Question

The Chartered Professional Accountants of British Columbia (CPABC) is the only regulated professional accounting body in the province of British Columbia. With over 36,000 CPA members and 5,000 CPA students and candidates, CPABC is responsible for the regulation and professional development of CPAs, as well as the training and certification of CPA candidates. As of 2020, BC has a population of approximately 5 million. It means that almost one percent of BC working population is CPA. Explain why we need so many CPAs by emphasizing on the importance of accounting information usefulness. Use concepts that were mentioned in lectures.

Answer 1

The accounting information is very important for the management or the decision making the body of an organization.Management cannot decide without reasonable information for backing it up.Accounting gives management information regarding the financial position of the business, such as; profit and loss, cost and earnings, liabilities and assets, etc.That is why the importance of accounting in business is very large.For making the right decision, Management depends on statistical data and information that accounting provides.The main object of Accounting is to record financial transactions systematically in the books of accounts and to find out the profit-loss and financial position of a business.Accounting information can also provide insight on growing or expanding current business operations. Accounting Information is useful for various reasons. Some of them are as follows:-

1. Business Performance Management - A common use of accounting information is measuring the performance of various business operations. While financial statements are the classic accounting information tool used to assess business operations, business owners may conduct a more thorough analysis of this information when reviewing business operations. Financial ratios use the accounting information reported on financial statements and break it down into leading indicators.
   
2. Decision Making - accounting information plays an important part in decision making necessary for the business.Although accounting information are available for a wide range of users - stakeholders (managers, employees, suppliers, customers, financial creditors, government and its institutions, the public, the media, etc.), the investors (shareholders) are recognized as the privileged users of accounting information. Four principal qualitative characteristics must be met for the accounting information to be useful in the management system: understandability, relevance, reliability and compatibility of information. Any economic transaction processing involves collecting, categorizing, summing and analyzing the data

3. Create Company Budgets - Business owners often use accounting information to create budgets for their companies. Historical financial accounting information provides business owners with a detailed analysis of how their companies have spent money on certain business functions. Business owners often take this accounting information and develop future budgets to ensure they have a financial road map for their businesses

4. Accounting Importance in Control - The main functions of modem management are planning and controlling.Controlling is essential for the completion of activities according to the plan. Accounting can help management much in control.

5. Accounting Importance for Motivation - Labor-employees are to be motivated for achieving expected performance. Financial reward is one of the main motivating factors of work.The management is to be aware of the financial position of the business for providing financial benefits. Accounting helps management by providing necessary information for making proper decisions.

6. Informing Investment Decisions - External business stakeholders often use accounting information to make investment decisions. Banks, lenders, venture capitalists or private investors often review a company's accounting information to review its financial health and operational profitability. This provides information about whether or not a small business is a wise investment decision.

7. Prevention of errors and frauds- Through the accounting system, the activities of employees are checked to prevent errors and fraud.

Role of Professional Accountants like CPA's in Making accounting information even more useful:-

The importance of the role of professional accountants in business in ensuring the quality of financial reporting cannot be overly emphasized. Professional accountants in business often find themselves being at the frontline of safeguarding the integrity of financial reporting. Management is responsible for the financial information produced by the company. As such, professional accountants in businesses therefore have the task of defending the quality of financial reporting right at the source where the numbers and figures are produced, These individuals employ an inquiring mind to their work founded on the basis of their knowledge of the company’s financials. Using their skills and intimate understanding of the company and the environment in which it operates, professional accountants in business ask challenging questions. Their training in accounting enables them to adopt a pragmatic and objective approach to solving issues. This is a valuable asset to management, particularly in small and medium enterprises where the professional accountants are often the only professionally qualified members of staff.ccountancy professionals in business assist with corporate strategy, provide advice and help businesses to reduce costs, improve their top line and mitigate risks. As board directors, professional accountants in business represent the interest of the owners of the company (i.e., shareholders in a public company). Their roles ordinarily include: governing the organization (such as, approving annual budgets and accounting to the stakeholders for the company’s performance); appointing the chief executive; and determining management’s compensation. As chief financial officers, professional accountants have oversight over all matters relating to the company’s financial health. This includes creating and driving the strategic direction of the business to analyzing, creating and communicating financial information. As internal auditors, professional accountants provide independent assurance to management that the organization’s risk management, governance and internal control processes are operating effectively. They also offer advice on areas for enhancements. In the public sector, professional accountants in government shape fiscal policies that had far-reaching impacts on the lives of many. Accountants in academia are tasked with the important role of imparting the knowledge, skills and ethical underpinnings of the profession to the next generation.They are the protectors of Public interest.