Accounting Present and Past – Essay Example

The paper "Accounting – Present and Past" is an excellent example of an essay on finance and accounting.
The occurrence of the sub-prime mortgage crisis can be traced to the failure of the accountants. Although they have no legal implication to have their decisions, opinions, and recommendations upheld by organizations, their role in assessing the financial position and consequently the suitability of a firm to meet certain financial obligations is paramount (Jones, 13). The lenders greatly depended on the reports and the recommendations of the accounting firms, to determine to which firms they would extend mortgages. This way, the greater the role of assessing the suitability of such firms was bestowed on the accounting firms. The other responsibility falls on the accountants of the lending firms, to ascertain whether the lending firm was in a better position to undertake such subprime mortgage lending, and still remain profitable. This is so because, one of the roles played by accountants in any given organization is to ascertain and predict the profitability of the projects and activities the organization is committing itself to (Jones, 16). Through the application of the requisite accounting standards and principles, the accountants involved in the lending process, both as auditors under the accounting firms and as accountants of the lending firms, should have discovered that the lending process had various flaws (Jones, 20). This way, they would have avoided giving a positive opinion to the effect that certain firms should receive the mortgages. Therefore, this failure of the accountants went a long way in subscribing to the subprime mortgage crisis, which eventually saw the collapse of the housing market in the USA.