Analysis of Accounting Profession's Conflict on Financial Planning

Accounting Theory 1
Accounting Theory
Name
Institution

Accounting Theory 2
Question one: Analysis of the chosen news article
The article, "Accounting profession faces another moment of truth on financial planning
conflicts," was published on Feb 18, 2019, by Andrew Robertson on Australian Broadcasting
Corporation. In the article, the author explains why the Accounting Professional and Ethical
Standards Board (APESB) is the conflicted pay offered to accountant financial planners. In 2012,
the board introduced standard remuneration payment plan, knowns as the APES 230, for
accountant financial planners a move that was opposed by the latter.
According to APESB, conflicted payments like soft dollar benefits, percentages of
management funds and commissions were the major contributors to financial scandals that have
diversely affected the financial market as the lives of Australia. The board maintained that such
benefits hinder the ability of Accountant financial planners to maintain the highest standard in
their operations. APESB wanted the conflicted payment to go because there were no mechanisms
at which the threats and risks associated with the payment on clients would be reduced to an
acceptable level. The finds backed the ideas by Kenneth Hayne in the report of the royal
commission. Hayne stated that experience has shown that the conflicts of interest between
accountant finance planners and needs of clients were not manageable (Higson, 2003, p. 83).
In simple terms the APESB wanted the conflicted payment gone as well as the accountant
financial planners to put the interest of customers first before theirs. Interestingly, three lobby
groups: - Chartered Accountants Australia & New Zealand, the Institute of Public Accountant,
and CPA Australia which financial APESB opposed the proposal and adopted the continuation of
conflicted payments (Kitson & Robert , 2009, p. 101). The reporter states that "The accounting
profession had passed up an opportunity to show that it truly is professional, that it understood

Accounting Theory 3
its fiduciary duty, that accountant financial planners really could be trusted to act in their
customers' best interest (Robertson, 2019)." In the future, it will be hard for account finance
planners to convince customers that they are acting to the best of their interests. Moreover, the
client cannot trust that accountant financial planners base their service of high standard and
professionalism. The lobby groups were supposed to put the interest of clients first by adopting
APESB's proposal but chose to reject it (Deegan, 2013, p. 35).
Link the major issues and ACC341 topics and theories:
a) The issue and ACC341 topics
The issue covered in the article relates to the ACC341 topic of Professionalism and ethics
in accounting that was covered in the second week. The topic outlines the need for accounting
professionals to observe ethical codes when executing their mandate. Abiding by ethical codes
and professionalism help accountants to demonstrate fairness and honesty, maintain trust and
promote their profession. New professionals are required to undertake ethics and professionalism
training that will help them to protect the profession’s reputation. Professional behaviour is a
fundamental principle of accounting ethics (Jones & Riah-Belkaoui, 2010, p. 97). Accountants

Accounting Theory 4
are required to adhere to the laws within a given jurisdiction. Professional behaviour prohibits the
accountant was engaging in actions that would negatively affect the profession’s reputation as
well as go against the expectation of business partners, the community and other stakeholders.
The link between the topic and the article arises from the impact of conflicted payments on the
Professionalism and reputation of accountant financial planners. APESB holds that continued
application of conflicted payments jeopardizes the expected high standard and professionalism
operations from accountant financial planners (Barth & Landsman, 2010).
b) Accounting theories explaining the issue
There two theories that can be used to describe the issue discussed in the article. The two
most appropriate theories that can be used to demonstrate the situation are the public interest
theory and the self-interest theory. Public interest theory is used to analyze the views of the
APESB on conflicted payments. On the other hand, the self-interest theory is used to demonstrate
the position of the accountant financial planners on conflicted payments.
i) Public interest theory
Public interest theory assumes that the market is inefficient and imperfect. The market
should be regulated to make it economically perfect and efficient. Generally, public interest
theory introduces regulations that benefit the rights of the public at large or protect the public
from exploitation. The theory supports the creation of a legislative instrument to overcome
imperfect competition, undesired market results, and unbalanced market operation. In the case of
conflicted payments, APESB was formed to develop a solution to the risks associated with the
payment system (Wolk, 2009, p. 72). The board holds that the payments system does not serve
the interest of the public. For example, conflicted payments have been associated with the global