Search results

This study investigates the perception of users of corporate annual reports about various aspects of accounting harmonization. To serve this purpose, a questionnaire was distributed to four user groups (investors, government officials, auditors and academics). The results of the analysis revealed that sharing the same language, as well as sharing similar economic and cultural features are the most important factors expected to positively affect the harmonization of accounting practices in the GCC countries. However, the most important factors expected to obstruct accounting harmonization practices across GCC countries are the lack of professional and legal requirements as well as enforcement problems. The outcome of the analysis also revealed that harmonization is expected to (1) improve comparison between companies, (2) increase usefulness of financial information to decision makers, and (3) ensure consistency in the use of accounting rules over time. It was also evident from the analysis that lack of harmonization is viewed as the most likely factor to prevent some investors from investing across the GCC countries.

China has undergone significant economic reform since 1978. The transformation from a centrally planned economy to a socialist market economy created the need for corresponding reform of the accounting regulatory framework. The accounting reform has culminated in the promulgation of the Enterprise Accounting Standard by the PRC Ministry of Finance effective from July 1, 1993. This review article analyzes the reasons for the recent accounting reform in China and its direction towards harmonization with international accounting standards and practices. The old and the new accounting regulatory frameworks are compared and contrasted. Some problems and prospects also are discussed.

CHAPLIN'S Modern Times depicted a harassed little worker who spent his days making a simple movement with a spanner on an assembly line. In any reshowing we laugh at him as the archetype of an outmoded era because many sections of industry know him no more. His descendants have escaped such drudgery and in the process ushered in a quiet revolution.

For more than two decades the framework governing the statutory audit of companies within the European Union (EU) has been the subject of debate and reform. Significant progress has been made with the publication of the European Commission (EC) Green Paper (1996), and the subsequent EC Conference (1997) and EC Communication (1998). The objective of this paper is to provide a commentary on the recent reviews of the regulatory framework for statutory audit at EU level in the context of ongoing developments. The paper concludes that the regulatory framework for statutory audit in the EU is far from complete and much remains to be done. The way forward, at least in the short term, relies on the accountancy and auditing profession taking the lead in finding solutions. The different nature of accounting, financial and legal traditions within the EU, and the need to search for consensus, however, makes it difficult to predict when the EC will be in a position to complete an internal market for audit services within the EU. A significant factor worthy of further consideration is that developments at the international level are in danger of outpacing the EU's ability to respond. Because of the size, power and adaptability of US financial markets, it is possible that US Generally Accepted Accounting Practices (US GAAP) and US Generally Accepted Auditing Practices (US GAAS) may become the dc facto global standards for listed companies.

The Department of Trade and Industry (DTI) issued a consultation document in November 1998, which set out a framework for the independent regulation of the accountancy profession. This framework broadly adopts the proposals put forward by the profession itself. In this paper, the focus is on audit regulation. The current regime is outlined and its structural weaknesses and procedural problems identified. The proposed reforms are described and critically evaluated. It is argued that the proposed reforms offer only a partial solution to regulatory concerns, since no changes are proposed to the existing regime either for registration, or for monitoring and discipline of the majority of audit cases. An expanded framework that rationalises current practices and provides a more comprehensive solution is suggested. A critical feature of the proposal is that a distinction is made between audits of small entities and audits of major listed companies, only the latter of which are of public interest. Each would have distinct licensing and monitoring procedures.

The UK regime for financial reporting and auditing was radically altered in 1990 and 1991 by two separate developments. When removing sole responsibility for setting accounting standards from the accounting profession, the opportunity was taken to establish a monitoring body, the Financial Reporting Review Panel (FRRP), to oversee compliance with company law and accounting standards, and with powers to apply to the courts for rectification. In addition, a new regulatory system for auditors was set up. This paper considers the problems arising between the regulatory responsibilities of the Institute of Chartered Accountants in England and Wales (ICAEW) and FRRP. In 50 cases (up to September 1999) FRRP found defects in accounts, 49 of which were audited by firms regulated by ICAEW, but no disciplinary action was taken by ICAEW until 1999. The way in which the new audit regulations were grafted onto the existing ICAEW disciplinary regime is considered, and the anomalies arising from that explored. The cases resulting in ICAEW's disciplinary action are compared with the other cases together with some evidence from finance directors and audit partners with experience of dealing both with FRRP and an ICAEW disciplinary investigation. The relevant theories relating to professional bodies and regulation are also reviewed. Finally, the authors review the problems identified in this study and make suggestions as to how they may be addressed.

This paper examines post‐Enron developments in UK audit and corporate governance regulation. It considers the latest government‐initiated reviews into audit regulation, specifically those conducted by the Co‐ordinating Group on Audit and Accounting Issues and the DTI Review Team, and into corporate governance, specifically those undertaken by Derek Higgs and Sir Robert Smith. The paper notes that the reviews were undertaken in the context of developments initiated both before and after the collapse of Enron, including, respectively, the new system for the regulation of the UK accountancy profession as established by the Accountancy Foundation, and the US Sarbanes‐Oxley Act. The reviews have been welcomed by government and thus should play a large part in setting the agenda for the future regulation of UK audit and corporate governance. The proposals for auditing share a number of characteristics with the recommendations of a pre‐Enron empirical study which investigated the regulation of UK listed company audit, although significant distinctions remain. The proposals for corporate governance continue the ‘comply or explain’ approach and do not recommend passing its regulation from the Financial Reporting Council to another independent body of ‘stature’ such as the Financial Services Authority (FSA). It is concluded that key to successful implementation of recent proposals will be the need, for audit, to demonstrate that there is no cosy relationship between regulators and the auditing profession, especially the ‘Big Four’ firms, and, for corporate governance, a willingness to look outside the ‘one‐size‐fits‐all’ approach.

On 16th April, 2002, the authors gave oral evidence to the House of Commons Treasury Committee Inquiry into Financial Regulation of Public Limited Companies which was set up following the collapse of Enron. This paper is adapted from the written submission to the Committee on which their oral evidence was based. The authors argue that the Enron collapse provides an opportunity for regulators to stand back and consider fundamental issues associated with the regulatory framework for financial reporting, auditing and corporate governance in the UK. They challenge the financial reporting framework as being muddled between the concepts of stewardship and decision usefulness. Company balance sheets are an amalgam of figures based on historical cost and accounting estimates. The increasing use of financial instruments and the inclusion of intangibles makes valuations complex and judgmental and therefore much more dfficult to audit. Incentives in the capital markets which drive the behaviour of all participants should be considered to ensure that the current system does not encourage dysfunctional outcomes and excessive rewards. The personal incentives for partners in audit firms are of particular interest as a potential key influence on auditor independence. It is suggested that non‐executive directors should be mandated to protect the interests of investors. The authors counsel against kneejerk reactions to the Enron collapse as a number of changes such as the transfer of regulation of securities listing to the Financial Services Authority (FSA) and the establishment of the Accountancy Foundation need time to settle down. They believe that auditor rotation will introduce costs without clearly identifiable benefits and are opposed to wholesale banning of auditors providing non‐audit services to their clients.

This paper examines latest thinking and new developments in the regulatory framework for statutory audit at European Union (EU) level. It follows an earlier paper, published in this journal. Since 1999 when the paper was drafted, even more developments have occurred both at an EU level and in the USA, which are likely to have a significant impact on statutory audit in the EU in years to come. Latest developments are reviewed in three areas: profession related issues; company law issues; and, accounting and auditing standards. The paper concludes that significant advances have been made towards completion of the regulatory framework of statutory audit in the EU. What remains of concern is a lack of progress towards adoption of international auditing standards. Unless financial statements are both prepared and audited in the same way, it is difficult to see how financial information in the EU can ever be truly harmonised.

Organisations either keep spares for their own use, or‐for‐sale to other organisations. In either case, the ultimate need is to be able to replace worn or defective parts in operational machinery or equipment. In an economic sense, spares are kept to meet the needs of the situation in the cheapest way.