Certain Responsibilities Ward Stakeholders â€Myassignmenthelp.Com

Question: Discuss About The Certain Responsibilities Ward Stakeholders? Answer: Introducation Business organizations, whether companies or other forms of business organizations, have certain responsibilities towards their stakeholders. Stakeholders of a business organization includes shareholders, employees, labor, creditors, debtors, banks and financial institutions that have provided financial assistance to such business organization, Government agencies, Tax authority of a country and society as a whole. It is important for business organization whether companies or other forms of organizations to fulfill their responsibilities towards each and every stakeholder. Only by satisfying the interests of each and every stakeholder an organization can successfully operate its business in the long run. Considering the main objectives of any business organization includes maximization of its earnings and shareholders wealth it would be only possible by providing careful attention to each and every stakeholders needs and interests (Tricker and Tricker 2015). Though it is the most im portant motivational factor for an organization to maximize its profits and shareholders wealth however, it would not be ideal for an organization to use all possible means and ways to achieve these objectives. To ensure business organizations stays within the ethical limits and legal boundaries while conducting its business operations various legislations have been enacted in different countries. A business organization by adhering to the provisions of these legislations while carrying on its business in a place in addition to fulfilling the standard norms and regulations of fair competition and business practice will discharge its responsibility towards the society which is one of the cost important stakeholders of a business organization. In case of business organizations and especially companies operating in Australia the provisions of Corporations Act, 2001 are the main guidelines to be followed while carrying on the business operations of the companies (Tricker and Tricker 201 5). The provisions of the Corporations Act, 2001 have clearly mentioned the highest standards of business practices that a business organization and a company should follow while carrying its business operations. Thus business practices in Australia should be regulated in accordance with the provisions of Corporations Act, 2001 to ensure that the practices are fair and not harmful to a society. Apart from the provisions of the Corporations Act, 2001 a business organization also needs to adhere to the code of professional ethics to ensure that the business practices are not in contradiction with the code of professional and ethics (Kaczorowska-Ireland 2015). In addition to the corporations Act, 2001 and code of professional ethics a business organization, whether company of other form of business organization, will also have to abide by the provisions of the Income Tax Assessment Act, 1936 in reporting its taxable profits and accordingly for payment of income tax. Income Tax Assessme nt Act, 1936 is the prime statutory enactment that guides the resident individuals and business organizations in the country in reporting its taxable profits and resultant tax liability from its business operations. In case of default in complying with the provisions of the Income Tax Assessment Act, 1936 in reporting its taxable profits and resultant tax from business operations there are provisions for penalty and punishment for such defaulting organizations. A business organization, especially a company, is considered as an artificial individual is liable towards the society in which it is operating by using the resources of the place to adhere to the highest standard of professional ethics and to the relevant provisions applicable to such organization (Vogel et al. 2015). The income tax liability for a business organization arises due to the various operations that it undertook in order to run the operations of business. Calculation of income tax liability of a business organization as well as a resident individual is to be made in accordance with the provisions of the Income Tax Assessment Act, 1936 (ITAA). However, PAYG is a system which allows business organizations to withhold tax on priority basis before computation of taxable income. Pay-As-You-Go (PAYG) is a system of tax payment where the payee deducts a certain percentage of tax from the amount of payment according to the standard provisions mentioned in the system. However, the computation of taxable profit and assessable income individuals are only to be made using the provisions of the ITAA. The assessable income of an individual and taxable profit of a business organization are to be computed keeping in mind the provisions mentioned in the ITAA (Gitman et al. 2015). There is substantial d ifference between calculation of income tax under PAYG system and ITAA. Whereas ITAA provides all necessary provisions to allow the business organizations to compete the taxable profit on which tax is to be imposed for a particular period PAYG is a system of withholding tax. The PAYG and ITAA are two different system and computation of income tax under the two system is also completely different. The objectives of ITAA and PAYG are completely different and thus, the calculation of income tax under the two systems would also be completely different. Whereas the objective of ITAA is to ascertain income tax liability of a tax payer; PAYG is about withholding of tax on priority basis (Mitchell et al. 2015). In case of business organizations, revenue generation activities, such as sale of goods, payment receipt for services provided, other incomes such as income from investments, interests received on bank balances constitute taxable transactions. Often people have a tendency to belief that only transactions that contribute to the revenue generation to an organization are taxable transactions however, it is not the case as the payments made in the ordinary course of business for expenditures necessary to run the business operations are also taxable transactions as these are all taken into consideration in ascertaining the taxable profit of a business organization to determine the income tax liability on such profit. As already discussed in case of business organizations operating in Australia and for resident individuals the Income Tax Assessment Act, 1936 and Income Tax Assessment Act, 1997 are the main legislations governing income tax provisions in the country (Williams et al. 2015). Australian Accounting Standards Board, here in after to be referred to as AASB for the sake of brevity in this document, is responsible to formulate accounting standards to guide accountants in the country for recording the financial transactions properly in the books of accounts. In order to reduce the alternative accounting principles and policies to minimum and to enhance the quality of financial reporting in the country the AASB was formed to formulate and issue accounting standards. Financial reporting quality has improved significantly after the introduction of mandatory accounting standards which are to be followed by business organization in preparation and presentation of their financial statements (Nicoll 2016). Financial reporting is the process of preparation of financial statements for the stakeholders of an organization to let them know the financial position and performance of such organization for a particular period. The reporting requirements for business organizati ons have been increased many fold after the formation of AASB as they have issued certain accounting standards which business organizations have to follow to maintain books of accounts for recording financial transactions properly. Before introduction of mandatory accounting standards by AASB business organizations and accountants were free to use different accounting principles and methods to compile the books of accounts however, the introduction of accounting standards by AASB has bring certain order to accounting. The requirements and restrictions have increased and these have enhanced the ability of financial statements to portray the true and fair picture of an organization as on a particular date. The reduction in number of alternative accounting principles and methods have enhanced the comparability of financial statements. It is important to understand that the AASB is always trying to improve the quality of financial reporting and hence, it is a continuing process one whic h will keep on trying to improve the financial reporting quality (Henderson et al. 2015). As already mentioned in case of Australia the business organizations and companies have to adhere to the provisions of the Corporations Act, 2001. Similarly, in other states and countries there are other legislations to govern the business practices of corporations and other forms of organizations. For example, in India the Companies Act, 2013 governs the business practices of companies and income tax related provisions are governed by the Income Tax Act, 1961; in United States of America, different states have different federal laws to govern the business practices of corporations and other forms of business organizations. Thus, in each and every country there are a separate legislation to govern and regulate the business practices of corporations and business organizations. The effectiveness of these legislations in different countries depend on the ability of the Government to implement these legislations to ensure that business organizations are adhering to these provisions while conducting their business operations. In a country like us, i.e. Australia, it is fortunate on our part that the Government agencies are efficient and do discharge their duties effectively thus, the corporations in the country more or less have followed the provisions of the Corporations Act, 2001. Its not like defaults have not been committed by companies however, due course of actions have been taken against such defaulting companies in accordance with the provisions of Corporations Act, 2001 and ITAA, 1936 to restore the faith of those who have followed the provisions of these legislations honestly (Gitman et al. 2015). The objectives of different legislations such as Income Tax Assessment Act, 1936, PAYG, The Goods and Services Act, 1999 etc. are different however, it is essential to adhere to the provisions of these legislations for those to whom these are applicable. Income Tax Assessment Act, 1936, here in after to be referred to as ITAA, has all the provisions related to income tax liability of resident individuals, non-resident individuals, artificial individuals (Companies, partnership firms and other forms of organizations). It is absolutely mandatory for the tax payers which could be an ordinary resident or a company to adhere to the provisions of the ITAA to avoid penalties and other forms of punishments. Each and every citizen of the country is bound to follow the provisions applicable to them according to the constitution of the country. In case of matters related to income and income taxes the residents as well as non-residents Australians for incomes arising in Australia will have to f ollow the provisions of the ITAA. PAYG or pay as you go tax is a form of withholding tax from the tax payers at the time of making payment to the tax payers. ITAA on the other hand computes the assessable income of an individual for a particular income year and accordingly determines the income tax liability of such individual. Both these system of income tax is different in their own way and works for different objectives. It is important to not mix the two but to understand the different objectives of these two systems. Accounting standards are guidelines and framework which are mandatory to be followed by individual tax payers, companies and other forms of organizations to record the financial transactions properly in order portray a true and fair picture of financial position of such individual, companies and other forms of organizations. These are standards issued by the Australian Accounting Standards Board to guide the practice of the accountants to enhance the quality of financial reporting. Both legislation and accountings standards primarily protect Government and Different agencies of the Government, such as Treasury, Enforcement Directorate, Environment Protection Department, etc. as the legislations and standards meant to control the activities and operations of business organization as well as control the behaviors of the citizen of the country in a constructive manner to fuel the development and growth in the economy and the country (Issacharoff and Eagles 2015). The standards and laws mainly promote clarity in financial transactions and dealing to help the country to collect correct amount of taxes from business organizations as well as individuals of the country (Drew et al. 2016). Improving the quality of financial reporting is one of the main objectives of accounting standards thus, it promotes improvement in financial reporting. The accounting standards and laws also promote transparency in financial reporting. Following the accounting standards and relevant guidelines provided in different legislations will improve the quality of financial reporting thus, the financial statements will portray true and fair picture of an organization which would not be the case if the organizations are allowed to use any method without any standard in preparation and presentation of financial statements. As discussed in the first part of this assessment that income tax calculated as per PAYG system will be completely different from income tax calculation under ITAA. However, it is imperative for a business organization as well as for an individual to calculate his / its income tax liability in accordance with the provisions of ITAA and not any other system. Similarly, using appropriate accounting standards and following the provisions of different laws will promote transparency, accuracy and accountability for a business organization and other tax payers (Devolder and Melis 2015). The accounting standards prevent accountants and organizations from using unfair and unreasonable accounting principles and methods to manipulate accounts according to their requirements. Thus, financial statements prepared in accordance with the accounting standards will show true and fair financial position of an organization and will prevent accountants from manipulation of accounts to achieve unethical objectives. Laws on the other hand prevents unlawful behavior on the part of business organizations and individuals in a country as fear of law will compel them to conduct their manners suitably and in accordance to the rules and regulations in the country (Crane and Matten 2016). The relevant laws and accounting standards promote ethical accounting as the main purpose of formulation of accounting standards was to enhance the quality of financial reporting to provide the users of the financial statements correct information to enable them to assess and verify the financial position of an organization properly. 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