Page 1: The role of the accountant
In today's increasingly competitive and uncertain business environment, organisations fighting for customers face a number of factors and issues which they may not be able to control and which affect performance. Professional accountants have a vital role to play in commercial success, by using their increasingly valuable knowledge in a way which gives their organisations or clients a competitive advantage.
But it is critical that this information is used in a way which is both fair and honest. This case study demonstrates how a professional body like ACCA (Association of Chartered Certified Accountants) has a responsibility for defining best business practice and supporting its members; helping them to use their knowledge for the benefit of their employers, clients, and other stakeholders. It also illustrates how ACCA provides a knowledge base for over 300,000 members and students in 160 countries worldwide, and encourages its members to operate commercially but within well-defined ethical standards.
An organisation's managers and other stakeholders (shareholders, suppliers, customers, the government, lenders, employees) will have differing concerns about how an organisation is performing e.g. its sales and profitability. They may also be interested in the organisation's:
- level and type of debt
- order book
- development plans, given current market conditions
- value and type of assets.
To satisfy these concerns and make decisions based upon them, these stakeholders require information. Much of the information supplied by accountants appears in the form of final accounts, which are subject to independent scrutiny (by independent external accountants acting as auditors) prior to public release. These audited accounts are used to assess performance over an accounting period. For large organisations they will include:
- a profit and loss account. This compares an organisation's outgoings (expenditures) with its income. In effect, it records the outcome of everything the business has done over a measured period of time.
- a balance sheet. This provides a snapshot of what a business owns and owes on a particular date.
- a cash flow statement. This reviews past cash movements, indicating when and how profits have been earned and whether the business has enough money to continue trading.
Accounting activities collate data into standard, intelligible formats. An organisation's decision-takers can then use this to:
- understand how well or badly the organisation is performing
- form a view on how the organisation, in whole or in part, is likely to perform in the future.
This information enables managers to consider the vital question "What is likely to happen if we take a certain action or no action at all?" The answer to this provides insights into what actions to take. In the modern world accountants are likely to have an input into almost all areas of business activity. Many accountants work in audit, providing advice and services to all sizes and types of business, while others work on non-financial matters, many of which involve strategic decisions which affect the long-term health of their own organisations.
Accountants operate at many levels and in several different roles within all types of organisations. Although some accountants operate in an advisory role to management, others go on to managerial positions, within firms of accountants which they themselves may own, on the board of public limited companies, or in the public or voluntary sector. An accounting background has proved invaluable to many people who have progressed to be directors and chief executives of large multi-national companies or their own companies, as it provides them with crucial knowledge and insight into business.