Warning to accountants

Press, 20 February 1979, Page 23

Warning to accountants

™ Wellington Accountants have been cautioned against inaccuracy in company financial reports. The executive director of E , rapl ° y e rs ’ Federation (.Mr J. w. Rowe) has told members of t‘he Society of Accountants that the public view of business activity was influenced by the information contained in a financial report. Any inaccuracy would create a lasting false itnpression and this was dangerous in a time of rampant inflation, he said. If current accounting practices, by showing profirs to be unrealistically high, lead to a serious increase in real taxation of business income during an inflationary period, they paradoxically iead to a real decline in profitability, the more so since they will have opened the way for wage demands.

I price-control demands, and 'the like. i “The unexpected result may well be that a paper profit becomes a real liability and increasing costs lead not to job creation but »-.> a cutting back in staff num- ; bers with a consequent ’ swelling of the ranks of the i unemployed (and further dejmands on the public purse),” said Mr Rowe. I Accountants could do I more to clarify the true (position of many employers. ‘Present accounting practices i often meant capital had to I be drawn on to meet costs. {There was also a need to {provide an accurate picture {of labour costs. j If inflation was to be ; brought under control, ; accountants must play their part by providing accurate ‘pictures of costs and profits, I said Mr Rowe. ’ “Lack of credibility in I financial reporting only con--1 tributes to inflation and its

1 attendant ills of unemployment and industrial unrest. t “Overstating profits plays r directly into the hands of - the militant unionists and 1 leads on to excessive wage t: demands and a continuation ■jof the inflationary cycle,” he tjsaid. 5 1 In the long run, the free- ; I enterprise system was {threatened. The accountant’s (role was of the utmost im’,’portance if a solution was to 5 be found. j| “Unless we generate more > profit, New Zealand will . continue to be a good place j in which to be bom and to 5 die but a place to leave during one’s w’orking life,” Mr , Rowe said.