P2 Assess the accounting function within the organisation in the context of regulatory and ethical constraints

 

                                     Ethics in accounting             

 More broadly speaking, ethics and ethical behaviour refer to values like morality, honesty, and integrity. But the regulatory bodies of certified public accountants have established a distinct set of guidelines known as the code of professional conduct. Some norms are universal even though the rules established by various entities around the world are all different. The following are the top five ethical guidelines for professionals in accounting (CFI Team, 2022):

 

 Integrity- to act honestly and openly in all interactions with colleagues and customers.

 

 Objectivity- to avoid letting prejudice, conflicts of interest, or improper outside influence affect professional or business decisions.

 

 Professional Competence and Due Care – to acquire and keep up professional knowledge and competence at the level necessary to guarantee that a client or hiring organization obtains competent professional service.

 

 Confidentiality – must uphold the confidentiality of information obtained through business and professional interactions.

 

 Professional Conduct – to abide by all applicable laws and regulations and refrain from any behaviour that the professional accountant knows or should know could damage the profession of accounting.

 

 Regulatory environment of accounting

 

 The standard of the services rendered by its members determines how well the accounting profession performs. The accounting industry’s regulatory framework aims to guarantee the reliability and excellence of these services. Accountants must therefore adhere to the highest ethical, technical, and professional standards.

 

 Companies act no 07 of 2007

 

 The Companies Act No. 07 of 2007 is regarded as the primary source of legislation to regulate corporate entities and all aspects of their operations, including accounting. Act contains sections on the definition of an entity, the accounting requirements of an entity, exemptions by act, the fundamental characteristics of a company, the registration of a company, company powers, annual financial reporting to members and the appointment of an auditor, as well as specific offenses like making false or misleading statements and impeding regulators.

 

 Accounting and auditing act

 

 The standards for auditing were elevated to the status of legislative enactments by the Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995. The Statutory Auditing Standards Committee was established under the Act with the mandate to recommend and offer other support to the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) in the adoption of Auditing Standards. The Auditing Standards must be adjusted to reflect changes in the financial reporting environment (CA Sri Lanka, 2023).

 

 International accounting standards (IAS)

 

 International Financial Reporting Standards (|FRS), which have now been accepted by the majority of the world’s major financial markets, replaced International Accounting Standards (|AS), a set of regulations for financial statements, in 2001.The International Accounting Standards Board (IASB), an impartial organization with headquarters in London, released both sets of standards (Donnelly, 2023).

 

 Sri Lanka accounting standards

 

 The Accounting Standards Committee is authorized under the Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995 to recommend the Sri Lanka Accounting Standards for adoption throughout the nation via the Council of the Institute of Chartered Accountants of Sri Lanka. The said standards must be followed in order for Sri Lanka’s Specialized Business Enterprises (SBEs) to operate. The “Accounting Standards Committee” is to be established in accordance with the Act in order to support the Council of CA Sri Lanka in the proclamation of these standards.

 

 International financial reporting standards (IFRS)

 

 International financial reporting standards, or IFRS, are the main set of accounting rules used by multinational corporations. They seek to promote uniformity in accounting and reporting procedures across a number of nations. There are 17 standards published by the IFRS Foundation that cover various areas of accounting

 

 Sri Lanka financial reporting standards (SFRS)

 

The International Accounting Standards Board’s (IASB), International Financial Reporting Standards ((FRS), upon which SLFRS is based, are widely used in financial reporting. SLFRS offers a thorough structure regarding the compilation and presenting of financial statements in Sri Lanka. The recognition, measurement, presentation, and disclosure of financial information are just a few of the many facets of financial reporting that are covered. In order to enable stakeholders to make wise decisions based on the reported information, the standards are intended to ensure the financial statements are transparent, comparable, and reliable.

 

 Corporate governance

 

 Corporate governance is the word used to describe how and why businesses are run. The decision making process, accountability framework, and power structure of an organization are all defined by corporate governance. It simply consists of collection of instruments that help management and the board manage an organization more successfully and efficiently. Aspects of corporate governance include risk management, business strategy, pay, and ethical behaviour. Poor governance can have a negative effect on a company’s operations and profits (Conmy, 2023).

 

 It’s crucial to keep in consideration that the regulatory framework might vary from one region to the next and that laws are subject to modification over time. In order to ensure compliance with the applicable laws, businesses should stay informed about the accounting and reporting standards that are relevant to their particular area and industry. They should also seek the advice of qualified accountants or experts.