ACC5AFM Accounting for Managers Assignment
Summary of Selected Articles
Leggatt and Killalea (2019) give an outline of how forensic accountants love their work and describes the financial detective skills that they require. Traditionally, accountants took data and build it up into ledgers and statements, but with forensics, they start from the data and work backwards. According to the author, they assist in the investigations across various cases, such as proceeds of crime, money laundering, embezzlement and fraud. Also, Leggatt and Killalea considers court appearances as an important part of forensic accounting and that an accountant should possess the necessary skills to explain their evidence to the jury. Further, apart from being purely technical, forensic accountants require effective interpersonal skills, such as strong communication and teamwork. Finally, it is important to try and do some kind of audit work early in the accounting career in order to gain audit skills, which are needed by forensic accountants.
Cooper (2020) examines the various business risks that are involved when businesses ignore issues brought about by climate change. According to the author, the Task Force on Climate-related Financial Disclosures (TCFD) considers climate change as an essential part of the evolving risk management matrix. However, accounting experts are called upon to widen their reflection of climate change beyond a technical point of view because they are important people within organizations. Sustainability policies were once conquered by the bottom line, but as such changes, accountants have a good position to have an impact by taming themselves on issues of sustainability. To address the issue, most of the major firms are getting worried about climate risk, and are trying to better understand their risks. Therefore, they are doing more of the prudent management of such risks.
Discussion of Current Practices and Issues
Today, financial crime is having a huge economic and social toll on people’s lives. Also, climate-related risk is the focus of various governments and regulators across the world. Climate change is considered a systematic risk to the financial industry that merits the rising inspection and improved vindication efforts of managers (Eccles & Krzus, 2019). Financial system considers such risks as threats with the ability to weaken the standard working of the structure and result to negative concerns for the actual economy. Some sorts of risks related to climate change increase to such thresholds. There are the physical risks connected to more common stark weather measures and permanent changes in environment. Also, there are transition risks caused by the technological and policy variations needed to realize a green economy. Such kind of changes strain carbon-intensive resources and affect the worth of other economic tools.
Therefore, the vast degree of projected harms as a result of transition and physical risks, alongside the fast nature of the damages could have a stark effect on financial organizations and the wider financial industry. Notably, financial firms not only are visible to the transition and physical threats of change in climate, but are also keenly increasing such threats by constantly offering considerable funding to activities that increase climate change. Over the previous decade, the largest United States (US) Wall Street banks have committed a lot of funds toward fossil fuel financing. Also, the largest insurers have held a lot of money in investments in fossil fuel, and the top asset managers have improved their assets connected to carbon-intensive businesses (Eccles & Krzus, 2019). The above efforts are all directed towards the fight against climate change.
Discussion of Future Developments
Regulators have a huge ramification for the financial services industry. Therefore, they have actively been focusing on the financial risks related to climate change. For instance, internationally, Financial Stability Board (FSB) has cautioned institutions about the disturbing effect of climate change and came up with TCFD, which gives recommendations for firms to disclose strong, uniform as well as comparable information regarding the risks and opportunities brought about by climate change. Similarly, Prudential Regulatory Authority (PRA) was the first global regulator to publish supervisory leadership to its banks on methods for the management of financial risks associated with the change in climate (Eccles & Krzus, 2019).
Moreover, the national financial regulator (ACPR) in France and Australia’s corporate watchdog (ASIC) and banking regulator (APRA) are few other examples of regulators that have emphasized the need for action. However, central banks across the world, such as European Central Bank, Fed, BoE, Reserve Bank of Australia as well as those of France, Italy, Australia as well as Netherlands, have examined what climate change has brought to their monetary policy and focused on methods to strengthen the banks’ pliability against the adversarial impact of climate change (Campiglioet al., 2018). In the future, organizations and accountants should heed and act immediately on the matter because the financial risks associated with climate change are huge to ignore.
Reflective Discussion
As seen above, climate change is considered a risk to the financial system stability and falls directly under the control of financial managers. Therefore, they must work on the developing systemic risk and establish phases to strengthen the pliability of financial markets and institutions. Delaying to act will boost the possibility of a climatic shock, thereby weakening the financial system and negatively disturbing the wider economy. Also, households, workers, as well as taxpayers should avoid bearing the burden for the failure of regulators to act. With every passing year, the negative result of climate change is getting more pronounced. Resultantly, the desire for substantial structural changes to the worldwide economy has been imminent and the financial risks involved are extremely high.
As stated by Campiglioet al. (2018), it is undoubtedly that organizations and businesses cannot remain untouched with such a change. Therefore, inaction is no longer an option and organizations should act conclusively and urgently in the management of risks involved with climate change. Also, they should look forward to capitalize on the associated opportunities. Climate-related economic risks should be identified, monitored, measured, managed as well as reported. Insurers, banks as well as businesses should be worried about the emerging risk scenery presented by climate change. However, they should consider the bigger opportunity for positive change. As the influence of TCFD and other standards of climate risk accounting expand, accountants need to be in the forefront to help investors and clients to making informed decisions.
References
Campiglio, E., Dafermos, Y., Monnin, P., Ryan-Collins, J., Schotten, G., & Tanaka, M. (2018). Climate change challenges for central banks and financial regulators. Nature Climate Change, 8(6), 462-468.
Coopet.C., (2020). Business Risks of Ignoring Climate Change.Itb.
Eccles, R. G., & Krzus, M. P. (2019). Implementing the Task Force on Climate-related Financial Disclosures Recommendations: An Assessment of Corporate Readiness. Schmalenbach Business Review, 71(2), 287-293.
Leggatt. J. & Killalea. M., (2019). True Directives. Feature Careers. Itb.
