For today’s accountants, understanding the law is crucial. This includes having knowledge of the legal standards and guidelines that impact accounting practices for individual clients and businesses alike. Much of the work that accountants do is tied to specific legal practices, and those in this field may need to consult with clients about certain regulatory issues and situations.
It’s important for accountants to build up their legal skills. Within the University of Alabama at Birmingham Collat School of Business online Bachelor of Science in Accounting program, students can take part in courses like LS 246: Legal Environment of Business. This comes as part of the lower level program core curriculum, and enables students to expand their competency of legal issues related to business accounting.
Today, we’re taking a closer look at the ways in which accounting processes intersect with the law, and the skills and knowledge this requires on the part of industry professionals.
Importance of business law in accounting
There are a number of responsibilities that come along with typical accounting processes, including making preparations and computations for tax returns, organizing and maintaining financial records, and assessing current financial operations to implement new best practices. As the U.S. Bureau of Labor Statistics notes, though, the duties of an accountant or auditor don’t end there.
It’s also up to accountants to keep up with current bookkeeping laws and compliance regulations, and ensure that their organization’s financial statements, partner and customer transactions, and all other accounting processes align with these laws. Having in-depth knowledge of certain business laws, as well as emerging compliance and other standards, is not only beneficial for today’s accountants, but is a key requirement.
What kinds of issues can impact legal accounting?
There are a number of key issues that can impact legal accounting processes, including those related to employment laws and transaction activity and reporting.
State pay equality laws
For instance, as AccountingToday contributor Laura B. Friedel points out, a number of states have recently implemented laws to close the gaps in pay between co-workers of different genders. These laws often place restrictions around asking employment candidates about their current level of compensation, or the amount of pay they received in the past. In addition, these standards also prevent employers from using a candidate’s pay information to make a decision about their employment offer.
While pay gap laws may appear to be a human resources consideration, the fact that these statutes place limitations on inquiring about a candidate’s pay level connect them with internal bookkeeping processes.
“These requirements make it more important than ever to standardize compensation structures and provide the tools available to determine recruits’ market value without relying on compensation history,” Friedel writes.
These are the types of market value forecasts and assessments that the accounting team would take part in. Therefore, it’s imperative for these professionals to be aware of state laws.
Updated reporting standards
As Small Business contributor Linda Ray notes, there are also somewhat consistent changes that emerge within the accounting industry’s generally accepted accounting practices (GAAP). New process standards are handed down by the Securities and Exchange Commission as well as the American Institute of CPAs. When these updates come, it’s imperative that accounting teams align their work with the new GAAP.
“Bookkeepers will be required by law to adopt the new procedures when creating financial statements for businesses,” Ray writes. “[Y]ou will have to train yourself and your employees on the new standards by the time they are adopted to provide your clients with the proper reports.”
Ensuring legal accounting
Ray points out that there is also the risk that an accountant will be asked to create or otherwise modify financial documentation in a way that is not consistent with current laws. This request might come from a client hoping to avoid noncompliance fines or other fraudulent financial activity. In this way, having a robust understanding of current bookkeeping laws will prevent accountants from falling into this type of situation.
“While you may not have to have a certified public accountant license to practice bookkeeping, you are still bound by the rules of ethics governing accountants that call for honest and reliable bookkeeping practices in all your affairs,” Ray writes.
Brushing up on bookkeeping laws: Online Bachelor of Science in Accounting
Issues like pay equality and changes in GAAP, as well as an array of other factors, make it critically important for professionals to understand legal accounting practices and current standards and laws.
Students in the University of Alabama at Birmingham’s online Bachelor of Science in Accounting will take part in the Legal Environment of Business course as part of their lower level curriculum. This course covers general legal accounting in the business environment, including the basics of contractual obligations, bankruptcy, employment considerations, ethical reasoning, decision-making, and more.