Accounting in

Organisations and Society

Module 1 - Organisations, Accounting
and Accountability
Topic 1 What is ‘accounting’, what do
‘accountants’ do, and why?
Opening poll
• What is accounting?
• Who does accounting?
• Who uses accounting information?
• Is accounting interesting?
• I will never do accounting !
• Is accounting relevant to everyone ?

2
 Course Learning Outcomes
On successful completion of this course you will be able to:
• Describe and explain the relationship between organisational
responsibilities, organisational accountability, and accounting.
• Justify why different perspectives of the roles of organisations within
society will in turn influence the types of ‘accounts’ we would expect an
organisation to produce.
• Explain the role of accounting in managing a business or organisation
including the concept of ‘resources’ of a business and how a ‘cost’
might be placed on the use of such resources.

3
 Course Learning Outcomes (cont’d)
• Identify and justify various approaches to measuring the performance
of an organisation inclusive of financial performance, social
performance, and environmental performance.
• Interpret and analyse a range approached to providing accountability
including measuring the performance of an organisation inclusive of
financial performance, social performance, and environmental
performance.
• Analyse case studies to identify instances that justify accounting is
both a technical and a social practice in a changing and interconnected
world.

4
 Learning objectives
• At the completion of this topic you should be able to:
• provide a definition of ‘accounting’
• describe the focus of ‘accounting’
• identify the possible audience of ‘accounts’
• provide a meaning of ‘accountability’
• explain the relationship between ‘accounting’ and
‘accountability’

5
 Learning objectives (cont’d)
6. provide an explanation of the breadth of ‘accounting’
7. explain who might be considered to be an ‘accountant’
8. explain how the objectives of an organisation influence the
type of ‘accounting’ undertaken;
9. explain the roles of ‘accounting’ and its evolutionary nature

6
 So what is ‘accounting’?
• Simply stated, ‘accounting’ can be defined as the provision of
information about aspects of the performance of, and resources held
or controlled by an entity to a particular group of people with an
interest, or stake in the organisation – we can call these parties
stakeholders (includes internal and external).

• But what ‘aspects of performance’ should ‘accounting’ address?

• What ‘accounts’ are stakeholders entitled to?

7
Relationship between accounting and
accountability

• According to Gray et al. (1997, p. 334) :

• Accountability is concerned with the relationships between
groups, individuals, organisations and the rights to information
that such relationships entail. Simply stated, accountability is the
duty to provide an account of the actions for which one is held
responsible. The nature of the relationships – and the attendant
rights to information – are contextually determined by the society
in which the relationship occurs.

8
Relationship between accounting and
accountability
From this definition, we can see that accountability involves
two responsibilities or duties, namely:
1. to undertake certain actions to meet stakeholders
expectation
2. to provide a reckoning or ‘account’ of those actions to the
stakeholders

9
 The role of ‘accounting’
• Therefore, the broad role of ‘accounting’, and of a
organisational report is to inform relevant ‘stakeholder’s
about the extent to which the actions for which an
organisation is deemed to be responsible have actually
been fulfilled.
• Reporting provides a vehicle for an organisation to fulfil its
requirement to be accountable. Such ‘accounts’ do not
have to all be prepared in financial terms.

10
 So what ‘accounts’ should we prepare?
• Different people will have different views about the
responsibilities of organisations, and therefore will hold
different views about what ‘accounts’ should be produced
by an organisation.

11
Case study
Life under Heathrow’s flightpath
• Residents who live close to an airport often believe they
have become used to the noise level of aircraft. However,
BBC news reported that one study has researched on 3.6
million people who live near London Heathrow airport and
found these people have 10 to 20 percent higher risk of
suffering heart disease, stroke and circulatory disease
(Heyden, BBC news, 2016).
Hyperlink: Growing up under Heathrow’s flightpath
Should Heathrow airport provide a publicly available ‘account’ of
noise pollution?
12
 An accountability model
• Assessments or decisions that need to be made as part of
the process of reporting aspects of an organisation’s
performance:
• Why would an entity disclose information?
• Who are the stakeholders to whom the accounts will be
directed?
• What types of disclosures will be made
• How should the information be disclosed

13
Why would an entity decide to disclose
information?
• Management’s motivations to report:
• Ethical motivation ?
• Justify its impact on society and the environment ?
• Protect owner/shareholder value ?

For a large company, why do you think they produce

publicly available reports?

14
 Why would an entity decide to disclose
information?
• Motivations for disclosing information could include (and it could be a
combination of these):
• to comply with legal requirements;
• to forestall efforts to introduce more onerous disclosure/accounting regulations;
• to influence the perceived legitimacy of the organisation;
• to manage particular (and possibly powerful) stakeholder groups;
• to increase the wealth of the shareholders and the managers of the
organisation; and/or
• a belief on the part of managers that the entity has an accountability (or a duty)
to provide particular information/accounts to particular stakeholders.
15
Who are the stakeholders to whom the accounts
will be directed?

• Motivated by managerial reasoning and strategising

 reporting to those who hold and exercise the greatest economic

power

• Motivated by ethical/moral reasoning

 the reports direct towards those stakeholders most affected by

the operations of the organisation
16
Who are the stakeholders to whom the accounts
will be directed?

• Motivated by managerial reasoning and strategising

 reporting to those who hold and exercise the greatest economic

power

• Motivated by ethical/moral reasoning

 the reports direct towards those stakeholders most affected by

the operations of the organisation
17
 Case study
Wesfarmers Limited
• Wesfarmers Limited is one of Australia major retail
companies, headquartered in Perth, Australia. The main
divisions include Coles, Bunnings Warehouse, Kmart,
Target etc. Wesfarmers listed a variety of stakeholders on
its website, and it can be accessed via the following link:

• Wesfarmers Limited stakeholder engagement

18
 What types of disclosures will be made ?

• What types of information will be disclosed and what issues

the ‘accounts’ should address:

 involves dialogue between the organisation and its identified

target stakeholders (often referred to as stakeholder
engagement).

19
How should the information be disclosed?

• The production of an account/report that addresses or

stakeholders’ information needs
 Various reporting frameworks and conventions are available
and can address different aspects of performance

20
Organisational objectives influence the form of
accounting undertaken

• Primary objective is to maximise profits

 The accounting/reporting will fixate on financial measures

• Primary objective is to reduce greenhouse gas emissions

 The accounting/reporting will focus on emissions,

improvements in emissions, targets, and so forth

21
 The changing role of ‘accountants’
• What an ‘accountant’ does has changed
 Traditionally an accountant primarily focuses on financial
performance and financial position
 Now, it is much more than that
• Social and environmental performance
• Climate change
• As expectation of the role of the organisation changes,
what the accountant does also must change
22
 Drivers of change for the accounting profession

• The Association of Chartered Certified Accountants (ACCA) released an

interesting report in June 2016 entitled Professional accountants – the future:
Drivers of change and future skills in which they note:
 Professional accountants must be able to meet current needs and
anticipate emerging demands.
 The following drivers have an major impact on accounting profession
• Increased regulation and stronger governance
• Globalisation
• Technology
• Changing societal expectations
23
 Multiple Choice Questions
1. According to the definition provided by Gray et al. (1997, p. 334), accountability
involves two responsibilities or duties. These are:
a. to prepare an annual financial report at the end of each financial year and
then distribute this report to shareholders.
b. to undertake certain actions in accordance with the expectations of a group of
stakeholders and to provide a reckoning or ‘account’ of those actions to
stakeholders.
c. to prepare an annual sustainability report at the end of each financial year and
then distribute this report to the community.
d. to undertake certain actions in accordance with one’s own expectations and to
provide a reckoning or ‘account’ of those actions to others.
24
 Multiple Choice Questions
2. An organisation may disclose information to the public. A motivation for
doing so is:
a. to comply with legal requirements
b. to influence the perceived legitimacy of the organisation
c. a belief on the part of managers that the entity has an accountability
to provide particular information
d. all of the above

25
 Multiple Choice questions
3. The role of the accountant is constantly changing. Which of
the following is not considered to be a key driver of future
change:
a. Different aspirations and expectations of coming
generations
b. Emergence of a cashless society
c. A reduction in outsourcing the accounting function
d. The evolution of various forms of social media
26
 Conclusion
• Because different organisations will have different
purposes or goals, and different stakeholders (who are
those able to affect the organisation, or those that are
affected by the organisation), then they can be considered
to have different responsibilities.

27
Copyright © 2017 RMIT University Vietnam