Practical Motivation

Discuss about the Contemporary Issues in Accounting for Presentation and Preparation.

In operational activities of an organization, ethics are concerned to compose good and moral decisions in regard to presentation, preparation, and revelation of financial information. The environmental accounting and auditing are the way in which the environment issues impact on organization’s financial statement and human being. The revelation and recognition of these issues stats the market inefficiencies that are exist due to different psychological facets and affect to financial decision making of the investors. Moreover, the regulators and auditors should examine obsolete theories such as fair value of accounting, prudence, matching, and historical cost to enhance their effectiveness. Due to this reason, the chosen topic for research proposal is environmental accounting and auditing. The issues in auditing and environmental accounting are not only general problem, but these issues have been embraced by all over the world (IISTE, 2012). This research is important because it enables the users to understand about the financial impact of auditing and environmental accounting issues on the organization.

In an effort, contemporary trend occurred in auditing and environmental accounting to make ensure the transparency, accountability, and stakeholder’s participation in a broader perspective. The auditor should ensure that acquisition, mergers, sustainability, proxy access, climate, and the executive reimbursement are synchronized. The principles of auditing are developed to ensure that the addressed issues may affect an organization’s performance. The auditor’s independency has impact on attention of investors, regulators, and researchers (Tepalagul and Lin, 2015). Similarly, it is essential to cooperate and share to generate better social, environmental, and financial performance of the organization. Therefore, the issues that many organizations do not produce in their report become considerable and the rationale which are not disclosed by the organizations need to be investigated. Moreover, evasion of taxes results as a corporate governance issues like corruption. In the area of heuristic-based biases there is prominent scarcity of research with inclusive deficiency of a research which is related to investor’s investment decisions. Essentially, a systematic set of concepts and rules of auditing should be developed to present the basic financial situation (Dozier, 2015). As well as, the auditing and environmental accounting can be observed as an essential part of the organization that is suffered from its rash behavior for long ter.

Although, there are many concerns regarding auditing and environmental accounting among people that have to forfeit as a result of operational activities of an organization. The independency of auditors is an imperative issue for auditing profession that impacts on audit quality. The environment accounting technique helps in identifying environmental cost and leads to cost saving for the organization. This research proposal is prepared to find the authentic cause of why the organizations are not constructing such reports. The regulator should close the gap which makes enable tax evasion and that are avoided by the organizations. In the current research, the reason of these issues is more thoroughly analyzed. The auditor should strengthen the current requirements of the policy for the extension of fair value accounting (Blay and Geiger, 2013). It is also required that the organization should make obligatory disclosures as well as, to encourage them.

Theoretical Motivation

According to Dhaliwal et al (2012), Environment accounting is way in which environmental issues impact on the company’s financial statements such as income statement, cash flow statement, and balance sheet. It helps researcher to understand about environment issues and their impact on the financial statements. Along with this, environment auditing is a tool that measures the effects of different activities on the environment. Environment accounting is a practice of using financial principles which is use to carry out costs of business. The environment auditing is systematic process that quantifies the organizational position and environment performance. This also analyzes the financial performance of the company and verifies the financial statements (Wang and Zhou, 2012).

In views of Vasarhelyi et al (2012), environment accounting and auditing are used to monitor the financial performance of the organization and to disclose the organization’s environmental financial information. Along with this, environment accounting and auditing can enhance the environmental performance of the company because it includes the certain rules and regulations. The regulator and the auditor are mandated to expand the rules and regulations to make ensure that the fair value of accounting, measurement basis, and corporate authorities are factored as improvement. They make ensure to share the corporative information to the public such as profit and loss accounts of the company. It is a critical work which offers the essential information for the user of fiscal statements. Besides, the present framework does not include the sections that may elaborate the disclosures and appearance. It is depicted by Parker (2012), that the concept of developing disclosure appearance issues are critical area therefore, these concepts should be stand on higher level frameworks. The role of business models related to environmental accounting is pervasive in financial reports because they have competing theories of the firm. The economic premises believe that the environmental accounting presents perfect information and has no any fraud in financial statements. In the same way, these economic premises argue that the accounting is a resource of diminishing transaction cost but the measurement is an issue in these premises.

Moreover, Aceitimo et al (2012) depicted that the sustainability of environmental accounting and auditing depends on numerous factors such as size of the organization, degree of competition and many more activities in the organization. A big organization becomes more visible and faces more public and political pressures to disclose sustainable auditing report. They want to produce a positive signal from such disclosures to attract investors which requires large funds. In the situation of competition the organizations would be reluctant to produce sustainable environmental accounting in apprehension of injury their competitive positions. As stated by Rao et al (2012), that the corporate governance in an organization directly relates to its environmental accounting and auditing. In this way, if the auditors are in large number s in the organization then there will be more chances in the organization which may disclose adequate information that relates to its operational activities.

Literature Review

According to above analyzed literature, it is identified that the individual’s outlook towards environmental accounting and auditing will help to influence their objectives. The literature presents that the poor and inadequate accounting perception of the organizations will results as poor attitude towards the users. In regards of fundamental factors there are conflicting results and intentions from the stakeholders. It will be helpful in providing scope for advance research. The following hypothesis is suggested which is tested during the research process:

“The inadequate accounting and auditing report may affect the investment decisions of an individual which are based on higher occurrence of emotions in compare of participating in an investment alliance.”

There are broad collections of emotional and cognitive biases which are measured in various ways. In this research, both primary and secondary data analysis methods are used. In this research, the questionnaires are distributed between different stakeholders of twenty companies all over the world. This research focuses on endowment bias and loss aversion as emotional biases that have significant different affects at individual or group level. The stakeholders should consist of managers, stakeholders, suppliers, government officials, and suppliers (Anderson et al, 2012). This research is conducted with several different countries over long time duration. The research model should be used to test the importance of fundamental factors. However, the different parameters of research are capable to extend the business student’s knowledge as a professional accountant about the issues of environmental accounting and auditing. The questionnaire of the research method would consist the open ended and close ended questions to find sequence regarding how well these stakeholders about environmental accounting and auditing issues. In this regard, if the stakeholders are aware about the auditing and environmental accounting reports of organizations then they will be satisfied by the obtained information disclosed by the company.  Therefore, the business decisions will be influence by the audit quality of the report. Further, there would be questions that may measure to situate pressure on the organizations to produce adequate audit report. The participants included in this research are varying in their preceding knowledge, experience, education, and awareness. The research is included both non-professional and professional investors. It will make sure a miscellaneous collection of individual preference and possible perceptions.  It is found that there are not only interrelated, complex, and cumulative relations between organizational change and auditors practices, but also the role of environmental accounting is in facilitating organizational dynamics (Burns, 2012). The evaluation of collected data from primary and secondary resources will be helpful to get conclusion about mentioned hypotheses.

Conclusion:

From the above discussion it can be concluded that the awareness about environmental accounting and auditing issues among stakeholders is increased in preceding decades. In this regards the organizations made efforts to generate economic prosperity by producing innovative and qualitative products which may provide strengthen to its financial statements. The stakeholders become more aware about organization’s operational activities that are affecting to their investments. Moreover, it is the need of stakeholder to become conscious about the importance of environmental accounting and auditing report. 

References:

Aceitimo, J. , Ariza, L. and Sanchez, I. (2012) ‘Explanatory Factors of Integrated Sustainability and Financial Reporting’. [Online]. Available at: https://onlinelibrary.wiley.com/doi/10.1002/bse.1765/full (Accessed: 12 October, 2016).

Anderson, H., Havila, V. and Nilsson, F. (2012) Mergers and Acquisitions: The Critical Role of Stakeholders. Melbourne: Routledge.

Blay, A. D., and Geiger, M. A. (2013) Auditor fees and auditor independence: Evidence from going concern reporting decisions, Contemporary Accounting Research, 30, pp. 579-606.

Burns, J. (2012) Social and Environmental Accounting, Organisational Change and Management accounting: A Processual View. [Online]. Available at: https://ore.exeter.ac.uk/repository/bitstream/handle/10871/16190/contrafatto-burns.pdf?sequence=2&isAllowed=y (Accessed: 12 October 2016).

Dhaliwal, D. S., Radhakrishnan, S., Tsang, A., and Yang, Y. G. (2012) Nonfinancial disclosure and analyst forecast accuracy: International evidence on corporate social responsibility disclosure, The Accounting Review, 87(3), pp. 723-759.

Dozier, B. (2015) Contemporary issues in Accounting and Finance. [Online]. Available at: https://barbradozier.wordpress.com/2015/06/01/contemporary-issues-in-accounting-and-finance-2/ (Accessed: 12 October 2016).

IISTE (2012) Issues in Social and Environmental Accounting. [Online]. Available at: https://www.iiste.org/Journals/index.php/ISEA/index (Accessed; 12 October 2016).

Parker, R. (2012) Towards a Theory and Practice of Cash Flow Accounting. UK: SAGE Publishers.

Rao, K., Tilt, C. and Lester, L. (2012) ‘Corporate Governance And Environmental Reporting: An Australian Study’. [Online]. Available at: https://www.emeraldinsight.com/doi/abs/10.1108/14720701211214052 (Accessed: 8 October, 2016).

Tepalagul, N., and Lin, L. (2015) Auditor Independence and Audit Quality A Literature Review, Journal of Accounting, Auditing & Finance, 30(1), pp. 101-121.

Vasarhelyi, M. A., Alles, M., Kuenkaikaew, S., and Littley, J. (2012) The acceptance and adoption of continuous auditing by internal auditors: A micro analysis, International Journal of Accounting Information Systems, 13(3), pp. 267-281.

Wang, D., and Zhou, J. (2012) The impact of PCAOB Auditing Standard No. 5 on audit fees and audit quality,  Accounting Horizons, 26(3), pp. 493-511.