The accounting profession has an important significance in today’s business environment and faces many challenges in the upcoming years. This is caused on the one hand by a seemingly unending series of accounting scandals, which grabbed the newspaper headlines over the last few years, and on the other hand by new regulations and accounting standards, which where introduced by regulatory bodies worldwide to prevent frauds and accounting scandals in the future.
Accounting scandals like Worldcom, Enron, Health South, Parmalat and many more have shaken the public’s trust in the accounting profession. Therefore it is vital for the profession to rebuild its credibility and to regain the trust of the market and investors.
1 Introduction
The accounting profession has an important significance in today’s business environment and faces many challenges in the upcoming years. This is caused on the one hand by a seemingly unending series of accounting scandals, which grabbed the newspaper headlines over the last few years, and on the other hand by new regulations and accounting standards, which where introduced by regulatory bodies worldwide to prevent frauds and accounting scandals in the future.[1]
Accounting scandals like Worldcom, Enron, Health South, Parmalat and many more have shaken the public’s trust in the accounting profession.[2]Therefore it is vital for the profession to rebuild its credibility and to regain the trust of the market and investors.
2 Challenges facing the accounting profession
2.1 New responsibilities
The challenges facing the accounting profession are manifold. One of the most important challenges for accountants will be a rethinking, as they can not see themselves as the providers of historical financial information anymore. Instead, the public demands from them to serve as the conscience of the corporation.[3]Moreover, “they [have to] act as gatekeepers to ensure that accounting standards are implemented properly, not just conventiently” says Ho Yew Kee, an associate professor of the National University of Singapore, in an interview with the Business Times Singapore.[4]
Another challenge for accountants, as well as for auditors, is to understand the business implications of financial decisions and actions, as finance and accounting forms an integral part of business strategy.[5]Therefore, greater responsibility and increased scrutiny are being imposed on accountants and auditors alike.[6]
2.2 Sarbanes-Oxley-Act
The Sarbanes-Oxley-Act (SOX), which was signed into law on July 30, 2002, represents the most significant improvement in securities law in the past decades and has changed the work of public accounting firms as well as the work of corporations dramatically.[7]Although the application is only mandatory for companies which are listed at a stock exchange in the United States, at the moment, it will probably have a major impact on the work of accountants and auditors worldwide.[8]This is due to the fact that other regulatory bodies, like for example the International Accounting Standards Board, will have to consider the adoption of the law as well to strengthen Corporate Governance of companies.
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[1]cf. The American Assembly, Accounting, 2003, p. 3.
[2]cf. Lim, Hwee Hua, ACCA, 19.04.2006, para. 5.
[3]cf. Lim, Hwee Hua, ACCA, 19.04.2006, para. 6.
[4]cf. Koh, Joyce, Challenge, 2004, p. 1.
[5]cf. Lim, Hwee Hua, ACCA, 19.04.2006, para. 7.
[6]cf. Schmidt Bies, Susan, Challenges, 19.04.2006, para. 1.
[7]cf. Casabona, Patrick A., Challenges, 2003, p. 1.
[8]cf. Wikipedia, SOX, 19.04.2006, para. 1.
- Quote paper
- Cornelius Streit (Author), 2006, Challenges facing the accounting profession, Munich, GRIN Verlag, https://www.grin.com/document/58650
