The accounting world is in the process of merging manifold cultures, procedures, and policies into one large universal system, the International Financial Reporting Standards or Ifrs. This new system's goal is to generate a universal method of accounting. Some experts theorize that the new standards will disregard old rules preventing fraud and that fraud will be harder to detect.
The Ifrs is a new set of accounting standards developed by the International Accounting Standards Boart that will finally become the global approved for preparation financial statements in communal companies. The purpose for this new law makes sense, especially for businesses. "A company can present its financial statements on the same basis as its foreign competitors, development comparisons easier. Furthermore, fellowships with subsidiaries in countries that want or permit Ifrs may be able to use one accounting language company-wide...Companies may also benefit by using Ifrs if they wish to raise capital abroad" (Aicpa). Using this new law will make the accounting process primary easier because a uniform law will aid in the interpreting and auditing processes for some companies. Inspecting the fact that the world is facing a financial crisis, many nations are willing to generate "a single set of high-quality global financial reporting standards" (Cancino). The main issue with the new international standards, however, is compliance and auditing issues. Some experts feel that fraud will become rampant among foreign and domestic countries.
Power Adapters
Auditors over the world have offered many arguments against the new international reporting system. The first issue on the minds of many auditors is the basis of current and time to come principles. The current generally approved Accounting law (Gaap) law is both a principle and rules based system. The possible Ifrs is solely law based. This incompatibility will want administration to turn the compliance-based advent to an economic-value advent with regards to financial reporting. With more human involvement, many auditors believe the risk of fraud and misstatement will increase. an additional one qoute with the new law is the turn to the enumerate and adaptation of existing accounting policies and procedures. Upper administration will have to adopt a new judgment-based advent to determined problems. For example, they will conclude the "timing and proportion of revenue recognition, timing and value of charge recognition of share-based payments...[and] timing, value, and reporting of charge recognition of employee benefits" (Cancino). The value judgment element will be a major qoute for fellowships and the consumers of the financial statements. This element will the heart of any fraud schemes that occur after the adoption of the Ifrs. fellowships will most likely take benefit of this judgment and mislead all readers of financial statements. Some of the possible problems and schemes contain "altering the valuation of accounts receivable by failing to manufacture approved reserves and allowances and recognize associated expenses, manipulating the methods to value inventory, creating an overstatement of account quantities and unit costs, writing off account when time to come value exists, overstating the value of assets, and inappropriately recognizing revenue and expenses" (Cancino). Businesses and firms will take the new law and abuse it, causing them to commit tax fraud and other fraud schemes that would determined hurt their reputations.
Prevention is the key thing on many upper administration individuals' minds. How will firms, with the new power to control their financial statements, want to conduct the risk involved? "Not only will the basis for reporting numbers change, internal controls over financial reporting need to turn as well. The old accounting policies and procedures may not be sufficient in light of the new basis of accounting, and fellowships must be ready to make wholesale changes to internal controls if they want their numbers to be credible and reliable" (Coenen). Preventing risk will be the hardest qoute that will arise from the adoption of the Ifrs.
The world is in the midst of an accounting hurricane as fellowships and organizations endeavor to couple the world's accounting systems into one uniform process, the Interational Financial Reporting Standards. Many auditors believe, even with the benefits of the switch, that fraud will become rampant among companies. There will be less focus on procedures allowing fellowships to generate their own statements. Risk estimation and arresting will be more primary than it is now to inhibit fraud. The Ifrs is similar to a glass house. It's a gorgeous and great idea, but it can swiftly be shattered.
Bibliography
Aicpa. Ifrs Faqs. 2011. 2011 - http://www.ifrs.com/ifrs_faqs.html#q1.
Cancino, Fernando. "The Fraud below the Surface." Internal Auditor (2010): 33-36.
Coenen, Tracy. Aicpa Store. 2011. 2011 - http://www.cpa2biz.com/Content/media/Producer_Content/Newsletters/Articles_2011/CorpFin/IfrsandFraudMoreChallengesMoreRisks.jsp.
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