MA619 Accounting Research Report: Globalization's Impact on Accounting

This report presents a literature review on the impact of globalization on accounting. It begins by outlining the research questions, which include the effects of globalization on accounting regulations, professional practices, and organizational productivity and efficiency. The report then details the rese...Read More

Running Head: GLOBLISATION ON ACCOUNTING
GLOBLISATION ON ACCOUNTING
Name of the Student
Name of the University
Author Note

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Table of Contents
Introduction................................................................................................................................2
Research Questions....................................................................................................................2
Research Methods......................................................................................................................3
Current Findings on the Topic...................................................................................................5
Researchable Gaps in the Area..................................................................................................9
Reference..................................................................................................................................11

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Introduction
The significant procedural and technological advancement can have deeper impact on
the professionals across various industries. Globalization helps in opening new opening new
opportunities for the international trade and business relationships and helps in boosting
modernization as well as access to services, jobs and products in the less developed nations.
However, from accounting point of view, increase in the business relationships and trade that
crosses the border also creates new set of challenges for the internal accountants.
The trends of new technology require the professionals to shift traditional and long-
held styles of working to reap the benefit of these new set of strategies. Although internal
business department such as information technology goes through the changes on more
frequent basis, the other departments such as accounting do not. In era of globalization, the
accountants should be agile and flexible for leveraging trending and new ways of doing
things, so that their productivity and efficiency can be improved. Further, future of
accounting is impacted heavily by the various factors such as changes in industry and
government standards, advancement of technology and other factors. It is because of this
reason, research on it become important. Hence, this paper aims to do literature review on the
impact of globalization on accounting.
Research Questions
What is the impact of globalization on accounting regulations and Systems?
In the process and progress of globalization, accounting has been greatly affected. It
has potentially impacted harmonization of standards of accounting and audit, financial
services, financial coordination, financial reporting and control of the dispersed subsidiaries
of the companies. For instance, accounting practices of the transnational companies,
international taxation and transfer pricing are some of the evidences for doing debate on

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globalization. The companies have gained immense globalization pressure for reporting their
activities and responsibilities of environment. Further, globalization has forced for
establishing single set of the financial reporting standards. The formulation as well as
promulgation of the IFRS are outcomes of the private, public and regulation interests, which
represents international concerning debate concerning globalization issues.
What impact does globalization have on accounting professional and best practices of
accounting?
The globalization has not only affected accounting functions, activities, practices and
responsibilities, but it has also influenced job responsibilities and behavior of accountants and
the other professions of accounting, for instance best accounting practices and accounting
professionalism. It is because of ever changing requirement of global world, the future
accountants need to possess the perspective, which influence both internal and external
environment. The market continues to change because of the fast-paced journey of the
information making globalization, which is an important factor in accounting.
Does Financial Globalization help in improving productivity and efficiency of
organization?
The technology innovations have catapulted financial district into globalized market.
It has had great influence on the way business is conducted by the businesses. Globalization
has been a boon to the business, its consumers and overall economy. It leads to reduction in
cost and helps in achieving economies of scale. In both developing and developed countries,
globalization helps in spreading new technologies and provides new economic opportunities
to the organization for improving its productivity as well as its efficiency.
Research Methods
Chi Square Test

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The Chi Square test is most commonly used to test relationship between the
categorical variables. Further, the null hypothesis of Chi-Square test indicates that there exists
no relationship on categorical variables in population rather they are independent. For
instance, research question that could be answered by using analysis of Chi-Square would be
“Is there a significant relationship between globalization and effectiveness in the practices of
accounting. Further, it is used for evaluating independence tests, while using crosstabulation.
It simultaneously presents distribution of the two categorical variables, with intersections of
variables categories that appears in cells of table. The independence test assesses whether
there exists association between two variables by doing comparison of observed responses
pattern in the cells to the pattern, which would be expected in case of truly independent
variables. For instance, Wilson E. Herbert used Chi square test for testing differences in the
responses consisting of categorical dependent variables for between subject analysis (Herbert,
Ene & Tsegba, 2014).
Regression Analysis and T-Test
Regression analysis is one of the powerful statistical method, which allows for
examining the relationship between the two or more variables of the interest. There include
different types of regression analysis, as at their core all examines influence of the one or
more independent variables on dependent variable. It is most reliable method to identify the
variables that have impact on the research topic. The process to perform regression help in
confidently determining the factors that matters most, the factors that can be ignored and the
way these factors influences each other.
On the other hand, T-test is a kind of inferential statistic, which is used for
determining that if there are significant differences between means of the two groups that
may be related in some features. For determining statistical significance, this method looks at

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the t-distribution values, t-statistics and the degree of freedom. For instance, A Umobong
performed multiple regression analysis on the accounting quality variables and then T-test
method was carried out for mean equality in order to compare post and pre IFRS (Umobong
& Akani, 2015).
Kruskal-Wallis Test
The Kruskal-Wallis Test is used when there is one measurement variable and one
nominal variable. It is a non-parametric test that means no assumption is made that the data
comes from distribution, which can be described by the two parameters that are standard
deviation and mean. Hence, this test can be used ordinal and continuous level dependent
variables. For instance, this test was used by Wilson E. Herbert for examining differences in
the ranked data and was performed for investigating demographic differences in responses
(Herbert, Ene & Tsegba, 2014).
VECM Granger Causality
When there are cointegration of two or more series of time, then there should be must
Granger causality, either both way or one way between them. Generally, presence of the
cointegration suggests that data can be modeled by using VECM model compared to using
VAR model. For instance, Md. Samsul Alam applied this test for finding causal linkage
between the set of variables (Alam et al. 2016).
Current Findings on the Topic
The increasing prevalence of globalization is not only affecting accounting, but it is
also affecting business practices all across globe. According to Domil Aura Emanuela,
globalization process represents challenges as well as certitude. The convergence and
normalization of the accounting indicates progress towards the growth of economy, retaining
capital within entities and tough supporting global markets (EMANUELA et al. 2015).

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The research by Dariusz Wojcik outlined trajectory of political struggle for the
reporting of country-by-country and presented exploratory analysis of the potential
effectiveness of the different versions of the country-by-country reporting in respect of the
policy objectives. It was found that full reporting by country-by-country could help in
offering greater value to investors and the other users and makes in the behavior of
disclosures more likely (Wójcik 2015).
The study by Panagiotis Trivellas outlined critical role of the general competencies in
link between culture of knowledge sharing and job outcomes in the accounting firm services.
A culture of knowledge sharing facilitates communication and exchange of information, team
working, decision-making and problem solving. The findings by researcher suggests that
employees in knowledge sharing environment of working are more likely to achieve higher
satisfaction of job and subsequently the effectiveness, which is the result of strengthened
general competencies (Trivellas et al. 2015).
The research by Peng-Chia Chiu examined the way improved environments of
reporting affects effectiveness of the product design and development. The researcher found
that effect of the IFRS mandate is pronounced more for an entity with the expanded
international sales, which benefits much more from the improved environment of global
reporting (Chiu et al. 2018).
The research by Shah Saud investigated effect of the financial development as well as
globalization for the selected OBOR initiative countries. The globalization pressure on the
ecosystem is debated widely, and researchers and academics urges clear policies at every
level. The findings of research indicated that there are positive relations between financial
development and the ecological footprints, carbon dioxide emissions and carbon footprint.

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Further, globalization is negatively impacting ecological footprint, emissions of carbon
dioxide and carbon footprint (Saud, Chen & Haseeb, 2020).
The research paper by Umobong investigated the differences in quality of the
accounting information before and after IFRS adoption. The findings of researcher suggest
that the financial reporting quality has not been increased over first two years after adoption
of IFRS. It was found that timely loss recognition and earnings management corroborate
largely the findings with the respect to value relevance of the accounting information.
Further, the researcher summarized that decrease in the quality of accounting is drived mainly
by the institutional factors and not the new adopted standards (Umobong & Akani, 2015).
Tetiana Osadcha stated that development of globalization process was accompanied
by the substantial transformations of the property relations. This has resulted into changing of
approaches of activities analysis on use of distribution, redistribution and resources of the
income. Hence, for solving this problem, the option is to implement the principle of
predominance of the substance over form in methodology of accounting, particularly in the
terms of assets recognition control (Osadcha & Bardash, 2018).
The research by Wilson E. Herbert investigated impediments to the adoption of IFRS
in Nigeria. The researcher examined attitudes of the key stakeholders towards adoption of
IFRS. It was found that two major roadblocks to the adoption of IFRS are lack of experience,
understanding and education by the financial reports’ preparer with IFRS use and lack of the
IFRS coverage in curricula of contemporary accounting (Herbert, Ene & Tsegba, 2014).
Aysel Guney stated that technological development has changed the methods to carry
out tasks within scope of the accounting transactions and activities, as it was carried out
through the electronic media.The researcher found that it is important to re-structure
accounting education and contents should be developed by considering the present conditions

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with respect of training graduates, so that they could have sufficient quality for responding
needs of the current era (Güney, 2014).
The research by Md. Samsul Alam examined impact of the trade openness and FDI on
the life expectancy. It was found by the researcher that FDI and trade openness increases the
population health, which is measured by the life expectancy in long-run. The analysis of
research suggests that the life expectancy is caused by the FDI and trade openness in short-
run (Alam et al. 2016).
The research by Paul Gillis purposes to put the case that there is new agenda of
research that is formed by taking the approach that combines existing work on transnational
accounting regulation with contemporaneous understanding of forces for the professional and
regulatory change. The researcher found that transnational accounting regulation is becoming
more revenant and significant. The author suggested that the self-regulation comes from the
professionalization and professional self-regulation system at national level is getting
transformed into global self-regulation system (Gillis, Petty & Suddaby, 2014).
According to Trevor Hopper, accounting is an object and an instrument in the
globalization, but its manifestation and impact is not uniform across the Southern developing
countries and Northern developed countries. The researcher reviewed contributions of
globalization and its influence on the developing countries and identified significant gaps. It
was found that accounting practices and knowledge and knowledge in developing countries
are driven by the international accounting institutions, for instance, IFAC and IASB, with
UN, IMF and WB acting as the mediating agents (Hopper, Lassou & Soobaroyen, 2017).
The research by Byung S. Min examined relationship between globalization, the
corporate governance and productivity of firm. The finding of researcher indicates that the
reinforcement of positive effect of liberalizing the equity ownership on total factor

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productivity of firm was by the indirect effects of management, when corporate governance is
improved by the firm. It was also found that interaction of managerial effect with the
increased ownership of foreign equity is more significant in comparison to interaction with
the exports (Min & Smyth, 2014).
The research by Otilia Dimitriu focused on the impact of paradigm of cloud
computing in the domain of accounting. The researcher highlights various definitions and
view points assigned to cloud computing concept as well as advantage and possible risks
determined by adopting these services, especially relating to accounting department. The
approach was centered financial implications and price offering, which come along with the
cloud computing. Hence, it was found that understanding of the specific business requirement
is important, whether offline or online (Dimitriu & Matei, 2014).
The research paper by Naoko Komori explored the way globalization is impacting the
accounting research in non-Anglo-Saxon with the help of examining Japan experience. The
researcher considers the processes that currently drive homogenization of the research
approaches within accounting studies of Japan at the expense of country’s own tradition. The
paper found the cultural diversity importance for accounting sustainability as research
discipline and innovative thinking (Komori, 2015).
Researchable Gaps in the Area
The globalization age is a ubiquitous topic in the accounting and the popular presses,
so far this phrase is used without substance. If globalization is beneficial as theoretical
construct, then there is requirement of detailed research in concrete as well as specific
mechanism, which constitutes globalization. In the literature of accounting, prior research on
the globalization has focused on role of the accounting in organization and its practices.
However, less research has been done on the role of globalization in accounting.

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The business movement towards global economy has accelerated the requirement of
moving towards the global accounting standards. Advances in the technology, lower trade
barriers, the internet, transportation and communication system have expanded the overall
marketplace in which entities operates. Hence, there is a great need for improving the
accounting systems. In the era of globalization, where most of the countries are following the
standards of IFRS, there exist some countries such as US who have not adopted itself with
the change in situations and harmonization. The collapse of various organization such as
Enron, world com has encouraged various research for addressing the concerns. However,
none of the research have able to provide the complexities involved in adapting to the IFRS.
Hence, this needs to be researched because convergence and harmonization will help leading
more prosperous and stabilized world economy and will help in resolving many financial
reporting issues of world.
The current trend encompasses highly advanced innovations such as automation
assisted by the cloud computing, automation and block chain, which is having great impact
on the future accounting processes and education. In particular, automation is shifting the
internal workloads of accounting for eliminating time-consuming and repetitive financial
process, which were performed by the accountants manually. The activities such as data entry
as well as invoice approval are now done through the automated solutions that handles these
kinds of task through artificial intelligence. The biggest change facing the professionals of
accounting is arrival of the computational power, which could make the data entry obsolete.
As companies continue to take advantage of these technologies, it has opened new
opportunities as well as challenges, which is hardly been researched. Hence, the gap in the
research needs to be fulfilled.

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Reference
Alam, M. S., Raza, S. A., Shahbaz, M., & Abbas, Q. (2016). Accounting for contribution of
trade openness and foreign direct investment in life expectancy: The long-run and
short-run analysis in Pakistan. Social Indicators Research, 129(3), 1155-1170.
Chiu, P. C., Hsu, P. H., Tian, F., & Yi, L. (2018). Sharing the Same Language: From the
Globalization of Accounting Standards to the Pursuit of Globally Recognized
Awards. Available at SSRN 3226197.
Dimitriu, O., & Matei, M. (2014). A new paradigm for accounting through cloud
computing. Procedia economics and finance, 15(14), 840-846.
EMANUELA, D. A., EMANUEL, A. A., ELIAN, P. C., ȘERBAN, C., & SILVIU, S. (2015).
ACCOUNTING NORMALIZATION AT THE CONFLUENCE BETWEEN
GLOBALIZATION AND NATIONAL REFORMS. Agricultural
Management/Lucrari Stiintifice Seria I, Management Agricol, 17(3).
Gillis, P., Petty, R., & Suddaby, R. (2014). The transnational regulation of accounting:
insights, gaps and an agenda for future research. Accounting, Auditing &
Accountability Journal.
Güney, A. (2014). Role of technology in accounting and e-accounting. Procedia-Social and
Behavioral Sciences, 152, 852-855.
Herbert, W. E., Ene, E., & Tsegba, I. (2014). Globalization of financial reporting: obstacles to
international financial reporting standards (IFRS) Adoption in Nigeria. Asian Journal
of Business and Management Sciences, 3(12), 25-41.
Hopper, T., Lassou, P., & Soobaroyen, T. (2017). Globalisation, accounting and developing
countries. Critical Perspectives on Accounting, 43, 125-148.

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Komori, N. (2015). Beneath the globalization paradox: Towards the sustainability of cultural
diversity in accounting research. Critical Perspectives on Accounting, 26, 141-156.
Min, B. S., & Smyth, R. (2014). Corporate governance, globalization and firm
productivity. Journal of World Business, 49(3), 372-385.
Osadcha, T., & Bardash, S. (2018). Identification of the impact of globalization on the
development of accounting methodology. Baltic Journal of Economic Studies, 3(5),
343-351.
Saud, S., Chen, S., & Haseeb, A. (2020). The role of financial development and globalization
in the environment: Accounting ecological footprint indicators for selected one-belt-
one-road initiative countries. Journal of Cleaner Production, 250, 119518.
Trivellas, P., Akrivouli, Z., Tsifora, E., & Tsoutsa, P. (2015). The impact of knowledge
sharing culture on job satisfaction in accounting firms. The mediating effect of
general competencies. Procedia Economics and Finance, 19, 238-247.
Umobong, A. A., & Akani, D. (2015). IFRS adoption and accounting quality of quoted
manufacturing firms in Nigeria: A cross sectional study of brewery and cement
manufacturing firms. International Journal of Business and Management
Review, 3(6), 61-77.
Wójcik, D., 2015. Accounting for globalization: evaluating the potential effectiveness of
country-by-country reporting. Environment and Planning C: Government and
Policy, 33(5), pp.1173-1189.