Globalisation and the expert accountant/auditor

Since the early 2000s the accountancy profession has been experiencing a relentless push towards global convergence of standards in accounting, auditing and ethics. Globalization affects the regulatory context in which we do our work as the standards in use are increasingly the same around the world. Convergence has become increasingly necessary to cope with businesses operating in multiple jurisdictions and reporting to multiple regulators. Accounts need to be understandable to a variety of readers and users need to be able to trust that those accounts have been audited to acceptable standards, wherever they were issued from Adelaide to Zurich.

What started as a gradual move towards harmonization of standards gained momentum with the announcement by the EU that all listed companies within it would prepare their accounts under International Accounting Standards from 1 January 2005. This deadline encouraged other countries to follow suit with Australia also adopting the 2005 deadline and New Zealand adopting from 2007. Numerous other countries have followed and the world is falling into two camps IFRS on the one hand and US GAAP on the other.

Similar moves were afoot in auditing and assurance and the standards drafted by the International Auditing and Assurance Standards Board (IAASB) form the basis of auditing standards used in major jurisdictions around the world. In 2006, the Australian Auditing and Assurance Standards Board (AUASB) issued the IAASB's standards as legally binding Australian standards with minor modifications. At this time the IAASB was in the process of redrafting its standards to make a clearer distinction between standards and guidance (the Clarity rewrite), which were issued, operative from 1 January 2010. Australia issued the Clarity standards operative from the same date and keeps up to date with amendments as they are issued by the IAASB.

The International Ethical Standards Board for Accountants (IESBA) is doing similar work on the ethical and professional standards to that of the IAASB, issuing high quality standards that can be adopted by ethical boards around the world. Again, Australia uses the standards of the IESBA as the basis for its own standards issued by the APESB.

While the context within which we do most of our work is becoming increasingly standardized, operating across jurisdictions has its complexities and can have a very direct impact on what we can do as experts. While parent company and subsidiary auditors are applying the same standards, even where they share a brand, they may be separate firms for legal purposes. As a result, access to actual working papers for the audit of an overseas subsidiary, as opposed to a memo from the subsidiary auditor, can be problematic where the subsidiary is in a country with a very different legal system. Harmonisation of the standards is only part of the issue and increased cooperation between legal systems is vital. In our next blog, we will talk about some of the things we learned about globalization and dispute resolution on our recent trip to the Singapore 2016 Global Pound Conference, Shaping the Future of Dispute Resolution and Improving Access to Justice.