The Constraints of Regulations and Ethics to the Function of Accounting



Regulatory requirements in accounting include both accounting laws and regulations as well as accounting standards in order to reduce risks and mistakes. In the UK, The Companies Act 2006 is the primary legislation governing the conduct of companies and the preparation and presentation of their financial statements in the UK (Gov.uk, 2023). The Act outlines the legal framework for the preparation of financial statements, the duties and responsibilities of company directors, and the rules for the conduct of audits of those financial statements. Under the Act, companies must prepare annual financial statements that comply with Generally Accepted Accounting Principles (GAAP) in the UK. GAAP provides a set of standards and guidelines that govern the preparation, presentation, and disclosure of financial information. Compliance with GAAP is essential for ensuring that financial statements are reliable, transparent, and comparable. Moreover, The Companies (Audit, Investigations, and Community Enterprise) Act of 2004 is another key piece of legislation that regulates accounting practices in the UK (Gov.uk, 2023). This Act sets out the framework for the conduct of audits, including the appointment of auditors, their rights and responsibilities, and the procedures they must follow when conducting an audit. The Act also provides for the investigation of companies, including their financial affairs and the conduct of their directors and officers.


Ethical requirements for accountants include adherence to professional ethical standards set by organisations such as the Institute of Chartered Accountants in England and Wales (ICAEW) and the Association of Chartered Certified Accountants (ACCA). These ethical requirements include integrity, objectivity, professional competence, confidentiality, professional behaviour and continuing professional development (ICAEW, 2011). Adherence to these requirements ensures the accuracy and reliability of financial information, protects the interests of stakeholders, and maintains the integrity of the accounting profession.


References

Gov.uk. (2023), “Companies Act 2006”, Legislation.Gov.Uk, available at: https://www.legislation.gov.uk/ukpga/2006/46/contents (accessed 5 April 2023).

Gov.uk. (2023), “Companies (Audit, Investigations and Community Enterprise) Act 2004”, Legislation.Gov.Uk, available at: https://www.legislation.gov.uk/ukpga/2004/27/contents (accessed 5 April 2023).

ICAEW. (2011), “Code of ethics - the five fundamental principles”, ICAEW, available at: https://www.icaew.com/for-current-aca-students/applying-for-membership/code-of-ethics (accessed 5 April 2023).

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