In many ways, the development of international auditing standards and regulations is connected with the harmonization of accounting principles and reporting. At present, national characteristics of accounting, of course, remain relevant, but the use and development of common approaches becomes objective reality. This happens for several reasons. (Bode S, 2007)
Currently the deepening of economic ties and development of the TNCs are the determining factors in the global economy. In the world there are more than 37,000 TNCs, which own more than 170,000 offices, also there are such business cases as mergers and acquisitions which unite companies from different parts of the world. TNCs tend to use the same accounting principles and accountability in all its branches, so that information coming to the office is easily comparable and reporting. However, in practice it is necessary to conduct two accounting: one in accordance with accounting principles accepted in the home country, the other in accordance with the laws of the host country. As a result, the accounting and reporting becomes more difficult, time consuming and increases the probability of error. Here raises the need for harmonization of accounting principles.
The second factor is connected with rapid development of the world stock market. TNCs tend to have their shares listed in many international exchanges, however, stock markets put forward strict requirements for inclusion of shares of companies in the listing. These requirements apply to the financial statements provided by the companies. In order that financial statements have been clear to all interested users, the International Committee of stock exchanges (IOSCO), uniting Exchange Committees of New York, London and other leading stock exchanges, began to develop uniform reporting requirements for companies whose shares are admitted to quotation. Work was carried out in cooperation with the International Committee on Accounting Standards (IASC) and has been completed by the end of 1998.
Many integration groupings also have done a lot of work to create a single market in financial services. In particular, the Member Countries of NAFTA have developed a set of basic rules and obligations, designed to eliminate barriers to trade in financial services. In 1991 an agreement was signed between the Canadian Institute of Professional Accountants, American Institute of Certified Accountants and the National Association of State accounting organizations, to establish mutual recognition of professional degrees and certificates of auditors based on local tests. (International Accounting Standards Committee 1998)
Great contribution to the development of international standards of audit made by international organizations: Committee on International Accounting Standards (IASC); OON bodies such as the Economic and Social Council, Commission on TNCs, the Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting UN (ISAR), Organization for Economic Cooperation and Development, the EU Commission on the Securities and Exchange Commission, the professional organization of accountants and auditors. (Regan 2003)
The unification of international standards on auditing is the result of a high degree of monopolization in the field of auditing and consulting services. The concentration of capital influences the sphere of audit and consulting, where about 90% of the market belongs to the ten to twelve companies, leaders, and there are large-scale merger of giants (for example, the merger of Price Waterhouse and Coopers & Lybrand). Such association should help companies improve service quality and effective use of experience in different spheres and the advantage of working with different countries. However, the union is effective if the methodology and audit standards used by the merging companies are uniformed.
Despite the achievements in the field of international auditing standards, it is too early to speak about the perfectness of the development of universal principles. Current international standards can be viewed as a collection of national and regional providers, which have mutual influence, because the national legislation in this area varies greatly in different countries. And the leaders in this field, as in the service sector in general, are the industrialized countries.
The trend towards globalization of capital markets makes it necessary to create a unified system of accounting and auditing. Awareness of this need is an important step towards the creation of international accounting and auditing standards. Otherwise, further development of international capital markets has been questioned, since a variety of accounting and auditing systems makes it difficult to choose an effective facility for investment. International Auditing Standards represent a system of standards, which provides reliable information on the aspects and procedures of auditing, based on generalization of current best international practices in auditing.
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