Accountants and/or Auditors Responsibilities and Contributions Towards Corporate Governance
ASSESSMENT 4: RESEARCH PROPOSAL FOR BUS707 APPLIED BUSINESS RESEARCH
Abstract:
The proposal has the purpose of studying and exploring the responsibilities of accountants and auditors in an organization and their contributions towards corporate governance. These two important functions in an organization also share the responsibility towards corporate governance. The research proposal sets the stage on the importance of the fields and conducts research background which is followed by setting objectives and research questions. These objectives and research questions are based on relationships between accountants and auditors and their contributions to corporate governance. However, it has been included as an objective to reach framework for corporate governance which is contributed by accountants and auditors together. For this purpose, qualitative research has been proposed after reviewing research articles in the literature review. It has been proposed that this proposed research should come up with an opinion regarding corporate governance so that accountants and auditors can benefit.
Research Background
Companies follow the rules and principles, and they have to follow the rules so that they can remain transparent and honest in their practices. In this regard, some departments and job tasks are more important than others to ensure transparency and honesty in a company. Corporate governance is the concept which is usually discussed to relate to the transparency of activities in a company. In simple words, corporate governance consists of a set of principles and objectives to run the business of a company. These principles are standards which decide whether an action is legal and allowed or not. Principles and objectives of a company are set to serve the benefits and interests of all stakeholders. Although employees are important stakeholders in a company, yet it is not always legal or ethical to work in their benefit only (Kowalewski, 2016). A company has to work to benefit any stakeholders while any attempt of abnormal and out of boxing action may be considered as illegal. To ensure corporate governance in a company, accountants and auditors have responsibilities because they have to ensure corporate governance initiatives to be practiced in a company. Therefore, they have the most valuable contribution to corporate governance.
Auditing is an important function of any business or company where it communicates results of obtaining and evaluating pieces of evidence to the interested stakeholders of a company. The process takes into account the economic actions that they should be economically and financially right against criteria established to evaluate business actions. There are a number of other processes which have to be carried out under it. Accounting is a function in a company which records financial transactions and processes and analyzes them. In the process of recording financial transactions, the business gets its picture and the health of a company can be determined (Agyei-Mensah, 2018). In the process of summarizing, analyzing, and reporting these business transactions help oversight authorities, regulators, and customs authorities have the true picture of the business. Therefore, accounting has a crucial contribution towards corporate governance as it serves its objectives.
Given these benefits and critical contributions of accounting and auditing for a business, it is proposed to conduct a study on the responsibilities of these processes or functions so that their role can be highlighted. Their responsibilities are needed to be discussed and explained because they have the role of bringing transparency in a company. Corporate governance has a set of principles and criteria which must be observed otherwise issues regarding integrity of the business may emerge. These two processes are representative of transparent practices in an organization because they can ensure clean practices. They are also able to detect any discrepancy or problem in the processes of business activity. Due to these reasons, the study has been proposed so that their useful attributes and contribution to corporate governance can be highlighted, promoted, and extended. More analysis on the topic is going to be done in the literature review where past studies on the responsibilities and contribution of accounting and auditing would be reviewed (Tassadaq & Malik, 2015).
Research Questions and Research objectives
Auditing has two main functions, i.e. internal auditing and external auditing. Both of its components play their role in corporate governance. Accounting is the process which is about financial transactions of a company, and it analyzes the financial data. These functions collectively work for effective and error-free decision making for the company. They compile effective and long-term reports on the business. Therefore, research questions and research objectives have been developed around these responsibilities and contributions of auditing and accounting. The purpose of the proposal is to have an expert opinion from this original research because a new and detailed analysis of these processes would help to understand their importance for a business. Given the understanding of auditing and accounting for a business or company, a company can take steps further to train its personnel working in these processes. In the following, research questions have been given:
Research Question 1: What are the responsibilities of accountants and auditors in corporate governance practices in a company?
Research Question 2: What are the contributions of accountants and auditors in corporate governance practices in a company?
Research Question 3: What art functions and activities of auditing which help towards corporate governance?
Research Question 4: What art functions and activities of accounting, which help towards corporate governance?
Research Question 5: Can there be a research framework of corporate governance, which has sole variety of accounting and auditing in a company?
Research Objectives:
- To explain and explore the responsibilities and contributions of accounting towards corporate governance
- To explain and explore the responsibilities and contributions of auditing towards corporate governance
- To recommend how corporate governance can be fostered through a focus on accounting and auditing
- To reach a corporate governance framework with an emphasis on accounting and auditing
Literature review
In order to conduct proposed research on the given topic, a structured interview has been developed so that an idea of the topic and the relationship between variables can be presented. A large number of articles have been included so that the proposed topic can have substantial evidence to carry out research. The literature review has been divided into two main parts. First, responsibilities of auditors or audit and contribution to corporate governance and second part include responsibilities of accountants or accounting contribution to corporate governance.
Auditors’ responsibilities and contributions towards corporate governance
Responsibilities of audit can be observed at different levels as it has to guide and help the management of an organization to ensure their control and risk management. It is because of its advisory nature where it looks into various risks involved in an action and the result; it helps choose management best possible chance (Fülöp, 2013). If there are any hidden risks, then audit functions inform the management well before happening those risks because monitoring risks is one of its responsibilities. The implementation of the risk management process is an important activity in an organization, and it is the responsibility of the auditing function to monitor and forecast risks; therefore, it assists management in the risk management process (Badea et al., 2014). It has also the responsibility to find any weaknesses in the internal control systems. Auditing function within an organization is broad enough to help and assist audit committee and external auditing function. These responsibilities make auditors and auditing function appropriate to be fit and suitable for corporate governance. These responsibilities directly to desired results of corporate governance and contributions to the field may be possible (Hentati-klila et al., 2017).
Its responsibilities and functions show that corporate governance is the most relevant context within which auditing function should perform. The Cadbury Committee defined corporate governance simply that it is the system which sets directions and control measures for companies. Under this simple definition, the role of the board of directors and their responsibilities to set directions for the company are hidden. Investors get profit in return for their investment only because of corporate governance principles (Soh & Martinov-Bennie, 2015). A number of other functions and definitions of corporate governance have this basic premise in them that it provides a context which governs the performance and security of systems and processes of an organization. Auditors exactly fit in this role under corporate governance as they provide security and certainty in an organization. Internal auditors ensure internal control while external auditors ensure third party monitoring of the company’s actions and processes. Auditors regularly meet and coordinate with governing bodies within an organization so that they can ensure new requirements possible in the organization (Tusek & Ivana, 2016).
The basic concept behind the function of auditing is that it is independent, and it has its directions and way of doing tasks. It undertakes assessment of various functions and activities of an organization, including governance system, control procedures, and risk management initiatives. These activities include the basic responsibilities of an auditor whether he is internal or external. In the result, corporate governance functions and principles are fostered and contributed by auditing function. It also shows that various basic features of auditing are crucial for the auditing function itself and the corporate governance field for the whole (Hay et al., 2017). However, the role of auditors can experience changes in the context of the purpose and business model of an organization. A service organization may have different forms of application of auditing while a manufacturing organization has to have different aspects of auditing function application. But it may only be different perspectives and aspects, and they may not necessarily be considered important when auditing has to abide by basic principles of corporate governance which are same for different businesses and contexts (Brender et al., 2015).
Auditors may be classified as internal auditors and external auditors, and they have been assisting role for each other. In the result, comprehensive governance picture of a business can be presented. External auditors, however, have little information as compared to internal auditors because they do not experience activities of business of the organization closely. It has been confirmed in research studies that internal audit is effective along with external audit and the audit committee. They ensure corporate accountability effectively. Thus, responsibilities of the audit function align with the principles of corporate governance. Therefore, it contributes effectively to corporate governance (Mahdavi & Daryaei, 2017).
Accountants’ responsibilities and contributions towards corporate governance
Accountants and accounting functions play an important role in an organization because they ensure obtaining, recording, and analyzing information on financial matters. The role and responsibilities of an accountant are reflected in functions of the field. For evaluating the performance of an organization, accounting ratios play an important role. Thus, accountants have the responsibility to use these ratios rationally so that the true picture of financial performance of the organization can be presented. Return on equity and return on assets are two ratios which are important to reflect the performance of a firm (Kowalewski, 2016). As far as contributions based on these responsibilities are concerned, accounting-based measures are important as part of corporate governance principles. These measures enable organizations to add value to the firm because of their crucial importance for firm performance. The relationship of corporate governance with accounting ratios of return on equity and return on asset has been established and discussed in studies that higher values of these ratios mean that the firm has effective mechanisms in place for corporate governance (Agyei-Mensah, 2018).
Financial reporting is an important function of accountants under which they report financial statements and the worth of an organization. They have to ensure ethical and transparent practices in recording, summarizing, and presenting financial information about the organization so that there are no objections to the information and data. Accountants have the critical responsibility of presenting accounting information to the external users, and for this purpose, different practices in accounting discipline are employed, including financial reporting measures (Al-Janadi & Abdul Rahman, 2016). Accountants have to be transparent in recording exact and real data for compiling reports. There should be honesty in the presentation of information on financial reports and decisions based on these reports must be ethical. Timeliness is also a factor in accounting that any information should be timely, especially where delay may negatively affect its usefulness (Lin et al., 2018).
It has been noted that delay in the publishing of financial reports may have a negative impact on the worth of these reports because delay affects effectiveness negatively. Financial statements affect the decision-making process of many external users, and any delay acts as a hurdle on their way in the decision-making process. It is noted that firms incurring losses or showing negative picture of the business have delayed performance of accounting practices (Munteanu et al., 2017). Such practices are not in line with corporate governance principles which ensure that any intended dishonesty must not be there so that the smooth functioning of accounting processes can take place. The presence of an independent board is helpful to ensure that financial statements and their reporting would be timely, and it follows a certain course of action. Accountants contribute to the decision-making process of the board and the organization (Tassadaq & Malik, 2015). True picture of the business revealed through financial reports lead to informed and right decisions of stakeholders. It also helps the organization because it can plan strategically in the coming years. Accountants contribute to the principles of corporate governance as well because they abide by its principles in their functions. Corporate governance has code and principles, and it is dependent on other departments and functions in the organization to be effective. Therefore, it needs contributions from other departments where the accounting departments offer valuable support (Uyar et al., 2017).
Corporate Governance Attributes and Contributions of Accountants and Auditors:
Accountants and auditors play their role in light of corporate governance attributes. Therefore, these attributes should be summarized in the following with the help of research studies on them. Then, it would be easy to understand the contributions of accountants and auditors to the field.
There should be an independent board of an organization, and its size should be small so that it can cause communication problems. Auditors can have a look into this aspect and can suggest precautionary measures in light of risks because of the large size of the board. Financial implications of large board size can be presented by accountants.
The presence of independent directors ensures higher performance and transparent practices in an organization, and auditors and accountants have valuable contributions in this principle of corporate governance. There should be gender diversity, but accounting and auditing fields do not need to ensure gender diversity in, the board because it is only an administrative decision to be taken by concerned management. Auditors only have a responsibility to manage risks and monitor them. Accountants have a role with financial and accounting information. Therefore, they do not need to be focused on irrelevant measures specific to management discretion (Dou et al., 2015).
The Independent audit committee is an important corporate governance principle, and it must ensure transparency so that any conflict of interest may not emerge. Accountants should also benefit from its presence as it oversees the overall functioning of an organization and in the result ensures that functioning in an organization is professionally done. This is how accountants and auditors add value to corporate governance. Based on these disciplines, a model or framework for corporate governance can be developed (Al-Janadi et al., 2016).
Research Design:
The proposed research would use qualitative research methods because it is appropriate for the objectives of the data. Auditing and accounting are integral concepts in business practice, and organizations cannot live without them. Therefore, it is highly effective and useful to have a detailed analysis of these concepts and their relationship with the concept of corporate governance. Moreover, the concept of corporate governance is also a very much researched topic, and lots of findings and research implications of corporate governance have been researched. Therefore, it would not be feasible to try to establish a relationship between the variables because it is already quite visible. It is obviously known that auditing has a positive relationship with corporate governance and accounting also has a positive relationship with this concept. Moreover, it is also noted that the very principles of accounting and auditing contribute to corporate governance because the basic premise of these fields is to use information and sources of information must be honestly used and utilized. Responsibilities of accounting and auditing are also well-researched topics where various functions of these fields and their importance have been part of many research studies. After setting this fundamental context of the methodology, further discussing qualitative research methods would be appropriate so that justification of its use can be ensured (McCusker & Gunaydin, 2015).
Secondary research is an authentic type of research because there is access of any researcher to a range of databases and research sources. Published research work on different concepts enables researchers to draw lessons. This is what would be used in the proposed research. However, every action towards research should have a reason, and this section in the proposal goes to establish this fact. In the following, justification of the chosen research type has been given which is followed by other issues in the methodology.
Justification of Using Qualitative Research Type:
If the definition of qualitative research is taken, it is noted that it inquiries about a phenomenon or concept systematically so that it can serve the purpose to develop an understanding of the researcher and the audience of the research. Usually, the research has the attributes of being holistic, narrative, and description based. This research process adopts the inductive reasoning or inductive process where data is organized in a systematic manner. Then, categories of that data are made so that patterns and new associations between the data and variables can be formed. In the case of proposed research, this definition can be applied as there are three main concepts involved in the research. First is accounting, second is auditing, and third is corporate governance. These variables are linked with each other by working on their contributions and responsibilities towards corporate governance. In light of the qualitative research methods, classification of literature on the topics would be classified under the heads of accounting, auditing, and corporate governance. Then, their basic concepts would be examined, and the very nature of these concepts would be related to each other (McCusker & Gunaydin, 2015).
It has been highlighted and explained as an example in the above literature review which is comprehensively prepared in an integrated manner. As an example, definitions of these three concepts can be thought and pondered. The basic purpose of all three fields can be identified, and one concept would seem to help other concepts. Corporate governance is about to follow principles and criteria of business operations and performance of a company. Auditing obtains and evaluates information. Accounting collects, summarizes, and presents transaction data. If corporate governance is explored in detail, then different themes may be identified, and the relation of one theme of corporate governance may be highlighted with the theme of other variables i.e. accounting and auditing. Above detailed literature review can be examined in this way and justification of choosing research methods can be noted.
Type of Qualitative Research:
There are four main types of qualitative research, and of those four main types; phenomenology research type has been selected. There is justification for it as phenomenology is used when concepts are explored and discussed. There are already three concepts in the proposed research, and they would be studied under this type of qualitative research. Then further associations and explanations of each concept are explored to find new realities and facts. It is appropriate to use phenomenology for this proposed research. Data analysis under this type of research is done by classifying and tanking data on giving concepts in the study and sense of collecting information is taken. The purpose of using this type would be to examine the relationships of variables of the study which are not under the observations of researchers (Percy et al., 2015).
Types of Data:
Being a qualitative research method, the data to be used in this research would consist of research studies on the given variables in the title of the research. Research studies which would be used are mainly journal articles which are published in reputed journals. These research articles from journals would be peer-reviewed and they would be based on the given topic of the research. Books may be used for the collection of data, but they must be researched books. Otherwise, books give a subjective analysis of a phenomenon or concept.
Data Collection Methods:
For the proposed qualitative research, journal articles would be searched and collected from the databases of the university library. Google Scholar would be used for searching articles, and then, qualitative research methods would be applied to these articles. As it is qualitative research, therefore, there would not be any sample size. In qualitative research methods, interviews and observation methods are used for collecting data, but this proposed research relies on secondary research which takes data and information from published journals and the above-noted methodologies would be applied to them.
Limitations of Proposed Research Methodology and overcoming them:
The proposed research methodology is qualitative, and it has some limitations like it is subjective in nature and it may be possible that the researcher manipulates the research process to get desired results. It would be avoided by sticking to objective analysis of studies where each journal article has certain and distinct findings. These findings would be used and classified to draw themes and relationships. Then, synthesis of the literature would end at major findings from this research.
Ethical Consideration:
In the proposed research, ethical considerations would be ensured through five considerations of human research. These considerations are informed consent, beneficence, and respect for anonymity, confidentiality, and privacy. These considerations ensure that researchers adopt ethical practices in their research. These considerations would be met as journal articles used in the research would be properly referenced, and there would not be theft of any other researcher’s work. The findings of the research would be properly presented, and there would not be any bias in the findings. The research would be authentic once these ethical considerations are met (Walsh, 2018).
References
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