ACCOUNTING THEORY 1 Essay Example

Accounting Theory: Article Review

Accounting Theory: Article Review

For this assignment, the article under consideration is dubbed “HSU Boss Used Slush Fund to Aid Allies” documented within the Australian Financial Review by McKenzie, Nick and Baker, Richard on April 30, 2014.

Facts of the Article under Study;

It can be established that the article argues concepts that are fairly related to accounting regulation and politics, ethics or rather the role of ethics in accounting and measurement in accounting as well. The article is based on the questionable activities of a Health Services Union leader by the name Kathy Jackson. She managed to embark on supporting the political and factional campaigns of her close allies using membership fees accumulated by the union as a whole. It is noted that about $300,000 of the membership fee was used to illegally support the aforementioned political campaigns. For instance, it was established that, after a thorough evaluation of the internal union banking record statements, about $284,000 was transferred from the Union’s main account into the National Health Development Accounts in the period between 2003 and 2010. This illegal transfer of cash was executed under the watch and authorization of the union leader Ms Jackson (McKenzie & Baker, 2014).

A probing team, of about seven HSU committee of management team members, which had availed their services to the commission in the period for which the illegal transfers happened emphasized that they did not comprehend of any existence of such an account. Intensive scrutiny of the leaked union records indicated that the leader of the union made a transfer of about $5000 in the year ending 2010 to a labor-based member of parliament. This transfer was later indicated as a payment to charity within the union end-year financial report statements (McKenzie & Baker, 2014).

Consequently, with several probes into the matter by both the regulator; Fair Work Australia and HSU, the transaction was altered to a description of a “fee for service”. Notwithstanding, the $5000 was deposited to “AB Hinc” account within an ANZ bank but the account was not disclosed to the Australian Electoral Commission as required under the disclosure laws. Significantly, the account was also not disclosed to ALP head office as required under the labor regulations and guidelines (Jones & Riahi-Belkaoui, 2010).

Further reports postulates that there was an internal effort made to scrap-off the existence of the fund given that auditor reports indicated the plans to edit spreadsheets to eliminate association with NHDA (McKenzie & Baker, 2014). These illegal alterations lead to accounting error within the 2006 financial statements as about $38,000 of the membership fee were utilized to final accounts of the company.

Application of the arguments within the Article to Accounting Concepts

First, it can be seen that the entire activity revolves around the concept of ethics in accounting. Ethics, within the accounting field, has been used for a substantial period to differentiate the level of professionalism from mere practice of accounting to earn a living. It should be understood that accountants and other notable leaders as the CEO are expected to adhere to the laid-out structural guidelines whenever faced by distinctive and complex ethical dilemmas (Godfrey, Hodgson, Tarca, Hamiliton & Holmes, 2010). For this case, the leader; Ms Jackson the Chief Executive Officer of HSU embarked on using membership funds in order to promote the political campaigns of her close allies without disclosing to the members. This is truly a breach of the accounting ethics that calls for immediate accountability of funds that are availed to an accounting officer for that matter. To make the matter worse, the chief accounting officer: Ms Jackson went ahead to collide with internal staff to eliminate the accounts used for the transactions in order to scrap-off possible future evidences.

Retrospectively, the issue tends to reflect on the concept of accounting regulation and politics since it postulates the breach of some of conceptual frameworks that all entities are required to withhold at all times (Hendersen, Pierson, Harris, 2004). For instance, the ANZ bank account by the HSU official was not disclosed to the Australian Electoral Commission as required by the laws. Significantly, the account was not disclosed to ALP as postulated within the Australian labor conceptual guidelines.

The fact that membership funds were used to finance political factions and later depicted as ‘payment to charity” within the financial statements is an indication of unallowable accounting measurement practice. Also, with further probing by Fair Work Australia, indicates that the item was altered to ‘fee for service”. This is not a positive reflection of accounting theories for that matter.

In conclusion, it can be seen that the article puts up a critical discussion on issues that relate so much to role of ethics in accounting, concept of accounting regulation and politics as well as measurement in accounting. All of these arguments revolve around Ms Jackson embarking on misusing membership funds and trying so hard not to disclose the true nature of the illegal activity.

References

Godfrey, J. G., Hodgson, A., Tarca, A., Hamiliton, J. & Holmes, S. (2010). Accounting Theory 7th Ed. Brisbane: John Wiley & Sons.

Hendersen, S., Pierson, G., & Harris, K. (2004). Financial Accounting Theory. Sydney: Pearson.

Jones, S. & Riahi-Belkaoui, A. (2010). Accounting Theory, 3rd Ed. Australia: Nelson.

McKenzie, N& Baker, R. (May, 2014). “HSU Boss Used Slush Fund to Aid Allies”. Australian Financial Review, Retrieved on May 7, 2014 from http://www.afr.com/p/national/hsu_boss_used_slush_fund_to_aid_FiqNQrSQSwoogIOhFzWKoO