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
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3. XBRL
• XBRL will loosen the control managers
currently have on data aggregation decisions
and place their performance under greater
scrutiny
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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
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5. 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
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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
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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
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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
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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
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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’
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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
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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
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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
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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
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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
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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
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