Scribd
Upload
25 views

Emerging Issues in Accounting and Auditing: Godfrey Hodgson Holmes Tarca

The document discusses several emerging issues in accounting and auditing. It covers the development of XBRL, the effects of corporate collapses and the Sarbanes-Oxley Act, issues with fair value accounting during the global financial crisis, reactions from standard setters, auditors roles in the crisis, IASB and FASB convergence projects, issues in convergence, international auditing standards, sustainability accounting and reporting developments, trends in sustainability reporting, and other non-financial accounting issues like water and greenhouse gas emission accounting. One of the major influences on the field is the growing internationalization of standards.

Uploaded by

Louis Valentino
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
25 views

Emerging Issues in Accounting and Auditing: Godfrey Hodgson Holmes Tarca

The document discusses several emerging issues in accounting and auditing. It covers the development of XBRL, the effects of corporate collapses and the Sarbanes-Oxley Act, issues with fair value accounting during the global financial crisis, reactions from standard setters, auditors roles in the crisis, IASB and FASB convergence projects, issues in convergence, international auditing standards, sustainability accounting and reporting developments, trends in sustainability reporting, and other non-financial accounting issues like water and greenhouse gas emission accounting. One of the major influences on the field is the growing internationalization of standards.

Uploaded by

Louis Valentino
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
You are on page 1/ 19

GODFREY

HODGSON
HOLMES
TARCA

CHAPTER 14
EMERGING ISSUES IN
ACCOUNTING AND AUDITING
XBRL
• XBRL = Extensible business reporting language
• Allows financial information to be presented in
an interactive way that in turn allows individual
items of data to be extracted by software to
produce reports custom designed by individual
users
– SEC (2008)
– 500 of largest US companies
• 2009 financial reports

2
XBRL
• XBRL will loosen the control managers
currently have on data aggregation decisions
and place their performance under greater
scrutiny

3
The effects of corporate collapses and
Sarbanes-Oxley Act (2002)
• High profile collapses in early 2000s changed
the image of accounting and auditing and its
regulatory environment
• Criticism of auditor independence and
corporate governance
• SOX
– peer reviews replaced by PCAOB inspections
– restrictions on provision of non-audit services by
audit firms to their audit clients
4
Issues surrounding the application of fair
value accounting during the global
financial crisis
• Some believe the practice of fair valuing
assets was contributing factor
– it requires the write-down in the value of some
assets when markets are turbulent
• marking financial assets to market
• Considerable dispute about this
– SEC investigation (2008)
• recommendations offered for improving fair value
accounting

5
Is the criticism leveled at ‘fair
value measurement’ fair?

6
Reactions by standard setters
• IASB (October, 2008) changed rules so that
losses from changes in market values of
financial assets could be reclassified under
certain circumstances avoiding charging mark-
to-market losses to the income statement
• FASB (2009) introduced a ruling to allow banks
to use their own judgement in determining the
fair value of assets, rather than using markets

7
Auditors and the global
financial crisis
• The GFC could lead to regulatory action
affecting auditors
– relatively little attention paid to the auditor’s role
in the crisis
– the accounting profession and regulators have
proactively issued guidance
– auditors of banks later suffering financial
difficulties can expect to come under scrutiny

8
IASB and FASB convergence
project
• 2002 and 2006 convergence agreements
• SEC issued (2008) a roadmap for the use of IFRS by
US companies by 2014
– markets becoming increasingly global
– new investment opportunities to US investors
– would make firms from different countries easier to
compare
– progress toward 7 milestones to be assessed in 2011

9
Issues in IFRS-US GAAP
convergence
• It is not certain that the US will adopt IFRS
• Some argue that competition between
standard setters is desirable

10
International auditing
standards
• Auditing standards are also being
internationalised
– have been redrafted
– growing international acceptance
• A move to IFRS would require US auditing
standards to change from assessing
‘conformity with rules’ to assessing ‘true and
fair’

11
International auditing
standards
• Both the auditing and accounting standards
boards must deal with issues relating to their
independence and governance before both
sets of standards are truly global

12
Sustainability accounting,
reporting and assurance
• Companies are issuing sustainability reports
• Sustainability accounting is a subset of social
accounting
• Sustainability can be regarded as meeting the
needs of the present without compromising the
ability of future generations to meet their own
needs
– environmental protection
– justice between peoples and generations
13
Recent developments in
sustainability reporting
• Global reporting initiative (2006)
• Accounting for carbon emissions
• Sustainability reports are increasingly being either
audited or reviewed by independent auditors
– companies with the most to gain from increasing the
credibility of their reports are more likely to seek
assurance
– little authoritative guidance

14
Trends in sustainability
reporting
• Some companies are now seeking assurance
for their sustainability reports

15
Other non-financial accounting
and reporting issues
• Water accounting applies accrual accounting
concepts to water resources
• Greenhouse gas emission accounting
• Both attempt to provide data on scarce
resources other than those traditionally
captured by financial accounting systems

16
Summary
• One of the major influences on accounting
and auditing practice and research is the
growing internationalisation of accounting
and auditing standards
• There have been recent developments in
sustainability reporting and assurance
• Water accounting and greenhouse gas
emission accounting are new developments

17
Key terms and concepts
• XBRL
• Sarbanes-Oxley Act 2002
• Fair value accounting and the GFC
• Auditors and the GFC
• Convergence project
• Sustainability accounting and assurance
• Water accounting
• Greenhouse gas emission accounting
18
19

You might also like