Public Sector Accounting Essay Example | Topics and Well Written Essays - 2000 words

Public Sector Accounting - Essay Example In order to demonstrate the differences an organization from each sector has been taken. The chosen public sector organization is The Royal Mail Holdings Plc and the publicly listed company is Aviva Plc. Royal Mail is a 100% UK Government owned organization involved with the postal services throughout UK, Ireland and Europe (Royal Mail Group Ltd, 2012). Aviva is a UK-based largest global insurance company and world’s sixth largest (Aviva, 2012). The third section demonstrates the effect of the objectives of public sector accounting and the rules and regulations governing public sector organizations in the form of differences and similarities in the format, style and accounting policies in the annual reports of Royal Mail and Aviva. The fourth section deals with the role of auditor in both the organizations. Overall the four sections in the project analyze if the differences between the two sectors’ accounting practices are prominent or if there is any reduction in their differing frameworks. Accounting Needs & Objectives The public sector encompasses all the organizations that are not owned or operated by private organizations. The organizations’ control lies in the hands of the Government, either national or local. Public sector in UK is diverse and includes nationalized industries, Government agencies and public service organizations. Nationalized industries are commercial organizations that sell goods to market but are mainly governed by government-appointed boards and ministers rather than markets or shareholders. The surplus generated from their operations is expected to enable replacement investment. The government agencies include welfare services and taxation body. These agencies are required to deliver satisfactory services to the claimants and taxpayers by using the resources at their disposal. The public service organization provides health, policing and defence services on behalf of central or local government. These services ar e financed from the tax revenues and therefore not charged from the public directly. Unlike the private sector with a clear objective of profit-making, the public sector has a complex mix of objectives and demands. It is primarily concerned with serving the general public. The importance of public sector accounting and disclosures, and their differences from the private sector accounting is due to the following reasons: Lack of making Profits: The ultimate objective of a private organization if profit making and/or creating wealth for its shareholders. However a public sector organization’s objective is not considered profit making. Sometimes this suggests the possibility of inefficient use of resources or absence of commitment to provide good service to the clients due to no profit-making. Lack of Competition: A private sector organization usually operates in an industry with direct competitors and subject to regulations by oversight regulatory bodies. Contrary to this the p ublic sector organizations are not subject to disciplines of the markets and lack the comparability with other firms. Public Interest: There is a corporate governance framework and audit rules for private organizat