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Accounting and Finance Assessment

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Added on: 2022-11-18 11:22:43
Order Code: 476740
Question Task Id: 0
  • Country :

    United Kingdom

Assignment Topic 1It could be argued that the world is in a state of flux, following the pandemic and the current economic crisis leading to a re-think of business strategies and approaches. Accordingly, accountants will have to show that they can be the new innovators in their approach.

Empirical and experiential evidence demonstrates that - despite institutional differences - the practice of accounting is dynamic and highly contextualized, thus evolving with business needs and changes to the market environment.

An example of this change in the innovation of business is the rise in cryptocurrencies and other digital assets. This largely unregulated environment is laden with risks and dangers to crypto and digital asset holders.

It could be argued that the regulators have been slow to regulate these markets, and accountants have had free reign to interpret the accounting rules to deal with cryptocurrencies and digital assets.

Also, whether you agree with it or not, environmental concerns are front and center of the global agenda, and the world has decided that ESG (Environmental, Social, and Governance) matters should be at the forefront of the political and regulatory agenda.

There are a number of alternative accounting methods which could be adopted and that have been explored and for which there are a number of theoretical and practical approaches.

As far as accounting is concerned, there is a growing concern that a fragmented regulatory landscape around ESG disclosures would hinder firms access to green financing.

To compound the issue, corporate governance codes and best practices guide boards, but are not strictly embedded in law which leads to the slow adoption of the green agenda for companies.

REQUIRED:

You are required to write an inpidual report

Topic 1

1. Drawing upon relevant research and theories, critically evaluate the idea from paragraphs 1 & 2 that the world is in a state of flux and that accountants have been innovative in their approach in recent years

2. Critically evaluate the idea that accounting is dynamic

3. Critically evaluate the idea that cryptocurrencies are unregulated and that the accountants have had free reign in this area

4. Critically evaluate the idea that the ESG mandate is growing considerably greener, and that the direction of capital is subsequently changing.

5. Critically evaluate the need for more stringent regulation around environmental and social governance by considering the theoretical and other aspects pertinent to this area.

6. Critically assess the idea that, in both an advisory and a technical capacity, accountants are dynamic and proactive professionals at the forefront of innovation, who act in the best interests of an ever-widening pool of stakeholders.

7. Produce a conclusion to your report

Assignment Topic 2

The net income (earnings) figure is arguably the most important item reported in the Statement of Profit or Loss and Other Comprehensive Income. Hence, managers are often tempted to resort to the use of various techniques, devices, policies, and schemes to increase or decrease the earnings figure.

Tesco, Britain's biggest grocer reported a 263 million black hole in its accounts in September 2014. Preliminary investigations revealed that the scheme used by some of the top executives of the firm to massage the company's earnings started well before 2014.

Commenting on Tescos's accounting scandal, Bruno Monteyne, an analyst at Bernstein stated as follows: “They started treating suppliers as a source of profits. Normally a retailer makes money by buying something at 20p and selling it for 30p. But when Tesco's profits came under pressure, they looked to get money for doing things that are not directly linked to selling more groceries."

In August 2017, the High Court approved a settlement between Tesco and the Serious Fraud Office that required the firm to pay 129m fine for the accounting scandal.  In addition, Tesco agreed to pay 85 million in compensation to Investors.

Clearly, earnings management is not only unethical but also costly. It also raises questions on the effectiveness of corporate governance mechanisms in constraining earnings management.

Required

Discuss the accounting techniques used by firms to manage earnings and the motives behind earnings management. Your work should also discuss the empirical evidence on the effectiveness of corporate governance mechanisms in constraining earnings management. Cite literature to support your answer.

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  • Posted on : November 18th, 2022
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