Slide AKT 405 Teori Akuntansi 14 Godfrey
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
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