In-Depth Analysis: Contemporary Issues in Professional Accounting

This essay delves into contemporary issues in accounting, addressing the perception of accounting as a tool for manipulation rather than a science based on fundamental laws. It examines the stereotypes associated with accountants, particularly the notion that they are conservative and pessimistic, and argues that these stereotypes are outdated. The essay also analyzes the role of history in shaping our understanding of accounting and discusses whether past events are always reinterpreted. Furthermore, it explores the objectives of accounting regulations, such as improving the quality of bookkeeping, regulating accountant practices, enhancing financial reporting, and reducing the risk of manipulation, questioning whether current approaches are sufficient to meet these objectives. The document is available on Desklib, a platform offering various study tools and resources for students.

Running head: CONTEMPORARAY ISSUES IN ACCOUNTING
Professional Practice in Accounting
Name of the Student:
Name of the University:
Authors Note:

CONTEMPORARAY ISSUES IN ACCOUNTING
1
Contents
Part 1:...............................................................................................................................................2
Part 2:...............................................................................................................................................3
Part 3:...............................................................................................................................................5
Part 4:...............................................................................................................................................6
Part 5:...............................................................................................................................................7
References:....................................................................................................................................10

CONTEMPORARAY ISSUES IN ACCOUNTING
2
Part 1:
What does the quote mean and how it has changed the way accounting was perceived
earlier:
The quote that accounting has been created to accomplish various desired objectives and is not
based on any fundamental laws or absolute concept certainly a demeaning quote to the concept
of accounting. It is suggesting that the accounting is primarily to manipulate accounts to show a
desired state of financial performance of an entity. Thus, the quote certainly tarnished the huge
importance of accounting in general. Irrespective of the nature of transactions that an
organization carries out and the nature of its activities accounting is meant to keep record of all
these transactions after summarizing and classifying these as per the accounting principles and
policies. The quote though is demeaning to the subject of accounting however, that does not
takes away from the fact that it is based on certain principles and policies that cannot be
compromised to accomplish desired objectives of interested people (Macve, 2015).
It is important to note that economic environment, financial conditions, business operations and
functions are different for different organizations. Apart from that the macro and micro economic
factors have huge impact on the economic environment of a country. Different countries have
different macro-economic and micro economic factors that affects the business operations of
organizations in these countries. Thus, it would be impossible to have a single set of accounting
standards and guidelines to maintain books of accounts and prepare financial statements of
different organizations (Libby, 2017). However, the underlying principles and policies which are
the foundation of Accounting still remain unchanged. The alternative accounting principles and
policies for different items in accounting increases the flexibility of the subject.

CONTEMPORARAY ISSUES IN ACCOUNTING
3
It would be wrong to describe that due to such flexibility that enhances the quality of accounting
and its usability for different organization as a weakness that allows business organizations to
achieve desired objectives from accounting.
As example, as organization has different options to provide for depreciation on certain non-
current assets. Use of straight line method of depreciation will certainly result in different
amount of depreciation and resultant accounting profit for an organization as compared to use of
reducing balance method. Similarly, in estimating the amount of provision for different items
such as bad debt and warranty expenses an organization has liberty to choose different method.
Thus, the accounting profit of organizations will be influenced significantly on the basis of
accounting methods used by an organization.
Despite the above accounting still remains one of the most effective means to disclose the
financial information of an organization. The perception of accounting has not been changed
even after reading the quote. The usefulness of accounting and its benefits go beyond such quote.
It is true that accounting is still evolving and in all probability it will remain an evolving subject
since the world of business is changing (Walton, 2018). The accounting standards boards of
different countries continuously looks for opportunities to improve the quality of book keeping
system. Thus, the importance of accounting and its effects on disclosing financial information of
an entity in summarized manner is unparalleled. Thus, the benefits of accounting far outweigh
the short comings of the subject which Catlett highlighted in his quote (Handel, Valerio and
Sánchez Puerta, 2016).
Part 2:
Accountants are conservative and pessimistic:

CONTEMPORARAY ISSUES IN ACCOUNTING
4
There are number of stereotypes that are attached with different professions in the world
however, not all reflect the true character of different profession. The character of a professional
is different from the profession that he / she is in. Often this simple fact is ignored while
developing a particular stereotype and attached it with a subject and profession. In case of
accounting it is often said that the accountants are conservative, pessimistic and boring.
However, there is no facts to establish the stereotype. Let’s discuss how accounting has been
associated with this stereotype and is the stereotype relevant to the profession (Linsmeier, 2016).
Accounting as a subject is based on certain concepts and principles. These are very much part of
accounting but not accountants. The fundamental accounting principles are going concern,
consistency and accrual basis of accounting. However, the current fundamental principles have
come this far after constant evolution. Earlier conservatism was very much attached with the
subject of accounting. It was a practice in accounting to provide for all possible expenditures and
losses even if chances of such expenditures and losses are relatively less (Barbour and Lammers,
2015). The conservatism concept in accounting also provided that while accounting for an
organization, no possible income and gains should be recognized in the books of accounts until
unless it is absolutely certain that such income or gain would accrue to the organization and there
is no uncertainty regarding the final receipts of any part of such income or gain (Whiting,
Gammie and Herbohn, 2015).
As example the concept of prudence can be taken that required accountants to make provision
for all expected losses and expenditures whereas no expected revenue should be included in the
income statement until unless it is absolutely certain that the amount of revenue will be received
by the organization. Hence, often the attitude of accountants is alleged as pessimist.

CONTEMPORARAY ISSUES IN ACCOUNTING
5
Though accounting over the years have undergone number of changes including provide for
possible gains and losses on amount of assets and liabilities by use of fair value concept but the
age old conservative stereotype has still remained with the subject. It is certainly not persistent
however, as those who uses accounting are quite aware of changing landscape in accounting. The
subject has changed from conservative approach to reflecting the true and fair picture of an
organization and its business transactions. Thus, the subject is no more uses conservative
approach to maintain books of accounts (Richardson et. al. 2015).
Example:
Accountants only deal with numerical figures hence, it is also alleged that they are boring. An
accountant in X Limited is responsible for recording all financial transactions correctly in the
books of accounts. Like any other professional an accountant also does his job, in this case of X
limited.
Hence, there was definitely a valid reason behind creation of the perceptions of conservative and
pessimism with accounting however, with evolution accounting as a subject has changed
significantly. Thus, the stereotypes that accountants are conservative and pessimistic are not
valid anymore. Also the fact that accounting is a subject and the accountants are professionals
with expert knowledge in the subject but however, they also have a personal traits and character
which are very unique to their own. Thus, it would be wrong to pain a professional with the
character of the profession and vice a versa (Haynes, 2017).
Part 3:
“History creates past reality for us. The past is always being reinterpreted.” (Hines, 1988, p. 253)

CONTEMPORARAY ISSUES IN ACCOUNTING
6
Accounting is all about recording financial transactions in the books of accounts by properly
summarizing and classifying these as per the accounting principles and policies. Thus, it is only
after transactions have been effected by an organization or business that the process of
accounting starts. Hence, in a way accounting is all about maintaining records for events that
have taken place in the past (Brouard et. al. 2017).
There is no denying the fact that Hines is absolutely correct while stating that history creates past
reality for us. Since the history documents the event that have taken place in the past and
provides us reference in the future to evaluate the past and learn from the past if possible.
However, the second part of the quote is quite interesting and directed more towards accounting,
i.e. the past is always reinterpreted. Honestly, it depends whether past is reinterpreted or not on
each subjects and the person reinterpreting (Djatej et. al. 2015). Accounting is a subject that
documents the financial transactions of an organization, business or of an individual to prepare a
composite books of accounts to reflect the effects of such transactions on the financial
performance and position of respective entities. Thus, the second part of the quote that the past is
always being reinterpreted is not justified when it comes to accounting and it’s utility.
Accounting is based on certain principles and policies that are to be followed while recording the
transactions in the books of accounts. It is not possible for the accountants to reinterpret the
transactions as per their wish. The transactions have to be recorded as per the principles and
policies of accounting hence, there is no room for scope that an accountant can use to reinterpret
the past, i.e. the financial transactions of an organization. Accounting is certainly about creating
reality on the basis of past events and transactions but it cannot be reinterpreted according to the
wish of the accountants (Bartlett et. al. 2016). The principles and polices of accounting do not
allow such leverage to the accountants to reinterpret the results of past transactions.

CONTEMPORARAY ISSUES IN ACCOUNTING
7
Example:
An accountant in an organization records financial transaction sin the books of accounts as per
the supporting documents and vouchers. Hence, the accountants are only allowed to record the
financial transactions that have occurred to prepare the books of accounts correctly. It is no doubt
an exercise to record the transactions that has already occurred however, it is not to reinterpret
the past rather it is about keeping the records of the past.
Part 4:
Objectives of accounting regulations and is the current approach sufficient to address these
objectives:
Accounting is a subject that has evolved over the years and still evolving to make it better. The
purpose of accounting is to record the financial transactions properly and correctly as per the
principles and policies of accounting. The objectives of having accounting regulations includes
the following:
I. To improve the quality of book keeping system: The regulations in accounting are issued
with the objective of improving the quality of book keeping system by an organization. Since
there are certain areas in accounting where accountants have the leverage to use their
personal judgments and professional competencies, accounting regulations have the objective
of ensuring maintenance of proper books of accounts despite such leverage.
II. To regulate the practice of the accountants: One of the objectives of accounting regulations is
to regulate the practices of the accountants. It is to ensure that the accountants must record
financial transactions as per the accounting principles and policies (Flynn, Earlie and
Cross, 2015).

CONTEMPORARAY ISSUES IN ACCOUNTING
8
III. To improve the quality of financial reporting: Financial reports such as Balance sheet, income
statements, cash flow statement, statement of changes in equity and notes to accounts are
prepared from the underlying accounting records maintained by accountants of an
organization. Accounting regulations improve the quality of accounting records and
subsequently the financial reports are improved.
IV. Reduces the risk of manipulation of accounts: As already mentioned that due to the inherent
limitations of accounting accountants have the right to use their personal and professional
judgment in number of areas at the time of recording financial transactions. Accounting
regulations reduces the risk of manipulation in accounting by providing strict guidelines for
the accountants (Kogut, 2015).
Comparability of accounting records is the qualitative character of accounting records that enable
the users of accounting information to compare the accounting records of an organization for a
particular period with that of corresponding previous year and even earlier of the organization.
Also the financial information recorded in the books of accounts can be compared with the
financial records of different organizations to evaluate the performance and position of an
organization with that of its competitors and peers in the market. It is only possible to compare
the accounting information of an organization with previous years accounting information
provided that one of the fundamental accounting principles, consistency, is followed in
maintaining the books of accounts of an organization (Francis et. al. 2015).
The accountants are only responsible to maintain books of accounts as per the rules and
regulations issued and developed for maintenance of accounting records. Thus, to claim that the
accountants make the whole picture and there is no full picture is not quite write. Accountants
only help in developing the picture on the basis of the financial transactions effected by an

CONTEMPORARAY ISSUES IN ACCOUNTING
9
organization thus, not make the full picture. The full picture is made by the organization itself by
entering into different transactions. The accountants are only responsible to maintain proper
books of accounts on the basis of which the full picture shall be portrayed (Otavová, 2014).
Part 5:
Importance of clients in accounting and potential problems in maintaining accounts in public
interests:
The clients are important in accounting as the purpose of accounting is to maintain accounts for
the clients. However, that does not mean that in order to satisfy the clients the accountants will
contravene with the accounting principles, policies and regulations. Clients are important as the
accountants are appointed by the clients to maintain books of accounts. But it is important to
understand that the whole objective of accounting is maintain proper books of accounts for an
organization by following the necessary principles and policies of accounting. The concept of
accounting is on the premise that it will help in maintaining proper records of all financial
transactions effected by an organization. There is nothing that should come between maintaining
proper records of financial transactions entered into by an organization and adhering with the
accounting principles, policies and regulations, not even the client (Frezatti, Carter and FG
Barroso, 2014).
The trust of public on accounting has increased over the years and this is mainly due to the ever
improving quality of accounting records. Accounting records must correctly summarize and
record the financial transactions as per the accounting standards and other regulations. Thus, it is
mainly to maintain accounting for public interest that has made the concept so integral to
business and users of accounting records. The concept of public interests enhances the quality of

CONTEMPORARAY ISSUES IN ACCOUNTING
10
accounting and is not in conflict with the importance of the client. Rather the obligation to act in
public interests and maintain proper books of accounts is in direct conflict with manipulation and
falsification of accounting records to depict a picture different from the actual financial
performance and position of an organization (Okoth, 2015).
Maintaining books of accounts in public interest will help to improve the quality of accounting
records maintained. The accountants knowing the importance to act in public interest will not
deviate from complying with the accounting principles, policies and regulations. The concept of
public interest is one of the essential conditions in accounting that contribute to the ever
improving qualitative characteristics of the subject. The accounting standards boards of different
countries including the Australian Accounting Standards Board (AASB) are continuously
looking to improve the accounting standards by keeping in mind the concept of public interests.
Hence, the obligation to act in public interest does not raise any potential problem with the
importance of clients in accounting.
Metonyms and metaphor article discusses the use of different nomenclature in accounting
to describe various facets of accounting. It is essential to have knowledge of these words and
nomenclatures to be able to understand the actual meaning of these depending on the place were
these have been used. Accounting since the beginning has been a subject that has kept on
evolving. Use of different metonyms and metaphor has made the subject even more effective.
Majority of the users of financial statements do not have advanced knowledge of accounting
thus, it is not justified to expect them to understand the different terms and words used in
financial reports. Metonyms and metaphor can be used in accounting to make it easier for the
relatively less knowledgeable users in terms of accounting knowledge get to understand the
different items that are mentioned in financial statements without complexity. However, often

CONTEMPORARAY ISSUES IN ACCOUNTING
11
the metonyms and metaphor have different meanings in different places thus, it is important to
understand the use of these at appropriate places.
It is also up-to the accountants and management to make effective use of various elements of
financial reporting to make it easier for the users of financial statements to understand the
various elements in financial statements with ease. The objective of accounting and financial
reporting must be kept in mind while maintaining books of accounts and preparing financial
statements.

CONTEMPORARAY ISSUES IN ACCOUNTING
12
References:
Barbour, J.B. and Lammers, J.C., 2015. Measuring professional identity: A review of the
literature and a multilevel confirmatory factor analysis of professional identity
constructs. Journal of Professions and Organization, 2(1), pp.38-60. [Online] Available from:
https://academic.oup.com/jpo/article-abstract/2/1/38/2690093 [Accessed 24 September 2018]
Bartlett, G.D., Kremin, J., Saunders, K.K. and Wood, D.A., 2016. Factors influencing
recruitment of non-accounting business professionals into internal auditing. Behavioral Research
in Accounting, 29(1), pp.119-130.
Brouard, F., Bujaki, M., Durocher, S. and Neilson, L.C., 2017. Professional accountants’ identity
formation: an integrative framework. Journal of Business Ethics, 142(2), pp.225-238.
Djatej, A., Chen, Y., Eriksen, S. and Zhou, D., 2015. Understanding students' major choice in
accounting: an application of the theory of reasoned action. Global Perspectives on Accounting
Education, 12, p.53.
Flynn, A., Earlie, E.K. and Cross, C., 2015. Gender equality in the accounting profession: one
size fits all. Gender in Management: An International Journal, 30(6), pp.479-499. [Online]
Available from: https://www.emeraldinsight.com/doi/abs/10.1108/GM-06-2015-0048 [Accessed
24 September 2018]
Frezatti, F., B. Carter, D. and FG Barroso, M., 2014. Accounting without accounting:
Informational proxies and the construction of organisational discourses. Accounting, Auditing &
Accountability Journal, 27(3), pp.426-464.
https://www.emeraldinsight.com/doi/abs/10.1108/AAAJ-01-2012-00927

CONTEMPORARAY ISSUES IN ACCOUNTING
13
Francis, B., Hasan, I., Park, J.C. and Wu, Q., 2015. Gender differences in financial reporting
decision making: Evidence from accounting conservatism. Contemporary Accounting
Research, 32(3), pp.1285-1318.
Handel, M.J., Valerio, A. and Sánchez Puerta, M.L., 2016. Conceptual Framework. [Online]
Available from: https://elibrary.worldbank.org/doi/abs/10.1596/978-1-4648-0908-8_ch2
[Accessed 24 September 2018]
Haynes, K., 2017. Accounting as gendering and gendered: A review of 25 years of critical
accounting research on gender. Critical Perspectives on Accounting, 43, pp.110-124.
Kogut, J., 2015. Directions of changes in sme accounting in accordance with the amended
accounting act. Research Papers of the Wroclaw University of Economics/Prace Naukowe
Uniwersytetu Ekonomicznego we Wroclawiu, (397). [Online] Available from:
https://www.ceeol.com/search/article-detail?id=297758 [Accessed 24 September 2018]
Libby, R., 2017. Accounting and human information processing. In The Routledge Companion to
Behavioural Accounting Research (pp. 42-54). Routledge.
Linsmeier, T.J., 2016. Revised model for presentation in statement (s) of financial performance:
Potential implications for measurement in the conceptual framework. Accounting
Horizons, 30(4), pp.485-498. [Online] Available from:
http://www.aaajournals.org/doi/abs/10.2308/acch-51543 [Accessed 24 September 2018]
Macve, R., 2015. A Conceptual Framework for Financial Accounting and Reporting: Vision,
Tool, Or Threat?. Routledge.

CONTEMPORARAY ISSUES IN ACCOUNTING
14
Okoth, P.G., 2015. USA, India, Africa During and After the Cold War. University of Nairobi
Press.
Otavová, M., 2014. Harmonisation efforts in the field of accounting of public sector. Acta
Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 59(4), pp.195-202.
Richardson, P., Dellaportas, S., Perera, L. and Richardson, B., 2015. Towards a conceptual
framework on the categorization of stereotypical perceptions in accounting. Journal of
accounting literature, 35, pp.28-46. [Online] Available from:
https://www.sciencedirect.com/science/article/pii/S0737460715000142 [Accessed 24 September
2018]
Walton, P., 2018. Discussion of Barker and Teixeira ([2018]. Gaps in the IFRS Conceptual
Framework. Accounting in Europe, 15) and Van Mourik and Katsuo ([2018]. Profit or loss in the
IASB Conceptual Framework. Accounting in Europe, 15). Accounting in Europe, pp.1-7.
Whiting, R.H., Gammie, E. and Herbohn, K., 2015. Women and the prospects for partnership in
professional accountancy firms. Accounting & Finance, 55(2), pp.575-605.