Role of Accountants in the Business World
First, let’s start out by showing exactly why accountants are very valuable in the business world. Accountants are known to be the boring people in the company just sitting on their chairs and stare at the computer screen as they make statement sheets about the different transactions. If looked in specific, accounting is one of the major roles in any business big or small. “The Primary task of accountants, which extends to all the others, is to prepare and examine financial records. They make sure that records are accurate and that taxes are paid properly and on time (Accounting Job Description). According to Jess Scherman a Content Specialist at Collegis Education, “In addition to preparing and analyzing financial data, accountants are also expected to explain their findings in written reports or presentations to their organization’s managers or to individual clients. Another key duty of accountants is to use their findings to suggest various ways to reduce costs and improve profits. (Jess Scherman). Based on these two different viewpoints, it basically says how major the role of an accountant is to every company or business. Without an accountant business wouldn’t know the profits they make, how much money they are spending, and what plans are working and making money also what is not working.
As usual with all things in life there are positives and negatives to things even if you enjoy it. The same is with Accounting, according to Gordon Hanson a freelance writer for Collegis Education there is six positives to becoming an accountant and four cons for being an accountant. First the positive is about having a clear career path when it comes to studying as its all straight forward. Secondly, is that the field for accountants is stable and is also a growing job field. The field is projected to grow 11 percent from 2014 to 2024 and the Baby Boomer generation will continue leaving the workforce in the coming years?”which should pave up the way. Third is having the potential for professional growth. Forth is that the earning potential is favorable, as of 2016 the medium is $68,150 and the top 10 percent is $120,000. Fifth is that you can work where you want to work, for example a big city or small city. You can even work from home or traveling to different clients, the possibilities is endless. Lastly is that there is an entrepreneurial potential, you can open a firm and be your own boss, but it does have its risks and not for everyone. The four cons is that the education is ongoing as to reach farther you will have to get degrees, the work can seem dull as its all math and investigating and to people who have no interest in those subjects it may be too boring, there is a busy season like the deadline on April 15, as it can become long days and weekend work that may be too much for people to handle as it starts right after New Year’s Day, and lastly the work can become stressful as it’s all about deadlines so you will be working under pressure sometimes (Gordon Hanson). In conclusion, a company’s future heavily on the job of the accountant because they are the ones who keep track of all the financial transaction dealing with the company, but nothing is perfect because important roles usually comes with stress that some people might not be able to handle.
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When it comes to scandals that deals with shady accounting, the Enron Collapse is a perfect example of everything that happens when a company gets greedy. First let’s find out a little bit about Enron before the fall and learn about the rise. Enron was founded in 1985, they started having trouble getting profits because of deregulations. They hired Jeffery Skilling to help come up with a business strategy and it worked out so well that they created a division called Enron Finance Corp with Skilling running it. By 1997 Enron had acquired electric utility company Portland General Electric Corp for about 2 billion dollars, which they made a profit making them into $7 billion also hired 200 more employees. In October 1999 Enron Online went live and at this stage of Enron career did two different things that Enron an overnight success making around $335 million in online commodity trades, “First, Enron was a counterparty to every transaction conducted on the platform. Traders received extremely valuable information regarding the “long and “short parties to each trade as well as the products’ prices in real-time. Second, given that Enron was either a buyer or a seller in every transaction, credit risk management was crucial and Enron’s credit was the cornerstone that gave the energy community the confidence that EOL provided a safe transaction environment. (William Thomas). Enron’s stock hit a all-time high at $90.56 and made onto the Forbes list as one the most admired and innovative companies in the world. So since the beginning of Enron in the 1985, the company had went from being in debt to one of the most successful and most innovative companies out there in the 2000’s. All because of Skilling and Fastow (the financial chief) and some questionable method there were the prime example for many new companies to follow.
Now that we know the rise of Enron, now let’s talk about all the shady accounting that was going on behind the scene. By 2001 people questioned the Enron’s financial statements, casting doubt on both the quality of the company’s earning as well as the business purpose of the transaction. In February 2001 Skilling was named the new CEO of Enron. By March Enron and Blockbuster ended their partnership as the stocks have fallen to mid 6o’s. Williams points out some reasons why stocks continued to go down, “Throughout the spring and summer, risky deals Enron had made in underperforming investments of various kinds began to unravel, causing it to suffer a huge cash shortfall. (Thomas). On August 14, Skilling resigned as CEO as stock dropped again to below $40 that same week. On October 19, Enron had locked their own employee from selling their Enron stock for 30 days making it more suspicious. On October 22 Enron announced the SEC was looking into the related party transactions between Enron and the partnerships owned by Fastow, who was fired days after. Enron had to announce that because SPECs investigations Enron went back to their financial statements back to 1997. In the restatement Enron had lost another $591 million in losses over the four years and also $628 million more in liabilities as of the end of 2000. By November 28, the stock had fallen all the way to 26 cents a share and Enron had to file for bankruptcy protection on December 2. The shady accounting that was being made during the rise of Enron were “Unduly aggressive earnings targets and management bonus compensation based on those targets. Excessive interest by management in maintaining stock price or earnings trend through the use of unusually aggressive accounting practices. Management setting unduly aggressive financial targets and expectations for operating personnel. Inability to generate sufficient cash flow from operations while reporting earnings and earnings growth. Assets, liabilities, revenues or expenses based on significant estimates that involve unusually subjective judgments such as reliability of financial instruments. Significant related party transactions. (Thomas). In conclusion the fall of Enron had shown people how greedy the corporation had to be to lie about so many things, just for money even if their employee’s got the worst of it as their stock in the company was worth next to nothing.
The question many people may be asking is why, why exactly would such high status people would risk everything. Is it just cause their greedy? Well there 3 main reasons why anyone would take advantage of their positions especially accountants as they work with the company’s money. These 3 reasons are called the Fraud Triangle. First is about Incentives/Pressures, because the business world is all about deadlines, companies feel the need to lie about earnings just so satisfy bosses or maybe a worker steals money for personal gain. Second reason is Opportunities, which is all about turnover in accounting personnel or other deficiencies in accounting and information processes can create an opportunity for misstatements. Last talks about Attitude/Rationalization, which is all about how if the higher up don’t care about the customers and overcharge and have a bad manner about them, then the accountant might believe its okay to behave in the same way. In conclusion, the reason might be because of greed, but the main reasons are more than just one answer and that is why these reasons are called the fraud triangle.
Being caught in these scandals aren’t just bad for the main people who were involved, the workers of these companies are the ones who get the worst. For example, in the Enron scandal the former vice-chairman of the company committed suicide, but apparently for his involvement in the scandal. A lot of workers lost their jobs and benefits because of the scandal, but at least justice is handed out to the main people. For example Skilling was sentenced to 24 years and 4 months for his involvement in the scandal and also most all his money went to the employees that lost so much because of him and the shady people. Another example is the Madoff investment scandal, which is now the largest Ponzi scheme ever and the founder Bernard Madoff was sentenced to 150 years in prison, so pretty gone for life. In conclusion, if someone ever gets caught in being involved in a scandal you could bet that their punishment will be large, but companies still do them thinking they will never get caught.
In conclusion being an accountant is a very big role as you pretty mush tell the owners what is working and what’s not, but that also comes with stress which can make you do some dumb things like steal money from that said company. Enron is a perfect example of what happens when you lie about your financial statements to get money by making people invest because they believe your company is doing really well. Greed will make too do dumb things and that is including stealing from the very people that employ you, even if it means possible jail time.