Large Firms Envision Worldwide Convergence of Standards

Abstract

Currently, largest accounting firms' are working diligently in conjunction with their partners in International Forum on Accountancy Development (IFAD) to achieve their vision of raising national accounting and auditing standards worldwide to meet or exceed internationally recognized benchmarks. An awareness of ongoing activities of firms and their IFAD partners to improve financial reporting, accountability, and transparency worldwide is crucial if other members of accounting community, including educators, are to support and, more importantly, actively participate in these efforts. IFAD was formed in 1999 on the premise that expertise of accounting profession and financial resources of World Bank and other international financial institutions when combined.. .could be harnessed in interests of enhancing accounting capacity and capabilities in developing and emerging nations (http://www.ifad.net). IFAD's objectives were eventually broadened to focus on common worldwide issues. Today more than 30 international institutions, including International Monetary Fund (IMF), International Federation of Accountants (IFAC), International Accounting Standards Board (IASB), International Organization of Securities Commissions (IOSCO), Organization for Economic Cooperation and Development (OECD), and International Association for Accounting Education and Research (IAAER), are working with firms to support reform programs designed to raise quality of financial reporting and auditing worldwide. The large firms and their partners agree that a framework for reforms in individual countries involves three steps: * determine standards that should apply; * assess extent to which standards have been adopted and arrangements for ensuring compliance; and * implement an action plan to address identified gaps in performance. DETERMINING THE STANDARDS The large firms' holds that general purpose financial information must be prepared using a single world-wide framework using common measurement criteria and fair and comprehensive disclosure. The Vision asserts that national standards of many countries should be raised with IASB's International Accounting Standards (IAS)/International Financial Reporting Standards (IFRS) (2) and IFAC's International Standards of Auditing (ISA) serving as benchmarks (http://www.ifad.net). Additionally, Vision highlights importance of implementing IFAC's new global ethics standards and significance of other issues that must be addressed if change is to materialize. These include corporate governance, financial accountability and reporting laws, and education. The Vision encompasses all countries, all companies, and all accountants and auditors. ADOPTION AND COMPLIANCE This step includes large firms' publication of GAAP 2000 and GAAP 2001 (downloadable at http://www.ifad.net). (3) These surveys of accounting practices in 59 and 62 countries, respectively, reveal that in many countries numerous, significant differences exist between local standards and international accounting standards. GAAP 2001 also lists recently issued national standards and proposals aimed at reducing differences with international standards. Commenting on GAAP 2001, IFAC President Aki Fujinuma stated, the report represents another critical step toward encouraging harmonization of international standards and ultimately, establishment of a single global financial framework. The development of such a framework is vital to efficient operation of global capital markets. (4) During this effort, firms and their partners are also addressing compliance with international standards. Reports by Cairns (1999) and academic research (Street and Gray 2001) reveal examples of companies claiming to prepare IAS financials that clearly diverge from IAS in some instances. …