The paper discusses about the importance of globalization and how it impacts the accounting professions. The accountants face challenges in analyzing and evaluating the financial transactions when there is change in the internal and external environment. The globalization has changed the macroeconomic as well as microeconomic environment in which the business used to function. Therefore, the challenges for adapting in this dynamic environment contributed by Globalization has increased for the accounting profession. The use of international accounting standards was encouraged by the European commission to promote the comparability of the financial statements of different companies’ present in different parts of Europe. However, the major difficulty that the accounting firms and international accounting bodies face is to make update to the accounting standards and principles every time when there is any change in the accounting practices of multinational companies (Tan, Laswad & Chua, 2021). The continuous updating has become one of the main feature of the accounting practices. . Globalization has helped to improve employment conditions in the economy. In economic terms, it refers to the global interdependence that free trade has generated. The employment opportunities for the accountants have also increased due to increase in the multinational companies. As globalization shows significant changes in the globe contributing to the economic integration, Globalization has shown significant transformation of business where mergers and amalgamations can be seen between the companies of different countries. this has resulted change in the requirements of skills and knowledge required by the accounting professional to deal with such complexities of business.
Globalization and its impact on accounting professionals
The term “Globalization” is understood as the rising interdependence of the world’s economies, beliefs and cultures, etc. as a result of cross-border trade in commodities. The international trade in services, technology, knowledge, people, and information has been encouraged by the outcome of Globalization. Countries have started trading in different international products, technology, information, etc. Globalization has helped to improve employment conditions in the economy. In economic terms, it refers to the global interdependence that free trade has generated (Crawford, 2019). The employment opportunities for the accountants have also increased due to increase in the multinational companies. As globalization shows significant changes in the globe contributing to the economic integration, Globalization has shown significant transformation of business where mergers and amalgamations can be seen between the companies of different countries. Managerial accounting is about evaluating and analyzing the accounting information that can be helpful for making effective business decisions. The overall operational and productions functions are based on these managerial accounting. However, the accounting information that are used by the managers for taking business decisions are prepared by the CPAs. Therefore, it can be said that CPAs role increases in the era of globalization as the businesses are largely influenced by the microeconomic as well as macroeconomic factors to great extent that include global conditions.
Role of CPA and Globalization
Increased international trade has resulted from globalization, which has been fueled by governments’ willingness to open up their economies to foreign investors. As a result, a new breed of powerful economic institutions has emerged i.e, multinational businesses. The Big Four accounting companies, in particular, dominate the accounting sector. They conduct majority of audits for both publicly listed and private companies. the aspiring accountants want to be part of these big four accounting firm and grow their career by handling multinational clients. The role of CPA (Certified Public Accountant) is to examine the financial records of the company. They are responsible for accounting work such as filing tax return, creating budget reports, conducting audit of the financial statements, and also verifies whether the financial reports are in compliance with the applicable accounting rules and regulations. They are responsible for assessing whether the transactions are reported in compliance with the accounting laws. Fraud has impacted the interest of stakeholder (Banerjee, S., Venaik & Brewer, 2019). The economy suffers significantly by the frauds. As per one of the news article published by Business Standards in 2013, there is huge increase in the risk of frauds due to globalization. The knowledge economy has been encouraged by the globalization. The risk in technology transfer and boost to the knowledge economy, the risk of information theft has increased. The external audit is conducted for assessing the risk of material misstatements and manipulation in the financial records (Crawford, 2019). The CPAs and auditors are responsible for assessing the risk of frauds within the company. They are responsible for appropriate assessment of the risk of material misstatement due to fraud. If the auditors need to include the opinion concerning such risk of fraud, if found any. They need to update themselves with the adequate knowledge and skills so that they can evaluate such risk of misstatements and manipulations. It is their duty to recommend the design of the system and procedures that can be helpful in protecting the organization from such frauds.
Risk of fraud due to globalization and CPAs role
Globalization has led to increase in corporate frauds. The corporate frauds are done in various forms. It has been seen that internal members are involved in manipulating the accounting information reported in the financial statements. The risk of corporate frauds can be detected by the audit examination of the financial reports of the company. Therefore, the role of accounting professional also increased due to the increasing corporate frauds by the global companies. Due to Globalization, the global companies are more susceptible to frauds. Therefore, the rising cases of frauds due to increasing global competition is a worldwide phenomenon and has become a global concern. The various organizations irrespective of their scale of operations, profitability or industry, have been impacted by the effects of globalization and shows risk of frauds. The accounting professional are competent enough to detect the significant red flags that are signs of frauds. They are responsible for highlighting such issues to the management and policy makers of the company. . The CPAs and auditors are responsible for assessing the risk of frauds within the company. They are responsible for appropriate assessment of the risk of material misstatement due to fraud.
Examples of change in accounting principles that has been standardized after globalization and for multinationals
Earlier the auditing firms used to deal with the domestic clients only. The CPAs have adequate knowledge of the country accounting and legal laws. However, when they deal with the multinational clients after globalization, they need to make themselves aware about the accounting standards that the global businesses are following. As a result of rising worldwide competition, commerce and investment, there has been great demand for such set of international accounting standards and reporting standards that can assist to harmonize the reporting behavior of all international companies. The business financial information provided by these companies need to provide accounting transparency, understandability, consistency and comparability. They need to ensure that investors receive more accurate and consistent reports. This is one of the significant reason that IFRS is promoted by the accounting regulatory bodies such as IASB and AASB. The International Accounting Standards Committee has promoted Financial Reporting Standards (IFRS) for ensuring that financial reports of all the companies operating in one market, are consistent, transparent and comparable. Although the IASC has no ability to enforce conformity with its accounting standards, many nations compel publicly traded corporations to generate financial statements in line with IFRS. The accountants need to adjust themselves as per the new accounting standards.
As per the article (Danos & Measelle, 1990), the complexity of business has increased that are especially engaged in the international businesses. Accounting is such a profession that provides services to the entities as per their requirements. The information that are provided by the accountants, must be used for making effective decision making process. The production and operational relating functions of the global organizations has significantly changed due to globalization. The role of accountants is to record financial transactions and also report about these business functionalities in the reports. Thus, the complexity of the business processes due to globalization have made the duty of accountants and auditors, more complex and challenging. As per (Baskerville & Hay, 2010), globalization lead to global expansion with the help of merger and acquisitions. The size of the entities are larger who are operating globally. The market size has improved significantly with the help of globalization. This is one of the reason that globalization has helped the companies to expand and improve their global position. Therefore, it can be said that the degree of work relating to accounting and auditing functions has also increased with the increase in the size of the business organizations.
Since the market size for the business entities has increased and global participation of the local companies have improved, there is increase in the existing market competition also. The deregulation of the economic system that has been seen in the global market where local firms are competing with the established businesses, expanded the existence of global corporate clients. This is one of the reasons that there is need of large accounting and audit firms. The need of large audit firms are necessary for providing the audit services to the large scale business organizations. Another significant effect of globalization on accounting profession is the impact of globalization on improving the efficiency of the auditing and accounting firms. The auditing firms have increasingly improved their efficiency to deal with the overseas clients. These firms are charging more competitive prices to the global players and also improving their bonds with the international clients for providing other accounting services apart from auditing. Since the accounting firms are improving their ability to serve the large global businesses. It can be said that globalization has helped the accounting firms to improve their efficiency to operate in the international market.
The accounting profession has been changed to huge extent by change in accounting and auditing standards. The accounting principles and standards have been made uniform and accounting firms operating in the field need to work following the updated accounting standards and principles. As per (????????, 2011), new regulations drafted by European commission, directed all the EU listed companies to follows the international accounting standards (IAS). The use of international accounting standards was encouraged by the European commission to promote the comparability of the financial statements of different companies’ present in different parts of Europe. However, the major difficulty that the accounting firms and international accounting bodies face is to make update to the accounting standards and principles every time when there is any change in the accounting practices of multinational companies. The continuous updating has become one of the main feature of the accounting practices. There is growing evidence that the need for changes in the measurement mechanism used by accounting professional has changed. The demand for new type measurements are essential for the global corporates so that complex financial and non-financial transactions are reported appropriately for effective decision making process. The future members of the accounting profession need appropriate training and education to work in the dynamic international environment.
Globalization has helped in improving the distribution of research information and technical knowledge. It has also improved collaboration between technological business organizations that has helped in enhancing the global investment in R&D. As a result, technology is advancing at a breakneck speed. It can be said that accountants of today’s world are in urgent need of required technical skills to analyses the functional operations of these technology based companies. They are required to learn to learn different accounting software that are significantly used by the large organizations for accounting purposes. Similarly, the mobile digital devices are becoming increasingly important to accountants for quickly analyzing financial reports and other accounting reports. Innovative and specialized capabilities are required to operate the accounting software as a result of globalization. This requirement of technical skills are giving accountants, new roles and opportunities. They are not supposed to only prepare the routine financial statements but they are getting roles also for financial analysis and decision making. In the era of globalization, Accountants execute duties from anywhere at any time using mobile digital devices such as laptops and personal digital assistants. The digital devices are proving very helpful to accountants for taking international projects and completing projects all around the world.
One of the issues that the accountants of globalized world is facing is relating to the increasing competitions among the accountants and accounting firms. One of the ways to deal with the rising competition of the accounting industry, is to provide quality services. The delivery of quality services at low cost can help the accounting firms to deal with the rising competition of the industry. Value added services should be provided to the customers and employers. The accounting jobs are being outsourced to foreign countries due to globalization. In this cases, the accountants need to make their accounting work valuable by providing different categories of quality accounting services such as filling tax returns, preparing financial reports, preparing financial plans, helping in financial decisions, etc.( Kamla & Haque, 2019) However, the quality accounting services can only be possible when the accountants learn the newer technical skills and accounting software to improve the accuracy of their work and for saving time of customers as well. The role of accountants have not been limited to the accounting field only (Golyagina, 2020). Due to the increasing number of global clients, they need to think about the customer relationship as well. The accountants need to have good relations with the multinational clients for outsourcing their services and therefore, they need to maintain a healthy relation with their customers as well. it is also concluded that the accountants of today’s world are in urgent need of required technical skills to analyses the functional operations of technology based companies. They are required to learn different accounting software that are significantly used by the large organizations for accounting purposes. Similarly, the mobile digital devices are becoming increasingly important to accountants for quickly analyzing financial reports and other accounting reports (Tharapos & O’Connell, 2021). Innovative and specialized capabilities are required to operate the accounting software as a result of globalization.
Conclusion
Globalization lead to global expansion with the help of merger and acquisitions. The size of the entities are larger who are operating globally. The various organizations irrespective of their scale of operations, profitability or industry, have been impacted by the effects of globalization and shows risk of frauds. The accounting professional are competent enough to detect the significant red flags that are signs of frauds. They are responsible for highlighting such issues to the management and policy makers of the company. The market size has improved significantly with the help of globalization. This is one of the reason that globalization has helped the companies to expand and improve their global position. Therefore, it can be said that the degree of work relating to accounting and auditing functions has also increased with the increase in the size of the business organizations. It is concluded that the corporate frauds are done in various forms. It has been seen that internal members are involved in manipulating the accounting information reported in the financial statements. The risk of corporate frauds can be detected by the audit examination of the financial reports of the company. Therefore, the role of accounting professional also increased due to the increasing corporate frauds by the global companies. In addition to this, there has been great demand for such set of international accounting standards and reporting standards that can assist to harmonize the reporting behavior of all international companies. The business financial information provided by these companies need to provide accounting transparency, understandability, consistency and comparability. They need to ensure that investors receive more accurate and consistent reports. This is one of the significant reason that IFRS is promoted by the accounting regulatory bodies such as IASB and AASB. The CPAs need to update themselves as per the changing accounting standards requirements for multinationals.
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