HISTORICAL SHIFT IN AUDIT PROFESSION

Historical Shift In Audit Profession

Historical Shift In Audit Profession

The fundamental ethical responsibility of an accountant is to fulfill this obligation, which is crucial to the functioning of commerce in any market. All other ethical responsibilities of the accounting professional are derivative on the performance of this task. Accounting Profession determines the ethical obligations and responsibilities of an accountant. A professional accountant has an obligation to record, provide, and attest to information regarding the economic affairs of an organization.

As economic and market systems grew more complex, the nature of the information required for the successful functioning of the economic systems became more complex as well and the demand for this information by various stakeholders increased. These two factors combined with the ever increasing volume of data led business owners and decision makers to request the services of a professional accountant. Originally, financial records were kept by and for the person who used the information.

The accountant is required to accurately record the debit and credit entries produced by a specific person or organization. The second requirement is to provide this record to the legitimate users of the information. To fully understand this definition, it is necessary to examine each of the three constituent parts; the first requirement is to record information. Legitimate users span the spectrum of stakeholders and there are four different reasons why users would seek this information: The first is that managers of the organization need the information provided by professional accountants to effectively plan and control the organization's operations. For example, if a certain division is consistently losing money despite repeated investments of time and treasure, it would be very helpful for a manager to have this information. The second is that investors use the information to determine which organizations would be a good investment for them based on their own risk tolerance and other factors. Third, rating agencies, lenders, and other groups use this information to assess the value of the organization and make decisions about its viability and future. Finally, the government uses this information to determine how much tax should be levied on an organization.

The Ethical Considerations

Depending on the use, giving out information can be very much like selling. For example, the CEO may be selling the board or the stockholders on the soundness of a company's financial situation. His or her bonus might be tied to how rosy a picture he or she is painting. The worth of his or her stock options may rest on the financial picture he or she is able to present. At the same time, the CEO is selling the IRS a different picture of the company, and still a different one to potential investors and/or lenders. Since accounting involves presenting the product to be sold, it enters into and influences market transactions. The question often asked is, “Why is an accountant obliged to disclose the true picture of the organization?” In response, it is possible to argue that accountants provide information, and if this ...