Academic journal article Review of Business

Special Issue: Global Regulatory and Financial Reporting Reform and the Convergence of Accounting and Auditing Standards: The Time Has Come

Academic journal article Review of Business

Special Issue: Global Regulatory and Financial Reporting Reform and the Convergence of Accounting and Auditing Standards: The Time Has Come

Article excerpt

Investors and creditors throughout the world base their decisions on the information published in various financial and economic reports issued by business entities. The most important of these are the annual and quarterly reports that depict an entity's profitability and financial condition, which investors and creditors review carefully before investing their fortunes. It is, therefore, imperative that these reports convey information that reflects the economic reality of an entity in a meaningful, transparent and comparable fashion.

Recently, however, there have been a host of corporate financial scandals, accompanied by fraudulent financial reporting, both in the U.S. and abroad, which have shaken the very foundation of corporate financial reporting and investor confidence. Obviously, this has had an adverse effect on investors' confidence in the global financial reporting process and ultimately on the market values of corporate equity securities. These activities lead to swift actions by governments and their regulatory agencies, accounting and auditing standard setters and other influential organizations around the world, to restore public confidence in the global financial system.

The use of different accounting standards by different countries over the years has also had an adverse effect on the flow of investment capital across borders, which has negatively affected international economic growth and security valuations. However, due to economic, political and regulatory developments, progress towards attaining a convergent set of global financial accounting standards has accelerated in recent years.

This special issue of the Review of Business focuses on the new global regulatory, accounting and auditing requirements that are aimed at enhancing the public's confidence in corporate financial reporting as well as the movement toward a high-quality set of global accounting standards that will improve the quality and transparency of corporate financial reports. It discusses the need for and progress underway toward a global set of principles-based accounting standards; the changing global standard setting and regulatory environment; and the implications of these developments to accounting professionals.

This issue begins with an interview featuring D. J. Gannon, CPA, who discusses the impact that international financial reporting standards are having on global financial reporting and related matters. He currently serves as a consultation partner in Deloitte's National Office where he specializes in international accounting and financial reporting. He has consulted clients on matters involving International Financial Reporting Standards (IFRS) and worked with SEC registrants that are foreign private issuers. He is Leader of the Americas IFRS Centre of Excellence, which provides technical assistance, including consultation and training, on matters involving IFRS to clients in the region. He currently chairs the AICPA's International Practices Task Force and the Accounting Standards Executive Committee's Short-Term International Convergence Task Force.

In his interview, D. J. Gannon clarifies why there has been an increasing trend toward the use of International Financial Reporting Standards--specially in countries that are now requiring companies to use IFRS for local reporting or listing purposes. He also explains why and how IFRS are affecting both U.S. and non-U.S. companies and the increasing efforts being made to develop a global set of high-quality, principles-based accounting standards. The interview ends with Mr. Gannon providing a very informative explanation of the impact the changes in the financial reporting environment are having on accounting professionals and their education requirements.

Following is a summary of articles in this issue that deal with the new global regulatory, accounting and auditing requirements (plus some new tax rules) that are aimed at enhancing the public's confidence in and understanding of corporate financial reports. …

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