REVIEW OF CURRENT ACCOUNTING ISSUES.
Added on 2019-10-30
13 Pages2740 Words134 Views
Running head: REVIEW OF CURRENT ACCOUNTING ISSUESReview of Current Accounting IssuesName of the Student:Name of the University:Author’s Note:Course ID:
1REVIEW OF CURRENT ACCOUNTING ISSUESTable of ContentsAnswer to Question 1:.....................................................................................................................2Answer to Question 2:.....................................................................................................................4Executive Summary:....................................................................................................................4Introduction:................................................................................................................................4Proposal:......................................................................................................................................4Debate so far:...............................................................................................................................5Significance of the proposal:.......................................................................................................6Conclusion:..................................................................................................................................7References:......................................................................................................................................8Appendix:......................................................................................................................................10Name:Student Number:
2REVIEW OF CURRENT ACCOUNTING ISSUESAnswer to Question 1:The article chosen for accomplishing the goal of this task is the ““Accounting watchdogto investigate KPMG over Rolls-Royce audit”. This specific article has been obtained from theGuardian and it has been published on 4th May 2017. Other articles are available in providing aneffective understanding of the theoretical issues; however, the illegal practices of some auditfirms have adverse effect on the related stakeholders of the concerned firms (Bebbington &Larrinaga, 2014).It has been observed that majority of the organisations functioning in the global markethave the intention to increase their overall profit levels. This has been accomplished byimplementing different company strategies primarily in winning the confidence and trust of thevarious stakeholders. The main reason behind winning such confidence and trust would enhancethe business operations of the international organisations. As a result, it would help in increasingthe rates of growth and future cash flows (Blayney, Kalyuga & Sweller, 2015). This specificarticle intends to explain the step of the “Financial Reporting Council (FRC)” to review the dealof Rolls Royce with “Serious Fraud Office (SFO) for incurring £671 million in order to settle theallegations related to corruption. As this specific issue has reached the public, FRC (theaccounting watchdog of UK) has initiated an investigation into the KPMG audit with RollsRoyce. The reason behind such investigation is that there is involvement of the engineeringgroup in settling a bribery case with SFO previously in 2017. Rolls Royce has come to an agreement to incur £671 million in order to settle long-termallegations of corruption associated with an agreement of deferred prosecution. The cost ofsettlement and pound value depreciation because of the Brexit effect has lead to a yearly loss of4.6 billion. This is the largest for the organisation in its years of operation. Due to this reason,FRC has carried out its examination to review the KPMG audit associated with the financialstatements of Rolls Royce between 2010 and 2013. The owner of KPMG states that theregulators need to review the issues related to the public interest. However, according to thedemand of KPMG, the audit work of Rolls Royce has been carried out effectively with full caread due diligence for assuring the overall quality of audit. It is to be noted that an apology hasbeen made on the part of Rolls Royce, as it has bribed the middlepersons to secure orders inName:Student Number:
3REVIEW OF CURRENT ACCOUNTING ISSUESIndia, Russia, China, Indonesia, Thailand and Nigeria. For example, the organisation has paid£28 million to the middlepersons in Thailand in order to obtain few contracts (Chatfield &Vangermeersch, 2014).Based on the above discussion, the public interest theory and the reputational theorycould be related to this particular article. The theory of public interest states that there is highfragility in the market and it has the tendency to operate ineffectively in order to favour anindividual rather than benefitting the entire community (Henderson et al., 2015).Thus, formonitoring this market, the government intervention is required. The pronouncer of this theorystates that there is development of regulations in the public interest in order to correct theineffective practices. However, Hodder & Hopkins (2014) argued that from the socialperspective, there are inefficient regulations and there is utilisation of them on the part of theprivate players to restrict the entry of competitors in the market. In this case, it has found out that Rolls Royce has bribed the SFO to settle the corruptioncharges. This has resulted in violation of the public interest, since SFO has concentrated onprotecting the actions of the organisation. Moreover, the middlepersons of the different above-depicted nations have undertaken bribes for securing the organisational contracts. Hence, this isan unscrupulous measure, which Rolls Royce has conducted in preventing the competitors frommaking entry into the markets. Because of the allegations, there is intervention of FRC ininvestigating the matter and it has applied stringent regulations on the audit organisations forevaluating and disclosing the financial statements of the organisation effectively. According to the reputational theory, the investors normally prefer in dealing with suchorganisations with strong reputation in the market along with effective financial growth. In thewords of Kanodia & Sapra (2016), cost-benefit analysis over long-term would represent that thedishonest actions do not take place for ensuring the overall organisational interests. However, asargued by Klimczak & Krasodomska (2017), since such action is for long-term, the dishonestbehaviour is likely to obtain short-term benefits. For Rolls Royce, the organisation has made anunethical practice with SFO for settling its corruption obligations. The primary intention is toretain the trust of the investors in order to accumulate greater funds for funding capital projects.From 2010 to 2013, the annual reports of the organisation contain misstatement, which hasenabled Rolls Royce to gather sufficient funds from the investors in undertaking new contracts.Name:Student Number:
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