1. GODFREY HODGSON HOLMES TARCA
CHAPTER 14
EMERGING ISSUES IN ACCOUNTING AND AUDITING

2. 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

3. XBRL
XBRL will loosen the control managers currently have on data aggregation decisions and place their performance under greater scrutiny

4. 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

5. Considerable dispute about this
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

6. Is the criticism leveled at ‘fair value measurement’ fair?

7. 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

8. 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

9. 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

10. 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

11. 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’

12. 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

13. 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

14. 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

15. Trends in sustainability reporting
Some companies are now seeking assurance for their sustainability reports

16. 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

17. 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

18. 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