The effects of globalization on both the accounting profession and education

Innovations in technology have catapulted the financial district into a global market. Globalization has had a great influence on the way companies do business. Companies are not only responsible for being aware of information that involves consumers in their own backyard, but also for understanding consumer culture, as well as economic, political and legal structures that exist in other countries. Due to the influence that globalization has had on business, it has changed the expectations that are required of incoming business students and their education. More specifically, accounting students are being impacted by the changes with which globalization has influenced the market. These students face the challenge most particularly throughout their undergraduate years to understand not only GAAP (General Accepted Accounting Principles) rules and regulations but also the standards set by IFRS (International Financial Reporting Standards). Within the accounting field, the main focus has been on external information that involves the preparation of financial statements and audits. However, due to the ever-changing world of the global marketplace, future accountants must possess perspectives that influence both external and internal reporting. The market will continue to change due to the rapid travel of information that makes globalization an important factor in accounting education.

Companies in the United States have largely adopted GAAP, which is a guide to how companies should construct financial information to produce statements. GAAP has been helpful in recent years because it makes it easier for US companies to communicate with each other. However, in the global environment, GAAP is burdensome for most companies. Abroad, they have adopted IFRS, which is another guide for producing financial information that helps foreign companies communicate with each other. Most countries use IFRS as the basis for the way in which business transactions are conducted. Since most of the world is using IFRS as the standard, the US has the tedious task of having to incorporate two different principles to conduct business. In Bruce Pounder’s article, “How Globalization Is Affecting American Accountants,” Pounder states that “American accountants will be at a severe disadvantage to the many foreign accountants who already master international accounting standards. and that they are therefore much better positioned to take advantage of the rapidly growing career opportunities in China, India and other emerging economies “(Pounder, 2007, p. 3). He then goes on to predict that as GAAP becomes more overshadowed by IFRS, American accountants will find that their skills and knowledge will become obsolete. Therefore, IFRS has been further integrated into the accounting for education curriculum. Students are required to understand not only GAAP but also IFRS and the changes that occur when working with both. By involving IFRS in the learning process, students will be prepared to take the CPA exam that was recently updated to include information about IFRS in the Financial Reporting and Accounting (FAR) section. Students are increasingly equipped with skills and information that will make them more marketable and efficient in the globalized business environment.

In the American economy, a thriving financial sector is often supported by strong auditing and public accounting firms. Therefore, the focus in recent years has been to ensure that accountants excel in gathering information involving assets, liabilities, equity, investments, etc. of a company. However, due to globalization, external accounting practices are not valued as much if internal practices are not also involved. Internal practices are important because they shape the way companies reach their customers in the foreign market. Authors Paul Danos and Richard L. Measelle stated in their article, “Globalization of the Business Environment: Implications for the Accounting Profession and Business Education,” that “In a competitive global market, the internal accountant must be sensitive to what drives business product costs and must work with production and marketing people to streamline all cost accounting procedures. ”(Danos, 1990, p. 79) The responsibilities of the in-house accountant are increasingly critical to the success of businesses. For a company that wants to expand to foreign territory, cost accounting is used to accurately develop information on the price of the product, location of manufacturing facilities, selection of suppliers, etc. Due to these factors, internal accountants must be familiar with cross-border regulations, tax treatments, and currency conversion costs. In public trust, auditors must be well versed in global accounting standards because “the world’s economies are becoming increasingly interdependent …” (Needles, 2010, p. 602) according to Belverd E. Needles Jr., author of the article. “Accounting Education: The Impact of Globalization”. The author continues to promote global standards for auditors because he strengthens his practices just by having to be familiar with those regulations. To be well versed in the global marketplace, accounting students are encouraged to take courses specifically designed to analyze different cultures, languages, and political factors influencing societies.

Globalization has influenced many changes that have occurred in both the accounting profession and education. Students are now exposed to problems that occur in the global market and how to solve them. Not only are these students expected to understand all the math and jargon related to the business world, but they are also expected to have a good sense of foreign consumer culture, as well as regulations tied to each country. Implemented with these skills, students will be able to excel in the new world of business.

References

Danos, P. and Measelle, RL (1990). Globalization of the business environment: implications for the accounting profession and business education. Human Resource Management, 29 (1), 77-84

Needles, BE (2010). Accounting education: the impact of globalization. Accounting Education, 19 (6), 601-605. doi: 10.1080 / 09639284.2010.501578

Pounder, B. (2007). How Globalization Is Affecting American Accountants. Montvale: Institute of Management Accountants.

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