Contemporary Issues of Accounting in company - Myassignmenthelp.Com

Question: Discuss about the Contemporary Issues of Accounting in company. Answer: Introduction: Climate change is one of the vital issues around the world to discuss owing to its great importance to the sustainability of the livelihood in the earth as well as growth of an economy. Carbon Disclosure Project (CDP) is one of the ambitious projects that have been collecting the carbon emission data of the firms, who willingly disclose their Green House Gas (GHG) emission data (Hahn, Reimsbach and Schiemann 2015). Most of the prior analysis on the climate change effect on the firms activity has considered either the legitimacy theory or the stakeholder theory; however, an analysis cannot be completed without the help of agency theory. Thus, this report used the agency theory along with the CDP disclosure data to discuss the effect of climate change. Besides this, the report will provide various views of the previous researches regarding the climate change effect on firms activity. Practical motivation: Thus, there have been various researches regarding the issues related to the climate change and its effect on the economic activities. However, most of the researches have considered the macro economic scenario while assessing the effect of climate change, though there is strong evidence that climate change cause alteration in the economic activity in micro level (Robson and McCartan 2016). Agency theory aligned with the stakeholder theory is being used by the various agencies to demonstrate their CDP disclosure. Moreover, the agency theory is aligned with the maximisation value of the stakeholder theory of the firms; however, it opposes the legitimacy theory (Mitnick 2015). Theoretical motivation: This research paper is meant to analyze the importance of agency theory and its inclusion with the CDP data in order to assess the voluntary disclosure of carbon emission by the firms. Various researchers have used the agency theory as the tool in their literature review to discuss the voluntary reporting practices of climate change by the firms. Agency theory argues that with the reduction in the information asymmetry in the organisation and lower agency cost, higher amount of reduction in carbon emission is possible. Moreover, agency theory provides a ground to disclose that strong corporate governance proxy aids the agency to reduce the information asymmetry (Javaid and Saboor 2015). Previous researches has displayed that there is negative relationship between the GHG emission and the voluntary disclosure, however with rise in corporate executive the relationship tends to prominence. Literature review: Agency theory entails that carbon disclosure has an impact on the liquidity of the firms share. In other words, agency theory argues that there is high probability of voluntary carbon disclosure with the rise in share prices as proposed by the stakeholder theory. Besides this, previous researches argue that firm size has an impact on the carbon disclosure. With rise in size of the firm, GHG emission will also rise and the firms will disclose more voluntarily in order to reduce the scope of detailed scrutiny. Considering the CDP data on the carbon emission by the firms, it can be found that agency theory along with the stakeholder and the legitimacy theory, emission reduction can be reduced by the 25.64% (Agoglia, Hatfield and Lambert 2015). When it comes to energy conservation by the firms as the means of reduction of carbon emission, strong organisational structure can be beneficial, because it can reduce the emission level the 9.49% (Benn, Dunphy and Griffiths 2014). Examining the GHG disclosure and considering the comprehensive theoretical framework of the carbon emission a positive significance among the firm size, corporate governance and GHG emission has been found in the prior literature reviews with the help of stakeholder theory and the agency theory. Another important factor that agency theory highlights is that firms with newer equipments produces lower amount of GHG (AAtkinson et all. 2015). Thus it is valid to assume that not only the agents of the firm moreover the capital of the firm and their lifetime affects the voluntary disclosure of the firm (Loannou, Li and Serafeim 2015). The report has considered agency theory along with the CDP data in order to investigate the legitimizing capacity of revelations as the form of voluntary carbon disclosure (Dahlmann, Branicki and Brammer 2017). Compared to the natural performance of a firm, this report has included the ecological performance and importance of budget along with good governance in the organ isation to find out how much climate change affects the economic activity of the firm. The report portrays that if there is good governance in the firm and the organisation includes Corporate Social Responsibility into their organisational structure, then it would be beneficial for the firm to reduce the carbon emission (Kaymak and Bektas 2017). Previous CDP disclosure analysis with the help of agency theory portrays that climate change not only brings in the negativity in the firm, it brings scope to development for the firms too. For instance, firms can induce more funds in their budgetary expenditure in order to bring in new capital and invest more in their RD to reduce the carbon emission (Intergovernmental Panel on Climate Change 2014). Previous researches display that development in the governmental plans regarding the climate change and corporate responsibility has acted as the stimulus to the firms. Hypotheses: The report is aimed to analyze the environmental responsibility and social accountability of firms with respect to the climate change. With the help of the CDP data and the agency theory the report has outlined how further research on the effect of climate change on the corporate risk management can be done. From the CDP data, carbon disclosure of the 1046 companies is traceable and regression analysis can be utilized as the means of analysis of climate change effect on the firms activity. This report argues in favour of the following test hypothesis: H0: No relationship exists between the independent and depend variables H1: Firms with higher carbon emission reflects higher amount of carbon disclosure At 5% level of significance, if the p value of the test is less than 0.05, then the test can reject the null hypothesis and alternative can be accepted. Conclusion: Climate change is certainly a burning issue that has been attracting researchers attention since decades. There is lack of microeconomic analysis of climate change effect on the firms activity, thus this report has used the agency theory along with the CDP data to interpret the effect in microeconomic level. The report has found from its literature review that with rise in carbon emission, the firms tend to disclose their GHG data more. Besides this the report has found that agency theory and CDP data has successfully analyzed the public accountability. 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