M1 Evaluate the context and purpose of the accounting function in meeting organisational, stakeholder and societal needs and expectations.

 

Evaluation of the Context and Purpose of the Accounting Function in Meeting Organisational Objectives of Commercial Bank of Ceylon PLC

The accounting function of the Commercial Bank of Ceylon PLC is vital to the organisation’s financial sustainability, transparency, and long-term viability. For example, the Annual Report 2024 states that the Bank’s accounting function exists in a regulatory, ethical, and governance framework that provides the foundation for the Bank’s accounting function and for the preparation of appropriate financial statements for both local and international users (Commercial Bank 2024, pp. 4-5).

 

Context of the Accounting Function

A normal context of the accounting function of the Bank operates on a mixture of regulatory requirements, stakeholder expectations, and corporate governance expectations. The Annual Report's financial statements set out that the financial statements are prepared and be presented “in accordance with the Sri Lanka Accounting Standards (SLFRS/LKAS) mandated in terms of the Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995 and the Companies Act of No. 07 of 2007” (Commercial Bank 2024, p. 4). This means that the Bank's accounting function prepares and presents financial statements in a manner consistent with the requirements of the International Financial Reporting Standards (IFRS) framework and adds validity to the financial statements the Bank issues to regulators, investors, and other stakeholders.

Moreover, the accounting function operates in the purview of the Board of Directors, the Board Audit Committee, and Independent Auditors (KPMG), who provide assurance on internal controls, financial statements and sustainability disclosures; the context illustrates the Bank’s commitment to integrity, transparency and accountability, which is critical to instilling stakeholder confidence and compliance with the Banking Act and Central Bank regulations (Commercial Bank 2024, pp. 5–6).

 

Purpose of the Accounting Function

The key role of the accounting function in the Commercial Bank is to provide the business with a reliable source of financial data for decision-making, performance assessment, and strategic planning. As such, the Annual Report 2024 points out that "the accounting system adopted allows the presentation of a true and fair view of the financial position and performance of the Group and the Bank, hence ensuring that management decisions are based on accurate, timely, and verifiable information" (Commercial Bank 2024, p. 4).

Moreover, the accounting function also facilitates stakeholder engagement and integrated reporting, which includes both financial and non-financial performance indicators to create a comprehensive assessment of how an organization creates value. For the Bank, in integrated reporting, it communicate its accounting under the International Framework, which links accounting data to sustainability, risk, and governance practices (Commercial Bank 2024, pp. 6–7). This shows how the accounting function links not just to financial performance but also to the Bank’s own goals of innovation, sustainability, and responsible governance.

 

 

Evaluation and Organisational Alignment

The accounting function assists in realizing the Bank's vision "to be the most technologically advanced, innovative, and customer-friendly financial services organisation in Sri Lanka" (Commercial Bank 2024, p. 3). The Bank's reputation for financial stability and ethical governance is maintained through the rigorous accounting controls in place. The function also ensures that the Bank complies with statutory obligations such as the Companies Act, Banking Act, and Colombo Stock Exchange listing rules to uphold public trust and shareholder value (Commercial Bank 2024, pp. 4–5).

 

In addition, the Bank improves its operational efficiency and manages risk through the integration of digital accounting systems and technology-driven financial reporting tools. The accounting department also contributes through optimization of resources, capital, and liquidity to ensure effective deployment within business segments for sustainable growth.

 

The reliability of the accounting information is further enhanced by the use of independent assurance mechanisms as contained in the report. To this end, independent audits performed by KPMG in compliance with Sri Lanka Auditing Standards give confidence to stakeholders that the financial disclosures made are appropriately presented (Commercial Bank 2024, p. 5).

 

Internal Stakeholders

Employees

The employees are identified as the backbone of the Bank's internal stakeholder population. They act as likely “the primary link between the Bank and external stakeholders,” helping ensuring value and excellence in service delivery across activity (Commercial Bank 2024, p. 63).

Management and Board Committees

Senior management, alongside the Bank's various Board Committees (Audit Committee and Risk Committee, for example), serve as internal governance stakeholders with responsibility for strategy and policy guidance. As the report notes: “stakeholder concerns and priorities are reported to relevant Management and Board Committees to facilitate transparent decision making and accountability” (Commercial Bank 2024, p. 64).

Key Management Personnel (KMP)

The Annual Report assesses Key Management Personnel as “those who have the authority and responsibility for planning, directing and controlling the activities of the Bank directly and indirectly.” Their decisions affect risk management, capital allocation and long-term sustainability (Commercial Bank 2024, p. 65).

Trade Union Representatives and Staff Associations

Internal stakeholders are identified as trade union representatives and staff associations protecting employee interest. For example, the report states "employees and their trade union representatives are providing open access to management on their own accord to bring forward their concerns...” suggesting that fairness and participatory dialogue is encouraged in the Bank (Commercial Bank p.65).

Internal Audit and Risk Management Units

The internal control and audit teams, in collaboration with the Integrated Risk Management Department, provide the indispensable internal stakeholder group for compliance and operational integrity. They "monitor risk exposures, review internal processes, and ensure adherence to policies and procedures," protecting the interest of stakeholders through effective oversight (Commercial Bank 2024, p. 66).

 

External stakeholders

Customers

The Bank recognizes that customers are the most important type of external stakeholder. As stated in the report, they are “fundamental to ensuring the Bank’s viability and long-term sustainability,” while engagement is acquired through various channels like digital platforms, branches, and feedback surveys. (Commercial Bank 2024, p. 62).

Investors and Shareholders

Investors and shareholders are also quite vital for any growth and are, therefore, key external stakeholders. Their role is such that it "has become essential for meeting capital adequacy requirements and sustaining financial performance," while engagement is maintained through continuous disclosures and investor relations activities (Commercial Bank, 2024, p. 63).

Government Institutions and Regulators

The report considers regulators—such as the Central Bank of Sri Lanka—and other governmental bodies to be among the external stakeholders who ensure "compliance, governance, and transparency in operations." It is important to maintain good relations with them, as this will provide operational legitimacy for Commercial Bank (Commercial Bank 2024, p. 64).

Business Partners and Suppliers

Business partners include providers of technology and correspondent banks that are important stakeholders in service delivery. They have been defined to mean “providers of critical and customized solutions that enhance the Bank’s service offerings and strengthen operational efficiency” (Commercial Bank 2024, p. 65).

Society and Environment

Greater society and the environment are considered an extended external stakeholder group. The Bank is committed to “operating responsibly in securing social legitimacy while positively contributing to the communities in which we operate,” by aligning its sustainability activities with the UN SDGs (Commercial Bank 2024, p. 66).

 

Societal needs and expectations.

Societal needs and expectations refer to the collective aspirations, demands, and values of the people in a community expecting organisations, governments, and institutions to act responsibly and positively benefit social, economic, and environmental well-being. In the contemporary world, people are starting cumulatively to expect organisations to act ethically, be socially responsible, and focus on sustainable growth in addition to profit making.

 

Carroll (1991) argues, the social responsibility of organisations includes all the economic, legal, ethical, and philanthropic expectations, that society has of them at any given time. In this regard, organisations are expected to be ethical, operate within the law, and be transparent in their operations to maintain the public good will. Additionally, citizens expect organisations to develop the economy through job creation, fairly compensation, and entrepreneurship to alleviate poverty and reduce inequality (World Bank, 2023).

 

Finally, in addition addressing economic needs and growth, society also expects organisations to be more environmentally sustainable, and that their operations produce less pollution, better manage waste and use environmentally friendly policy and technology in their operations to ameliorate the impacts of climate change (United Nations, 2022).