We do need accounting regulations as the accounting practices vary from country to country and also between public and private, so in that case accounting regulations allow us and the users of the financial information to review the information as and when needed. The accounting regulations are needed because each country has their own framework to present the financial information and it becomes very difficult for the users of financial statements to derive the exact information what they need from the financial information presented by the companies that is why there is need to implement the accounting regulations on the companies so that a harmonized structure to present the financial statements is followed by all the countries and companies as well as make the financial information easy to use and available for the users of the financial information (Jeanjean and Stolowy, 2008). The accounting regulations make the financial information easy to use and presentable.
The international accounting regulations help the financial statements to have a comparability quality inbuilt in it as it will be easy to compare the financial information of the companies across the world. This will help in promoting international transactions as well and make the chances of confusion in the minds of the users of financial statements very less. The investors at the time of making any investments analyse the financial statements of the company to know about the growth of the company and many other prospects of the company (Marra, Pettinicchio and Semprini, 2015). The investor and the company can be based out of different domicile and as the financial statements are made out on the basis of the international accounting regulations this will make it easy for the investor to analyse the financial information.
The IFRS makes it easy for the people to make judgements about the company’s performance as that confirms that the rules needs to be unified for all the companies among the world and makes the financial statements true and fair. The people or we can say the users of the financial statements can analyse the financial statements with the help of IFRS and the principles adopted by the company as disclosed by them in the notes to accounts attached in the company’s financial statements. The IFRS makes the financial statements easy to present and proper accounting methods are followed by the companies. This also creates a harmonised system of accounting for all the companies to follow so that the financial information is made comparable.
Global Financial Crises started in the year 2007 and is considered to be the most horrible financial crises after the great depression of 1930. The crises began in US subprime mortgage market and then it developed into full blown banking crises at the international level. The crisis was followed by the great recession and the global economic downturn (San, 2009).
The major cause of the crisis was the overflowing of US housing bubble that was in 2006/2007. The already increasing default rates on subprime and adjustable rate mortgages (ARM) were on hike thereafter that contributed all the more for the financial crises. The crises were just because of the widespread failure in the financial crises, failures in corporate governance as too many firms were performing irresponsibly and were taking too much risk. Another major cause was the volatile mix of too much borrowing and risk by households and breaches in the accountability and ethics.
The first sign of the financial crises occurred in 2006, when the prices of houses started to fall. At first sight the retailers appreciated it as they thought that the overheated market will return to the more sustainable level but the opposite of that happened as there were many homeowners with questionable credit. Banks also gave 100% loans or even more than the value of the homes to people. These financial crises can be avoided if the banks have pulled out the loans and mortgages given by them to the public. The federal fund rates and the discount rates were also reduced and the central banks in England, Canada, China and European Central Bank also resorted to rate cuts to support the world economy. The efforts of all these were also gone in vain as the rate cuts were not sufficient to stop this extensive financial breakdown (Arnold, 2009).
The Global Financial Crises of 2007-08 has made us to learn that the self-reliance of the financial markets once crushed cannot quickly be re-established. In this organized world a superficial liquidity crises can very quickly be converted into a balance of payment crises for sovereign countries and solvency crises for financial institutions as well (Reinhart and Rogoff, 2009). This will also lead to full blown crises of confidence for the whole world. But the positive aspect is that after every crisis that happened in the past has given a new beginnings and opportunities to the markets to grow even bigger.
The accounting education at university is considered as a part of education for business, as experience and as practice in learning to learn. Accounting education is important as this is a part of data processing device which provide deeply substantial data regarding the prior experience of the enterprise. The major objective of accounting is to offer awareness into the result of decision making process of management. The main aim of imparting accounting education is to comfort students in learning how to become a professional accountant (Hines, 1988).
With the accounting degree one can become an accountant and many other job prospects are available for the accountants as accounting managers are cited as one of the best job profile. The job titles that are available for a degree holder of accounts are accountant, staff accountant, Financial analyst, accounting manager, senior financial analyst, tax manager, accounting clerk, Controller, Bookkeeper, Internal auditor, tax accountant, audit manager and Business analyst. So we cannot contend that there is no scope available for accounting degree holders other than accountants profession there is too much scope available within this field (Garrison, Noreen, Brewer and McGowan, 2010).
Accounting education is termed as the thing that reflects the characteristics of the organisation and is also for the proper reporting and communication of business transactions as accounting is termed as the language of business. Accounting information and the communication process flows side by side as the accountant is called the transmitter who understands the information needs of the users of financial statements and conveys to them the desired information as and when needed (Weygandt, Kimmel and Kieso, 2009).
Critical thinking is all about highlighting the problem and then the solution of the same is to be found out and then a proper analysis, revaluation and justification of the solution will be performed to make it accurate (Hopper and Bui, 2016). Critical thinking and accounting goes side by side as assessing the financial health of the company, assessing the financial risks of the business practices, evaluation of the accuracy of the financial records these all are parts of the critical thinking in accounting. Critical thinking is not a skill to be taught to person it is just naturally inbuilt in the person. It is necessary for accountant to thin crucially else the financial statements will get biased.
The agency theory explains the relationship between the principle and the agent in the company’s perspective principle can be company or mangers and agents can be employees and the shareholders of the company. Agency theory is concerned about determining the problems that exist between the principle and agent in the agency relationship that too because of the unaligned aims or different aversion stages to risk. The most mutual agency relationship is between the shareholder and the company executives (John and Knyazeva, 2006).
Agency problem is the conflict of interest between the company’s management and the shareholders of the company. The manger acts as the agent for the shareholder and he is supposed to make the decisions that will maximize the shareholders wealth (Van Puyvelde, Caers, Du Bois and Jegers, 2012). Agency theory is presented in an innocent manner as the controversy between the manager and the shareholders this is not confined to the controversy as it is more than that it is about the interest of both the managers and the shareholders in the company. Managers are of the view to increase their wealth and shareholders are of the view to increase their wealth so the problems occur between them resulting into agency conflicts. This is not as innocent as it is termed in the accounting knowledge as it may lead to mislead the financial information. This is not just an alignment problem between the manager and the shareholders but also lead to industrial conflicts at times and effect the goodwill and reputation of the company as well. The share prices also get affected because of the agency conflicts as the shareholder will start to sell their interest in the company to other stakeholders (Campbell, Campbell, Sirmon, Bierman and Tuggle, 2012). The agency problem is not a small problem this will lead to many big disasters and revolutionary changes in the operations of the companies.
The accounting information also flows because of these agency conflicts as the shareholders can leak the information of the company if the conflict is major and the interest of shareholders is compromised (Radebaugh, Gray and Black, 2006). The company’s share prices start to fall and the major effect is on the reputation of the company. The company needs to maintain a balance between its managerial personal and its shareholders to protect itself from the downfall and compromise of the reputation. The agency conflicts prove to be very harmful for the companies and it is necessary for the companies to avoid these conflicts else the operations of the companies will severely get affected because of that and agency theory is also criticized as in the sense that it is not innocent.
Public interest is termed as the welfare of general public contrary to the selfish interest of any person, group or firm. General welfare in a broader sense means the welfare of society as a whole. Public interest helps a person to build up the public image and also protection from the government and recognition and promotion as well. Public interest is also a matter of state secrecy and confidentiality as claimed by the government. Public interest is actually the welfare of the public and not only the welfare of an individual or company. Public interest is wider in its concept and can be collaborated with many other theories likely to be public interest in accounting practices.
Public interest in accounting practices means that the accounting of the company is to done by keeping in view the interest of its shareholders, creditors, employees, managers and other stakeholders (Hilton and Platt, 2013). The company needs to maintain all the ethical practices in its accounting and there is need for the companies to behave ethically to maintain their goodwill and reputation. Public interest in general sense and in accounting sense means the same as public interest in general sense means welfare of the society and public interest in particular sense of accounting means the welfare of the shareholder and the other stakeholders of the companies. Public interest if implemented in the accounting prices then that will make the goodwill and reputation of the company on hike and will ultimately benefit the company (Carsrud, and Brännback, 2011).
Accountants need to prepare the financial statements in public interest as the main aim of business id not only to earn profit figures or to maximise the profit but also the welfare of the society as business essential part is its customers. It is very necessary for accountant to prepare the financial statements in the public interest. Public interest ultimately leads to the ethical responsibilities of the company and if the company meets its ethical responsibilities then it will be beneficial for the company as that will protect the company from the government regulations.
The above study is based on the accounting and the different perspectives in which the accounting practices can be done as the company needs to meet all the regulations for the regular flow of business, the public interest in of vital importance in the workings of the companies. Apart from that we studied the causes and major happening and the impact of Global Financial Crises on the economy. The recovery form the Global Financial Crises helped the economy to grow a bit more and many sights of improvement. We also get to know about the fields available for accountants apart from the basic field and how the accounting degree is helpful in creating a bright future for any individual. This analysis we made with the help of different case studies. Further we learnt about the agency theory and the agency conflicts that arise between the principle and agent relation and how they affect the growth of the company. With the above analysis we got to know that the agency theory is presented in a quite innocent manner but actually it is no that innocent as it harm the company a lot.
Arnold, P.J., 2009. Global financial crisis: The challenge to accounting research. Accounting, organizations and Society, 34(6-7), pp.803-809.
Campbell, J.T., Campbell, T.C., Sirmon, D.G., Bierman, L. and Tuggle, C.S., 2012. Shareholder influence over director nomination via proxy access: Implications for agency conflict and stakeholder value. Strategic Management Journal, 33(12), pp.1431-1451.
Carsrud, A. and Brännback, M., 2011. Entrepreneurial motivations: what do we still need to know?. Journal of Small Business Management, 49(1), pp.9-26.
Garrison, R.H., Noreen, E.W., Brewer, P.C. and McGowan, A., 2010. Managerial accounting. Issues in Accounting Education, 25(4), pp.792-793.
Hilton, R.W. and Platt, D.E., 2013. Managerial accounting: creating value in a dynamic business environment. McGraw-Hill Education.
Hines, R. D., 1988. Financial accounting: In communicating reality, we construct reality. , Accounting, organizations and society, 13(3), pp. 251 – 261.
Hopper, T. and Bui, B., 2016. Has management accounting research been critical?. Management Accounting Research, 31, pp.10-30.
Jeanjean, T. and Stolowy, H., 2008. Do accounting standards matter? An exploratory analysis of earnings management before and after IFRS adoption. Journal of accounting and public policy, 27(6), pp.480-494.
John, K. and Knyazeva, A., 2006. Payout policy, agency conflicts, and corporate governance.
Marra, A., Pettinicchio, A. and Semprini, M., 2015. International Financial Reporting Standards: accounting and financial reporting using IFRS. McGraw-Hill Education.
Radebaugh, L.H., Gray, S.J. and Black, E.L., 2006. International accounting and multinational enterprises. New York, NY: John Wiley & Sons.
Reinhart, C.M. and Rogoff, K.S., 2009. The aftermath of financial crises. American Economic Review, 99(2), pp.466-72.
San, M.S., 2009. Global financial crisis. Plastic Rainbow Book Publication.
Van Puyvelde, S., Caers, R., Du Bois, C. and Jegers, M., 2012. The governance of non-profit organizations: Integrating agency theory with stakeholder and stewardship theories. Non-profit and voluntary sector quarterly, 41(3), pp.431-451.
Weygandt, J.J., Kimmel, P.D. and Kieso, D.E., 2009. Managerial accounting: tools for business decision making. John Wiley & Sons.