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Over the last decade or so the credibility of the accounting profession has taken some major hits. Enron, WorldCom, and the Australian HIH Insurance case are just a few examples where the executives of corporations have served their own self interest while leaving the stakeholders and society to cop the blow. So how can the accounting profession safeguard against these huge corporations destroying their credibility? Will there have to be a major shift towards accountants being ultimately responsible to society as well as the common stakeholder? Without the corporation evolving into the giant capital raising tool, the modern industry would never have developed so tremendously.

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It is this notion though, which has transformed share ownership from a responsibility into simply a transfer of wealth in the hope of a buck or two in return. Shareholders ?own’ the company, but as there are often hundreds of thousands of shareholders to any one company ? how does any normal shareholder have any control over what it is they supposedly own? Transferability has become the biggest demand with respect to share ownership. Investors want to be able to sell at the drop of a hat or buy just as quickly. For this to work shareholders must have limited liability (which means relinquishing control), and there must be millions of shares available for trade. The latter of the two results in any one shareholder having a less meaningful stake in the company.

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All of this collapses into the simple “Wall Street Rule”: vote with management’s wishes or sell up! (Monks & Minow, 1995) So in the end, management has very little accountability as any unhappy shareholder simply finds a new investment. This idea of accountability slipping away from the shareholders grips is of much concern. If the board of directors are not accountable to the shareholders then where is their incentive to act in their best interests? Even more concerning is: who is watching over society and the public interest? Surely this is left up to the regulatory agencies: the governments and the financial accounting standards board ? but are they doing their job? It wouldn’t appear so in Australia as Rule B1 of the Joint Code of Ethical conduct is not having any significant influence.

Rule B1 focuses on the public interest and states that above all else, accountants responsibilities lie with the ?community and its laws’ (Henderson & Henderson, 2001). But the accounting profession was not built this way. Accountants are conditioned to serve their clients needs above all else. Have you ever seen an audit report that refers to the firm’s performance with regards to the community? In Ladd’s book, he argued that the corporate community is growing so large it has become a great influence over nations, and because they are growing so large they are beginning to influence governments and industries ? as a result affecting the lives of a huge chunk of the nation.

Because of this Ladd believes management’s responsibilities should be extended beyond simply looking after the needs of the shareholders to enveloping the public’s interests as well. This emphasises the greater scope of accountability which has become a core issue in accounting in recent times. As the modern industry has turned the stock market into a huge influence over the actions of corporations, the traditional shareholder’s role has also evolved. The demand for transferability has meant managements accountability has diminished to a large extent and this has led to major concerns over the negative effects corporations are having over our society, and leaves the question of who is responsible for ensuring it will be protected unanswered.

The accounting profession is in a difficult position, as the public expect auditor’s reports to cover everything ensuring their interests are kept safe, yet the accounting industry has worked on the notion for so long that their first responsibility is to their client. Perhaps there needs to be a shift in the underlying fundamentals of the responsibility of accountants: in a world which is only now coming to grips with the effects of the modern industry, for example global warming, should accountants consider these effects when signing that audit report, or are we taking it too far?

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Kylie Garcia

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