Does the way in which accounting represents the world facilitate the control of organizations - Essay Example

They way in which accounting represents the world does not always facilitate the control of organizations. Representation versus control Not every nation has adopted the International Financial Reporting Standards (IFRS) delivered in 2001 by the IASB. Because of this, there are independent and corporate investors that have identified opportunistic tax havens across the world. The ability to utilize foreign business accounting practices as a means to shelter resources continues to cause problems with how other businesses internationally perform their strategic management functions.

For instance, Singapore has amended its tax laws as it had not, until 2009, adopted global accounting standards (google.com, 2009). Previously, businesses operating in Singapore maintained the ability to act as corporate and private investor tax havens as financial reporting from businesses in this country were able to manipulate data in a methodology that would be considered illegal in countries using the IFRS. Cost accounting not measured against IFRS, internally, eliminated the need for external auditing consultants, provided opportunity for less fiscal transparency, and allowed for strategic policy formation where allocation of costs was not standardized.

What this speaks to is a lack of corporate governance in countries that are not yet fully standardized in the accounting function. Especially in terms of fiscal transparency and auditing practices, the businesses required less control and managers or executives with access to costs had the ability to shuffle currency or provide tax havens for investors with clever allocation of resources. “Culture is often considered to be one of the most powerful environmental factors affecting the accounting system of a country” (Tsui & Windsor, 2001, p.144). These authors consider accounting to be a “socio-technical” activity that involves human-based resources and financial resources in a way that is inseparable (Tsui & Windsor, p.145). In collectivist cultures, there is a mentality related to tradition and group affiliation where values are consistent with securing the needs of the group.

These values are common in countries like Singapore and India. Thus, there is a resistance to change regarding adoption of international accounting standards that change the scope and policy formation related to resource utilization and fiscal transparency to the rest of the world. “Differences in accounting practices are manifestations of nationally different cultural systems” (Askary, Pounder & Yazdifar, 2008, p.145). Thus, businesses operating in one collectivist nation might have more focus on expansion whilst an individualistic country such as the United Kingdom might have more focus on developing more cost control by building a culture of lean production philosophy.

In this situation, the method of accounting would differ, as would most assuredly those management systems in place in terms of control. In the individualistic culture that has adopted international standards, the implementation of new technologies to facilitate cost control and inventory control might be organisation-wide, such as new enterprise resource