporting. Additionally, accounting theory can be
considered as logical reasoning which aims to assess and direct accounting practices. As
regulatory requirements change, accounting theory also helps establish modern accounting
methods and techniques. This assignment gives a brief understanding of various accounting
theories adopted and discusses present regulatory framework. It also analyses accounting
financial reporting environment. For the better understanding of accounting theories one real life
experience is taken for financial reporting fraud.
TASK 1
Australia does have a variable disclosure regime within which financial statement
specifications are established by type of entity, primarily based on entity's importance of
customer interest. Entity types might be classified as:
 Required to disclose enterprises mainly mentioned companies and certified controlled
investment schemes / recommended interest agreements which have listed financial
instruments or issued shares or any other financial instruments as a result of circulation of
a brochure;
 Non - listed Public corporations and limited by shares companies (that is, a private
company which fulfils at least two of below conditions: $10 million or more gross gross
margins, $5 million or more gross assets and 50 or more staff members); and
 Small owned business.
Under Corporations Law, all disclosing entities, companies and registered managed investment
schemes are required to maintain records that accurately record their financial transactions and
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that would allow the preparation of financial statements and the audit of those financial
statements.
All organizations must file annual financial statements, except for limited proprietary companies.
The consolidated financial statements include a balance sheet, a declaration of income and loss
and a statement of cash flow (Al-Htaybat, von Alberti-Alhtaybat and Alhatabat, 2018). The
issues to be disclosed in financial statements are contained in accounting standards made by the
Australian Accounting Standards Board ( AASB) and enforced by Corporate Law. The
Corporate Law also provides for the preparation of consolidated financial statements where such
statements are needed by an accounting standard. This usually happens in circumstances where
one entity is controlling one or more other entities. Annual financial statements must be
distributed to the entity's members (for approval at the reporting entity's or companies annual
general meeting) and must be filed with the Australian Securities and Investment Commission
(ASIC).
In addition to meeting the criteria of annual filing, reporting organizations are expected to file
half-yearly financial statements.
In general, these are an abbreviated version of the annual financial statements. Half-year
financial statements must be issued with ASIC but must not be distributed to members. All
annual and semi-annual financial statements must be:
Accompanied by a briefing by the directors on entity’s operations;
Followed by a declaration by the directors as to whether the reports meet the criteria of the
accounting principles and provide a accurate and fair view of the financial condition of the
company and whether the organization is solvent; and
Audited in case of half-yearly financial statements audited or reviewed by a registered company
auditor who is independent of an organisation
TASK 2
Yes Australian financial reporting environment is over regulated as an entity has to report
to various government bodies. As Australia aims at promoting investor confidence and honesty
in the economy, companies and capital markets. A promoter of this is transparent and accurate
financial reports prepared according to the specifications of the legislation. In all Australian
states and territories same standards of reporting apply. The Australian Taxation Office (ATO),
the Australian Securities and Investment Commission (ASIC) and/or the Australian Stock
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