Regulatory and Ethical Aspects of Accounting

The accountancy profession's regulation includes entry and licencing criteria, such as education requirements; monitoring of professional accountants' behaviour and performance; the standards, including ethical standards, that professional accountants must meet; and disciplinary methods.

INTRODUCTION
Accounting plays an essential role in any type of organization and it contributes
hugely in operating the business. In this assignment, I will put myself as an accountant of
HD Dental Clinic to evaluate the purposes and functions of accounting in operating the
business. This essay will demonstrate the role of accounting in both regulatory and
ethical aspects by consulting and researching information from different sources to find
out the most appropriate answers. The responsibility of accounting systems within the
organization and with the stakeholders is also discussed. The scope of this research is
limited to the HD Dental Clinic and some other stakeholders.

Task 1
Accounting has three main functions: identification, recording and
communication. The accounting system has to identify and process financial information
by monetary term, thus ensuring the payments of cash flows in and out of the company.
Accounting makes financial records for organizations. It is utilized to song expenses from
commercial enterprise operations in addition to an organization's profits. It also can be
applied to are expecting economic achievement and the destiny desires of a company to
create budgets and take benefit of current opportunities. Accountants use these statistics
to put together monetary statements utilized by commercial enterprise specialists and
authorities officials. The ultimate purpose of accounting is to provide information
concerning business performance and income statements for users to help their decisions
making (Atrill & McLaney, 2017). The users of accounting information can be separated
into two groups: external users (creditors, investors, customers…) and internal users
(managers, employees,…). The data provided for external users is called financial
accounting and the one for internal users is managerial accounting.
A business entity is a enterprise that exists independently of those who own the
business. (Weetman, P., 2019). There are three primary forms of business entities: sole
trader, partnership and limited liability company. Within the case of this assignment, Dr.
Hoang Duong is a sole trader who owns HD Dental Clinic. A sole trader is an individual
who enters into business alone, either selling equipments or providing services
(Weetman, P., 2019). Because the business of sole trader is single owner, Dr. Hoang
Duong will have to take all the benefit of the good time and risk of the bad times from the
business activities of the clinic.
Managerial accounting will identify and record the economic events by the
monetary values of HD Dental Clinic and determine how internal processes such as
purchasing equipment, expenses for electricity, account receivable, and revenue from
services performance… impact the company's finance. The accountants are involved in
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daily financial functions like payroll and invoicing. They conjointly arrange for future
business choices primarily based on monetary reports and analysis by making budgets.
Accountants generate reports to facilitate a business to increase productivity and impact
economic growth. Accounting may facilitate decisions however staff is compensated for
their work supported how wages have an effect on the company's profits. Since social
control accounting isn't for public view, accountants in this field will use their ways and
choose information to advise company leaders concerning trends and output (Indeed
Editorial Team, 2021). By recording transactions, the accountant will create accounting
reports for the owner, which is the communication function of accounting. The
accounting reports can help Dr. Hoang Duong comprehend his enterprise’s condition.
Therefore, he can make the best decision for operating the business.
Financial accounting will use data from the past to analyze a company’s cash
flows. The accountant who adds this field produces statements supposed for public use.
They maintain structures for reportage and filing all the money transactions a business
makes and then report the business results of the clinic. Hence the external users can base
on the report to make their decisions. For instance, in case Dr. Hoang Duong wants to
borrow money from the bank or other creditor, he has to give them the financial report of
his company as evidence. The bank (creditors) will depend on the financial information
to decide whether they can give credit to the company or not. Additionally, the inventors
will base on income statements to evaluate the developing potential of the clinic to make
their decisions to invest in the company and how much money they should capitalize on.
Moreover, the Tax Authority of the government also depends on the accounting reports to
make sure that the clinic fulfills the tax obligation. Accounting is responsible for news
the money workings of the corporate and ensuring they change to any or all native and
national laws and guidelines.
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Task 2
1. Looking from an objective point of view, both owner and employee of HD Dental
Clinic have offended the environmental protection law, public health law, and ethical
principles of accounting.
In the regulatory aspect, HD Dental Clinic has infringed public health and
environmental protection law by mixing medical waste with domestic waste and
disposing of untreated rubbish to the city's landfill. Environmental protection activities
mean activities that are carried out in order to maintain the surrounding environment
natural and clean, to limit adverse impact on the environment and to face environmental
incidents; to improve environmental pollution and degradation and to recover and
enhance the environment; to exploit and utilize natural resources appropriate and
economically, and to protect biological diversity (Viet Nam National Assembly, 2001).
The clinic has not treated and sorted waste in accordance with the regulation. Moreover,
they did not record the waste treatment expenses, which may lead to mistakes in
accounting reports. Disposing infectious wastes to the environment is forbidden by the
Ministry of Natural Resources and Environment of Ha Noi city. Besides the pecuniary
penalties, the enterprise that infringed the law can be faced the risk of suspending
business activities. More problems may arise if the inhabitants want to sue the clinic for
public fitness care. Being stopped commercial enterprise operation may result in
stagnancy and losing reputation, which might badly affect the long-term profitability and
survival of the clinic.
In the ethical aspect, HD Dental Clinic did not want to pay for the proper
treatment process, so they chose the illegal way to dispose of the waste. Their actions do
not ensure transparency and faithful presentation in accounting reports. The accounting
target is to provide relevant, timely information for user decision-making, so the
accountants must behave in an ethical manner so that the information they provide users
will be trustworthy (Warren, C. S., et al., 2020). The company did not disclose the
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garbage treatment expenses, which led to erroneous accounting reports. An accountant
has the responsibility to serve the public interest and uphold the public trust in the
profession. Accountants are responsible for the validity of the financial statements they
work on, and they must perform their duties following all applicable principles,
standards, and laws (Khadija, K., 2020). As an accountant of the company, Ms. Lan
Huong has offended the ethical principles of accounting by contemplating ignoring the
fault of her company and covering the mistakes. The illegal error of HD Dental Clinic
could cause infectious disease that is significantly dangerous to public health. Her
behavior has contributed to the company breaking the law and bringing threats to society.
A professional accountant should not allow bias, maintain objectivity and neutrality and
not be conflicted by others’ interests or influence of business judgments. Ms. Lan Huong
has not recorded the expenses of disposal treatment of the clinic in the financial
statements, which is not a professional characteristic of a trustworthy accountant. She
also failed to fulfill her duty as an accountant to provide relevant, faithful presentations in
the financial reports.
2. Misstatement of financial reports will cause many severe problems for the
company and the stakeholders such as the Government of the city, the Tax Authority,
creditors, investors… The stakeholders want truthful reports from the business entity to
inform their decision-making. However, the accounting system of HD Dental Clinic did
not adapt to the stakeholders’ needs. First of all, by not reporting entirely economic
events, the clinic could not fulfill the tax obligation strictly for the Tax Authority. As a
result, The Tax Authority will base on the severity of the enterprise’s violation to make
the final judgment on the corporate penalty. Secondly, the banks or creditors will not give
credits to HD Dental Clinic because of their errors in financial statements. Moreover, the
business condition is a going concern. Hence the investors may stop the ideas to
capitalize on the company. HD. About the responsibility with the public, the accounting
department will have to evaluate the damages of the neighbors affected by the company's
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harmful disposal. Therefore, planning to compensate for the damages by monetary
values.
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Task 3
Currently, Dr. Hoang Duong’s clinic is a private company; if Dr. Tran Anh joins
the company as an owner, the company will become a partnership business
organizational structure. There are some differences in the way of operating the business
between a sole trader and partnerships; those changes in the concept of enterprise will
directly affect the accounting system of HD Dental Clinic. A partnership arrangement is
quite similar to a sole trader but differs in having at least two partners. Both types of
business entities have unlimited liabilities. Thus, the owners have to share the
responsibility for running the business and share the risks together.
There is no requirement to make financial accounts publicly in the sole trader
concept. Still, within the idea of the partnership, all the business information has to be
public between the owners. Dr. Hoang Duong and Dr. Tran Anh own specific
percentages of profits and liabilities, and the shares will depend on the capital
contribution they capitalized on the clinic. According to Accountingtools, when a
partner invests funds in a partnership, the transaction involves a debit to the cash account
and a credit to a separate capital account. The role of accounting is to record the balance
of the investments and distributions to a partner, so it is customary to have a separate
capital account for every partner to avoid the commingling of information. Finance
business partners are accountants who work strictly with the business to assist it create
critical decisions. They discourse historical results likewise future plans. Key strategies
are also discussed, as these all impact on the profit results. The accounting system has to
identify, record and communicate all the financial information to the owners to help their
decision-making in operating the business. A partnership’s profits and losses can be
divided according to the partners’ method in the partnership agreement. The accounting
function is to calculate the ratio of capital contribution of each owner and make income
reports frequently so that the owners will base on the financial statements to share the
profits or losses.
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Role of accounting in meeting stakeholders and societal needs
Dr. Hoang Duong wants to borrow money from the local bank to broader his
business. In order to give credit to the enterprise, the bank will demand some specific
financial information from HD Dental Clinic because lending money involves various
risks. The accountant of HD Dental Clinic will have to turn in accounting reports as
evidence to show that the company is able to pay the loan and the interest rate. The
historical profits are no guarantee of the future performance of the clinic. Thus, historical
accounting reports will help the lender assess the repaid possibility, the value of the
collateral, and the company’s liquidity. Therefore, they can decide how much money they
should give credit and calculate the interest rate they want to gain. The owners and the
business entity are not legally separated in the sole trader and partnerships concept. The
tax will be calculated based on the owners' incomes from business operations. The
accounting will system works as a tool to record and verify the owners’ income. About
the want of certification by Global Clinic Rating, HD Dental Clinic will have to satisfy
the standard benchmark of the organization. The accounting function proves that the
company has enough financial potential to adapt to the Global Clinic Rating’s
requirements. The accountant has to provide historical business performance and the
enterprise's direction and future strategies to guarantee that HD Clinic can satisfy the
certification conditions.
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Conclusion
In conclusion, I have evaluated the purposes and functions of accounting in
operating the business in regulatory and ethical aspects. Throughout the analyzing
process, it can be witnessed that accounting is an indispensable part of any organization.
The accounting system's responsibilities to inform the organization's decision-making and
with the stakeholders were also illustrated. The accounting functions were listed to meet
the organization, stakeholder, and societal needs.
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5. National Assembly, 2001. LAW ON PROTECTION OF THE ENVIRONMENT.
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8. Indeed Editorial Team, 2021. What are the functions of accounting? Career Guide.
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