The role of accounting profession in development and regulation of Essay

The role of accounting profession in development and regulation of modern capital markets since 1970s - Essay Example It should be noted that the accounting profession can be divided into two major categories: the public accounting, ‘related to services such as tax and auditing’ (Bailey 1989, p.1), and the internal accounting, which refers to accounting services related to organizational activities (Bailey 1989, p.1). The accounting profession, in both of its forms, can affect the development of capital markets worldwide, as analyzed below. Through the decades, the accounting profession has highly contributed in the development of the capital markets worldwide. The relationship between the accounting profession and the capital markets from 1970 onwards is examined in this paper. The characteristics of the accounting profession and its effects on business performance are also discussed, in order to understand the current challenges of the specific profession but also its role in the achievement of organizational goals. The role of accounting profession in the development and the regulati on of capital markets can be understood only by referring primarily to the characteristics of accounting profession, as they can be made clear through appropriate theories. According to MacIntosh and Hopper (2005, p.263) ‘the sociology of professions literature emphasizes on the social structure on which each profession is based’; at the next level, the particular social structure can be used both for promoting the profession involved and for addressing the needs of the public (MacIntosh and Hopper 2005, p.263). From another point of view, Jeffrey (2010) notes that the accounting profession is more related to the virtue theory. The above theory emphasizes on the value of professional judgment, which is depended on ‘the efforts of the individual to develop good habits, such as wisdom, courage and justice’ (Jeffrey 2010, p.115). In practice, it seems that both these theories can be valuable in the development of accounting profession, promoting the relationsh ip of this profession with the interests of the public, as these are best served with the individual involved has highly developed specific characteristics, such as wisdom and justice (Jeffrey 2010, p.115). At the next level, the relationship between the accounting profession and the development of capital markets should be investigated. The involvement of the accounting profession in capital markets worldwide can be characterized as intensive. This trend is made clear in the following case: accountants in USA, in UK and in Canada have made strong efforts for ‘developing the objectives of financial statements’ (Riahi-Belkaoui 2004, p.164). More specifically, in UK, the Corporate Report, published by the Institute of Chartered Accountants, emphasized on the value of these objectives for ensuring ethical conduct in business transactions (Riahi-Belkaoui 2004, p.164). Kisielnicki – Hubler (2008) also notes that the value of accounting profession in setting ethical st andards in financial reporting is critical; he also explains that the involvement of accounting profession in the development of capital markets is likely to be indirect, through promoting standards, ethics and rules of conduct (Kisielnicki – Hubler 2008). Even in this context, the influence of accounting profession in capital markets seems to be high. The level at which the accounting profession can influence the development and the regulation of capital markets