What is Accounting? “Accounting is the process of identifying, measuring and communicating financial information about an entity to permit informed judgements and decisions by users of the information” (Weetman, 2016). There are many different roles in accounting, ranging from Assistant Accountants to Chief Financial Officers. This essay will discuss the differentiated roles of accounting in business deduced from the ICAEW Without Question film, and how accounting has influenced the economy in recent times such as the credit crunch in 2008.
Roles in Accounting
Accounting in a business is a vital component for growth and expansion. Without an Accountant, the insufficient amount of financial records of a business will most likely hinder the growth of the entity, and in worst case scenarios may cause businesses to make a loss.
The main types of Accounting roles include: Management Accounting, Financial Accounting, Auditing, Tax
One of the main types of Accounting is Management Accounting. Management Accountants create financial statements which is used internally in a business. Managers of a business then use the financial information to attempt to perform rational decisions. In addition to this, Management Accountants view trends in the business cycle and may offer advice to a business on their future strategies.
Another type of Accounting is Financial Accounting. Financial statements are created which is then used externally
Auditing assesses the accuracy of an entity’s financial records, and determines whether the records comply with the accounting laws and regulations. There are 2 types or auditors: Internal Auditors and External Auditors. Internal Auditors work alongside an organisation internally to assess the financial records,
As a result of the credit crunch in 2008, bank auditors were not successfully able to monitor whether the money it was loaning out to clients were able to be retrieved. In the case of Northern Rock, auditors were arguably responsible for not recognising the financial position of the bank. Holding long term assets (in this case mortgages), and short term liabilities (in this case short term borrowing), which resulted in a liquidity crisis.
ICAEW Without Question Film
Martin Jelani offered to assist Karen Walker on issuing an aggressive tax relief claim for Rapston Hotel on a contingency fee if there are any savings, and was willing to spend his annual leave on assisting her, portraying commitment to the project. After evaluating Jenny Hunt’s paperwork of the relief claim, Marin criticised her for the low tax relief claim fee and encouraged it to be a lot more aggressive.
It is questionable whether Karen was to blame for the situation as she accepted the offer from Marin for tax advice which led to Martin performing irrational decisions. However, Karen was aware at the time that it was a specialist area of Martin’s, therefore it seemed reasonable to seek for advice. In addition to this, Will Jackson stated in Year One that the tax claims were fair and no further evaluation was needed.
Throughout the film, Jenny was uncertain on the tax relief claim as Martin’s claim was significantly higher than her draft. Jenny may have been at fault here as she complied with Martin despite her being uncomfortable with the claim as Zoe described her as being “shaky” at the meeting.