Globalization’s Effects on The Accounting Profession and Standards
Added on 2020-09-28
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Running head: Globalization’s Effects on The Accounting Profession and Standards1Globalization’s effects on The Accounting Profession and StandardsUniversity of Maryland Global Campus
Globalization’s Effects on The Accounting Profession and Standards2The principles that guide and standardized accounting practices in a nation are known as accounting standards. The first accounting standards were developed in the U.S. in the 1930s andcountries after that followed by developing their own accounting standards (FAF, 2020). The two most dominant accounting standards in the world are the Generally Accepted Accounting Principles (GAAP) and the International Financial Reporting Standards(IFRS). Accounting is animportant and inevitable tool for the human development. The world erupted to become a global village due to globalization, which is characterized by stretching the social, business, and political activities across regions and continents. With the increasing prevalence of globalization,the need was felt to change to a unified system of accounting (Beke, 2011). Some advantages and disadvantages to globalization including convergence of accounting standards globally, new skills and specialization, diversity, and technological changes that will be discussed in this paper.As globalization is accelerating and the world opens new opportunities, more corporates will be based on the emerging markets. Globalization influences changes in the accounting standards and accounting companies face benefits and challenges going global to take advantage of open markets. Merging or acquiring other firms and entering new geographic areas is now more common than ever with Certified Public Accounting (CPA) firms. Based on the new business characteristics, the supply chain shifted, and more investment capital are spent to recreate the new firms. Given the different currencies, standards, laws, and rules and regulations related to taxes, audit, advising and legal matters it is challenging for accounting companies that operates in different geographic areas sometimes to maintain profitability. Moving and adopting a single set of global accounting and financial standards can ease the barriers for companies to expand overseas. For companies to expand globally they need to consider the international cost of compliance, by adopting new sets of accounting records to meet the new country’s reporting
Globalization’s Effects on The Accounting Profession and Standards3and statutory requirements and this would have burdens on the company’s expense. According toan article from Forbes (2015) companies must evaluate the costs risk and benefits of expanding their businesses globally in order to remain in business “Thus, it is for crucial for CEOs and business leaders to understand its full impact and determine if the rewards outweigh the risks” (para.2).To recognize their skills and specialization, and to move up the value chain, accountants need to acquire professional qualifications to keep up with globalization. This is explained by thegrowing popularity of accountants seeking certifications such as Certified Public Accountants and Chartered Certified Accountant qualification worldwide. According to an article from accaglobal (2016) one of the challenges facing professional accountants is that they will have to acquire softer skills to be able to cope with the workplace diversity “they will need to collaborateand partner with people in other parts of the business...provide insight and information...think and behave more strategically and become more involved in decision- making than before” (“Drivers of change and future skills,” 2016, p.10). On the other hand, one of the great advantages that will benefit CPA firms is increasing the workplace diversity. Employers will be looking to hire multilingual personnel who understand different cultures and countries and having learned the skills that help manage diverse teams. Increasing firm’s diversity with teams equipped with foreign languages skills and broader market knowledge and having employees with the same ethnic background as a client can better serve a diverse client based and increase understandability of client’s needs. Unifying the accounting standards globally help accountants to serve their clients in different parts of the globe with ease and integrity without the fear of misunderstanding the accounting standards of other countries and make it easier to evaluate international options for investments: “In fact,
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