The Role of Accounting in Society

This report analyzes the ethical misconduct of a company in the banking and financial sector and discusses the recommendations and findings of the Banking Royal Commission. It also explores the importance of accounting and reporting for ethical business conduct.

Running Head: THE ROLE OF ACCOUNTING IN SOCIETY
THE ROLE OF ACCOUNTING IN SOCIETY
Name of the Student
Name of the University
Author Note

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Table of Contents
Introduction................................................................................................................................2
Discussion..................................................................................................................................2
1. Key Recommendations......................................................................................................2
2. Findings in respect of company.........................................................................................3
3. Accounting and Reporting for Ethical business conduct...................................................4
Conclusion..................................................................................................................................5
Reference....................................................................................................................................6

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Introduction
The aim of this report is the analysis of the ethical misconduct of the company within
the banking services, superannuation and financial sector. For this analysis, discussion will be
based on the final report of the ‘The Banking Royal Commission’ on 1 February 2019. This
is the royal commission, which was established by the government of Australia for inquiring
into and reporting on the misconduct of the banking, superannuation and financial services
sector (Financialservices.royalcommission.gov.au. 2019). Therefore, this report includes the
discussion on the recommendations based on the commissioner’s final report. In addition,
discussion will be based on ethical misconduct underlying the findings. Lastly, discussion
will be done on the how accounting and reporting is useful for the encouragement of the
ethical business conducts (Financialservices.royalcommission.gov.au. 2019).
Discussion
1. Key Recommendations
The final report of Kenneth Hayne’s in the service industry of banking and finance
have made 24 referrals to regulators Apra and Asic for taking actions for the misconduct.
They made 76 recommendations for fixing the problem as well as criticized the executives
for the misconduct. According to them, the entities, their senior management and board are
primarily responsible for the misconduct (Financialservices.royalcommission.gov.au. 2019).
These recommendations on the finding have highlighted governance, culture and
remuneration structures in the industry of banking, superannuation and financial services
(Financialservices.royalcommission.gov.au. 2019). Following are the recommendations
based on the findings of the report:
 Banking- The brokers of mortgage should act in the borrower’s best interests. Their
commission should be banned for 2-3 years. They are subjected to the same laws as

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applied for financial advisors and the dealers of the car are brought in to the act of
credit.
 Financial advice: At least once in a year, client has to renew the ongoing fee
arrangements and lacks of independence to the clients have to be disclosed by the
financial advisors. In addition, further consideration should be done by the ASIC for
reduction of the cap on the commissions for the product of life risk insurance.
 Insurance: Prohibition should be done on the hawking of the insurance product and
the exemptions of claim handling as well as exclusion for the policy of sale of funeral
expenses should be removed.
2. Findings in respect of company
Ethical misconduct by the company and affected stakeholders
It has been find that, executives of national Australia Bank was involved in the
misconduct. The chairman Ken Henry and CEO Andew Thorburn was testified during the
hearing at final round. It has been find that the employees of the National Australia bank has
accepted bribes of cash for approving mortgages which was fraudulent for smashing sales
target. The CEO treated all the issues of fees that were for no service that was nothing more
than the combination of system deficiencies with carelessness (Andrews 2014). The national
Australia bank has noted the release of the report of Hayne but it did not have responded
directly to the comments made by him. The financial advisory section of NAB is infected by
some contagions, which includes file reconstruction, poor advice has resulted in client’s
compensation payout and forged client signature (Weiss 2014).
Impact on Stakeholders
The relationship between company and the customer exists because of the mutual
building of the expectations on good faith, trust and fair dealing in the interactions. It has

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been find that more than 540,000 consumers have loosed the trust in the organization. The
stock price of the company will have the greater impact, which resulted in the demonstration
of the anger on the part of shareholders. The business has performed very poorly in using the
metrics of the non-financial for determining the outcomes of remuneration. The standards of
the community were not met; hence, all there was the major impact on all customers,
employees, government and shareholders (Fallon and Cooper 2015).
Causes of Ethical Misconduct
Charging for providing the financial advice, which was not at all provided was
motivated by the greed that is greed by advisors and greed by licenses. In addition, charging
the customer with no fees for the services, which was never provided, banks move in the
wealth management (Nytimes.com. 2019).
Addressing Ethical Misconduct
The recommendation of the final report will address the ethical misconduct because it
affects the ethics and code of conduct of the organization and industry as a whole. The
Banking Royal Commission was established which followed the revelation that have been
made by the media of culture of greed which was within many Australian financial
institutions. They conducted public hearings of the companies was in to the misconduct and
submitted the finding and recommendations which will help the concerned government in
taking appropriate actions (Andrikopoulos, Samitas and Bekiaris 2014).
3. Accounting and Reporting for Ethical business conduct
I have learned during the lectures and the research that accounting services consists of the
diverse ranges and because of the collapse of the several corporates, the need of giving the
attention was very much required for accepting the ethical standards in the accounting
professions. I have also learned that any inaccuracy in the financial reporting, which is caused

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by the unethical practices by the company can affect majorly the loss of the revenue through
the corporate collapse and scandal. In addition, I have learned that the ethics of accounting
has formed the basis for the regulatory and legal requirements and it includes the issues in
relation to maintain the public trust (Andrikopoulos, Samitas and Bekiaris 2014).
Conclusion
Hence, it is concluded from the analysis that the company should ensure that they are
conducting their business with the integrity and objectivity in the fulfillment of the ethics of
the financial accounting and reporting. Therefore, it has been learned from the scandal of
National Australian Bank, which was pointed out by the Banking Royal Commission in their
final report that such scandal affects the expectations of all the stakeholders. Hence,
transparency about method of accounting adopted by the company and the practices has
increasingly become important for the trustworthiness and ethical conduct of the business.

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Reference
Andrews, W.A., 2014, March. Identifying, Resolving, and Managing Common Ethical
Dilemmas in the Workplace: An Experiential Approach. In Developments in Business
Simulation and Experiential Learning: Proceedings of the Annual ABSEL conference (Vol.
27).
Andrikopoulos, A., Samitas, A. and Bekiaris, M., 2014. Corporate social responsibility
reporting in financial institutions: Evidence from Euronext. Research in International
Business and Finance, 32, pp.27-35.
Fallon, F. and Cooper, B.J., 2015. Corporate culture and greed—The case of the Australian
wheat board. Australian Accounting Review, 25(1), pp.71-83.
Financialservices.royalcommission.gov.au. (2019). Financial Services Royal Commission -
Home . [online] Available at:
https://financialservices.royalcommission.gov.au/Pages/default.aspx [Accessed 11 Apr.
2019].
Nytimes.com. (2019). National Australia Bank Chiefs to Resign in Wake of Damaging
Report. [online] Available at: https://www.nytimes.com/2019/02/07/business/national-
australia-bank-resign.html [Accessed 11 Apr. 2019].
Weiss, J.W., 2014. Business ethics: A stakeholder and issues management approach. Berrett-
Koehler Publishers.