1. THE ROLE OF ACCOUNTING IN ECONOMY, BUSINESS AND FINANCE BA 344 Special Topics in Accounting and Auditing Dr. Yasemin ZENG İ N KARA İ BRAH İ MO Ğ LU

2.  Is it possible to run a business without an accountant?  YES YOU CAN RUN A BUSINESS WITHOUT AN ACCOUNTANT, ONLY IF YOU CAN DRIVE A CAR WITHOUT FUEL!!!!!!!!!!!!!!!!!!! BOOKKEEPING!!! Accountant !!!!!!!!!!!! Reference: Mugan-Akman 2007

3. Environment of a Business Organization Reference: Mugan-Akman 2007

4. Business Activities Operating Activities Financing Activities Investing Activities

5. Accounting Information in a Business

6. What is Accounting?  Accounting is an information system  Accounting is the language of a business

7. Users of Accounting Information

8.  Financial Accounting  Managerial Accounting  Cost Accounting Fields of Accounting

9.  Accounting lies at the heart of business.  It is possible to survive, for a while at least, without an effective marketing plan, poor human resource management and indeed a poorly designed business strategy. However, if there are serious faults with the management and control of the business’s financial systems, it will fail. Role of Accounting in a Business

10.  Basic Roles;  Measuring, recording, analyzing, summarizing and reporting economic activities  Fullfil the information need of internal and external users  Provide management with information to assist them in their decision making and other activities. Role of Accounting in a Business Financial Accounting Management Accounting Cost Accounting

11.  Beside recording, summarizing, and reporting;  Accounting and Stewardship  Accounting and Control  Accounting and Planning  Accounting and Information Role of Accounting in Today’s Business

12. Primary Financial Statements  Income Statement  Statement of Changes in Equity  Balance Sheet- Statement of Financial Position  Cash Flow Statement (or Statement of Cash Flows)  NOTES

13. Income Statement  Summarizes the revenues and expenses of an entity for a certain period in time  Reveals the results of operations during a period  Shows whether an entity is successful in achieving the goal of profitability Example of an Income Statement  TURKCELL-English TURKCELL-English  TURKCELL-Turkish TURKCELL-Turkish

14. Statement of Changes in Equity 14-28  Summarizes the transactions that affect the shareholders’ equity in a given period  Increases in the share capital or payments of dividends to shareholders during the period are presented Example of a Statement of Changes in Equity  TURKCELL-English TURKCELL-English  TURKCELL-Turkish TURKCELL-Turkish

15. Balance Sheet  Reports financial situation of a company  Gives information about a company’s assets, liabilities and capital.  Snapshot of the financial position at a given date Example of a Balance Sheet  TURKCELL-English TURKCELL-English  TURKCELL-Turkish TURKCELL-Turkish

16. Cash Flow Statement  Deals with cash in-flows and out-flows company resulting from operating, financing and investing activities for a specific period  Presents information regarding the goal of liquidity Example of a Cash Flow Statement  TURKCELL-English TURKCELL-English  TURKCELL-Turkish TURKCELL-Turkish

17. Auditing and Auditors’ Opinion  Independent audit of financial statements:  the examination of the financial statements, accounting system and internal controls, and the accounting records of a company  purpose of an independent audit is to express an opinion on the financial statements-  whether they are prepared in accordance with the generally accepted accounting principles  whether they fairly present the financial position of the company  auditors’ report implies that the financial statements are free of material misstatements

18.  Unqualified opinion: (The Best) A clean opinion meaning that the financial statements appear to be presented fairly.  Qualified opinion: The auditor finds some situations that don't comply with GAAP. The auditor determines the financial statements are presented fairly except for (the situation that doesn't comply) and declares the reasons.  Disclaimer opinion: The auditor doesn't want to or can't give an opinion on whatever's being audited.  Adverse opinion: (The Worst) It states that the financial statements do not fairly present the financial position, results of operations, and changes in financial position, in conformity with generally accepted accounting principles. Types of Auditors’ Opinion

19. Regulatory Bodies  National  Capital Markets Board (CMB)  Ministry of Finance  TURMOB (Union of Chambers of Certified Public Accountants of Turkey)  Turkish Accounting Standards Board (TASB)- Changed on 26/09/2011  Public Oversight, Accounting and Auditing Standards Authority  International  International Federation of Accountants (IFAC)  International Accounting Standards Board (IASB)- International Financial Reporting Standards (IFRS)  Financial Accounting Standards Board (FASB) -US

20. Development of Accounting  Commercial transaction records - 3600 BC  Accounting in ancient times and Middle Ages- clay tokens & money- single-entry system  Evolution of Double Entry System- Accumulation of wealth - Fra Luca Bartolomeo de Pacioli- in 1494- Summa de arithmetica  19th century – distinction between creditors and owners - national accounting standards  Early 20 th century - standardization of financial reports  End of the 20 th century, these developments had resulted in the global standardization of accounting standards, and in the beginning of the 21st century, the International Financial Reporting Standards were issued

21. Development of Accounting in Turkey  Commercial Code of 1850 - translation of the French Commercial Code  A second Commercial Code was enacted in 1926- based on the German commerce and company laws that controlled the accounting rules  1950s on- American expertise has been utilized and the Turkish economic system - heavily influenced by the American system  A new Commercial Code came into effect in 1956  Istanbul Stock Exchange (ISE) came out in 1984; full operations started in 1986.The foundation of the Capital Markets Board (CMB) and the Istanbul stock exchange, and the increase in foreign investments

22.  The first set of financial accounting standards was developed in January 1989 by the CMB, to be effective for the fiscal years that started on or after January 1, 1989  The Ministry of Finance published the committee’s report in a communiqué on 26 December 1992, establishing the principles and the uniform chart of accounts to be in effect starting 1 January 1994  Turkish Accounting and Auditing Standards Board (TAASB) was founded in 1994  Turkish Accounting Standards Board (TASB-IFRS) First set of Turkish Accounting Standards to be effective in 2006 which are converged with IFRS (2005) Development of Accounting in Turkey

23.  Full set of Turkish Accounting Standards (TMSs)/Turkish Financial Reporting Standards (TFRSs) fully convergent with the IASs /IFRSs by TASB (2010)  New Turkish Commercial Code which requires all the companies to use TMS/TFRS and subject to audit and give authority to TUDESK to set the Turkish Auditing Standards (2011)  Turkish Financial Reporting Standards for SMEs (TFRS for SMEs) to be effective in 2013 (2010)  Public Oversight, Accounting and Auditing Standards Authority(2011) Development of Accounting in Turkey

24.  Accounting is a back bone of economic development.  Accounting in Investment & Financial Appraisal  Accounting for Efficient Markets  Cost function of Accounting for Economic Development  Fraud, Accounting & Economy  Accounting, Financial Services &Economy Accounting is the language of business to communicate the results with others, without accounting information there will be confusion in the whole society and economy. Role of Accounting in Economy

25.  Accounting information for  Prosopective Analysis - Firm Valuation  Enterprise Risk Management  Strategic scenario planning  Capital budgeting and management  Financial Management Role of Accounting in Finance

26.  Myth 1: Accounting is boring  Myth 2: Accounting is mathematical  Myth 3: There is a lot to learn  Myth 4: It is all done by computers by those days-accountants are obsolete Myths about Accounting

27. Welcome to the world of accounting…