Capital Market and Accountancy teaching material

teaching material for capital market and accountancy traning

1. Capital Market and Accountancy What is the role of Accountancy in stock Market SEWALE ABATE(PHD), AAU 1 2 nd April, 2022

2. What is capital market? Capital markets are where savers come to invest their capital in long term investments such as: corporate debt, equity-backed securities, and government bonds In other words, savers – those with capital – come to invest and those who need capital come to borrow. SEWALE ABATE(PHD), AAU 2

3. What is capital market? SEWALE ABATE(PHD), AAU 3

4. What is Stock market The stock market refers to public markets that exist for issuing, buying, and selling stocks that trade on a stock exchange or over-the-counter.  Stocks, also known as equities, represent fractional ownership in a company , and The stock market is a place where investors can buy and sell ownership of such investible assets. SEWALE ABATE(PHD), AAU 4

5. CONT… An efficiently functioning stock market is considered critical to economic development , as it gives companies the ability to quickly access capital from the public . Such financial activities are conducted through institutionalized formal exchanges or  over-the-counter (OTC ) marketplaces which operate under a defined set of regulations.  SEWALE ABATE(PHD), AAU 5

6. Cont.…. While earlier stock markets used to issue and deal in paper-based physical share certificates, the modern day computer-aided stock markets operate electronically. SEWALE ABATE(PHD), AAU 6

7. What is Over-the-Counter ? OTC is the trading of securities between two counterparties executed outside of formal exchanges and without the supervision of an exchange regulator. OTC trading is done in over-the-counter markets (a decentralized place with no physical location), through dealer networks. Contrary to trading on formal exchanges, over-the-counter trading does not require the trading of only standardized items. SEWALE ABATE(PHD), AAU 7

8. Functions of a Stock Market Fair Dealing in Securities Transactions Efficient Price Discovery Liquidity Maintenance Security and Validity of Transactions Support All Eligible Types of Participants Investor Protection Balanced Regulation SEWALE ABATE(PHD), AAU 8

9. Benefits of a Stock Market Enhance savings mobilization Help in resource allocation Promote efficient financial system Help term transformation and improve capital structure Allow de-concentration of ownership Improve accounting and auditing standards Provide effective tools for monetary and fiscal policy Help privatization efforts SEWALE ABATE(PHD), AAU 9

10. Improve accounting and auditing standards WHAT DOES IT MEAN IN OUR SETTING? WHY? WHERE DO WE STAND NOW? WHAT IS REALLY THE ROLE OF ACCOUNTANT AND AUDITORS IN THE COMING CAPITAL MARKET? DOES REALLY WE KNOW THE IMPACT THAT WE ARE SUPPOSED TO HAVE ON IT? SEWALE ABATE(PHD), AAU 10

11. IFRS IFRS is a single set of accounting and financial reporting standards developed by the International Accounting Standards Board (IASB). They are intended for global use by entities in all types of economies – from developing countries to emerging markets  to well-established industrialized nations . The purpose of IFRS is to provide financial statement users with consistent and comparable information across borders. SEWALE ABATE(PHD), AAU 11

12. International standards on auditing ISAs are established by the International Auditing and Assurance Standards Board (IAASB). The IAASB is an independent standard-setting board overseen and supported by the International Federation of Accountants (IFAC), a global organization with 175 member entities and associates representing 130 nations and jurisdictions. IFAC member entities are nationally recognized professional accountancy organizations.  SEWALE ABATE(PHD), AAU 12

13. WHY? Decisions have to be made by different users. Reliable, comparable, consistent information are required. Independent and objective opinion is required. I nformation should be fair representation of what it asserts to represent. OTHER THING REMAIN CONSTANT THE SUCCESS OR FAILUR OF THE CAPIATL MARKET DEPEND ON US SEWALE ABATE(PHD), AAU 13

14. Role of public accountant Public accounting firms can engage in multiple roles in the capital market. These roles include financial reporting, auditing financial statements, taxes, consulting on accounting systems, M&A advisory, and capital raising ( In the process of IPOs ) Therefore, public accounting firms are usually hired by corporations for their accounting and advisory services SEWALE ABATE(PHD), AAU 14

15. Where do we stand now? ?????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????? SEWALE ABATE(PHD), AAU 15

16. Role of public accountant In order to achieve the benefits of stock market accountants and auditors in this country have to be professional and capable to perform their role as accountant and auditors. Which means we are suppose to maintain the integrity of accounting information . Integrity of Accounting information is enhanced in three primary ways. SEWALE ABATE(PHD), AAU 16

17. Role of public accountant First certain institutional features add significantly to the integrity of accounting information. These features like standards for the preparation of accounting information (IFRS-IASB)-standard setting bodies, SEC/CMA/AABE an internal control structure audits of financial statements SEWALE ABATE(PHD), AAU 17

18. Role of public accountant Second, several professional accounting organizations play unique roles in adding to the integrity of accounting information. LIKE Accounting society of Ethiopia (ASE) Ethiopian professional association of accountant and auditors (EPAAA) ACCA, CPA ETC SEWALE ABATE(PHD), AAU 18

19. Role of public accountant Finally, and perhaps most important, is the personnel competence, judgment and ethical behavior of professional accountants. Competence, Judgment and Ethical Behavior Certified Public Accountants ( CPAs/ACCA) Certificate in Management Accounting (CMA) Certificate in Internal Auditing (CIA) Code of Professional Conduct SEWALE ABATE(PHD), AAU 19

20. Role of public accountant These three elements of the accounting profession come together to ensure that: users of accounting information can rely on the information to be fair representation of what it asserts to represent. SEWALE ABATE(PHD), AAU 20

21. DISCUSSION THANK YOU FOR LISTENING SEWALE ABATE(PHD), AAU 21