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The Effect of Globalization in the Accounting World
The Effect of Globalization in the Accounting World
With the continuous changes in the world, and the evolution of technology, communication has been a vital source of clarification among our world. Particularly, this effort to communicate effectively among diverse cultures and ideas has been reflected majorly through globalization of the business world. Although change is often a concept that is accepted and encouraged, it poses certain threats to public accountants. Within this paper, these threats, as well as certain opportunities, will be exposed in relation to globalization. In addition, I will describe the views of globalization held by accounting standard setters such as the IFAC, IFRS, and the IFRS. Lastly, I will mention how accounting practices can help small businesses remain relevant throughout the effects of globalization.
Globalization increases the interaction of those of different cultures. In the world of business, this means that new ideas and information will be brought into view. More specifically, in the world of accounting, this change may adversely affect groups of professionals. These groups include those working for or providing services to foreign-owned SEC registrants, or to US based expanding enterprises will be effected. In addition, accountants who have restricted expertise, familiarity, and capabilities may be limited in their role as globalization continues. For example, those working to provide services to foreign-owned SEC registrants or to US based enterprises are facing certain pressures because of the declining significance of KSAs established exclusively on US GAAP. According to corporate leader, Charles Henry, KSA stands for “Knowledge, Skills, and Abilities.” Often, KSAs are used to refer to a sequence of account reports that are mandatory in applications for US Government jobs. In this way, KSAs are utilized to decide which applicants would best qualify for a job position. While there is not a dependence of KSAS on U.S. GAAP, accountants should be cognizant of how to accurately comprehend and associate U.S. GAAP financial statements with IASB financial statements. In addition, globalization poses threats to those limits in skills and expertise pertaining to unfamiliar territory. For example. this group is at risk of unemployment due to outsourcing, or to other U.S. colleagues that hold more valuable expertise that allow them to serve client’s needs more adequately.
Conversely, globalization can positively impact accounting professionals. The first group that may benefit from globalization would be those who expand their KSAs to understand evolving U.S. and foreign accounting standards. By expanding their knowledge, they expand the opportunities they have to better serve clients both in the U.S. and overseas. The second group that may gain from globalization would be those who focus on completing their financial service KSAs with management driven KSAS in a way to maximize the well-roundedness of their services. This type of advancement of knowledge and expertise can commonly be shown in practice among Big Four accounting firms.
While these prestigious firms value the benefits of globalization, accounting standards setters such as the IFAC, IFRS, and IASB hold similar views. Generally, these authorities believe that it is in the best interest of professionals to cultivate a well-rounded set of standards for financial accounting and reporting. These ruling classes affirm that if accountants uphold the highest quality of skills, they will make the world’s markets more proficient by improving the reliability of financial statements. In turn, this competence would decrease the costs of investments for businesses, which would stimulate monetary growth.
This increase of stimulation in the economy through globalization could have a positive impact on small businesses. Although it seems as though globalization can only positively impact large practices, it can also positively impact small businesses through the use of technology. Since the use and breadth of technology is evolving day by day, it leaves many opportunities for small businesses to expand within the market. Although they might be placed in a few locations, they can expand their client base by communicating via technology-based resources. In a recent survey of U.S. Accounting firms by the American Institute of CPA’s Private Companies Private Section, it was revealed that international services is expanding for accounting practices of all sizes by 79%. This percentage is expected to rise within the next five years. Through this statistic, it can be assumed that small businesses can continue to thrive and stay relevant through globalization.
Throughout this paper, I have discussed the threats and opportunities posed by globalization. Along with this point, I have highlighted how this topic will positively and negatively impact public accountants currently and in the future. In addition, I have provided insight into the views of international accounting standard setters and their positive view of globalization. Finally, I have concluded that the future for small businesses may be favorable in light of globalization through the use of technology. Overall, this paper has stressed how globalization can bring many opportunities to the accounting world as long as professionals challenge themselves to continuously improve. Most importantly, this paper has shown how globalization can positively impact those who hold themselves to a higher standard in order to better serve their clients now, and in the future.