1. Contents
Introduction...................................................................................................................................................2
Does IASB not act in a Public Interest?....................................................................................................2
Murphy’s Assertion of Existence of Cartel...............................................................................................3
Implication for accounting in different countries......................................................................................3
Different accounting systems for local authorities, for different countries...............................................4
IFRS and UK’s Local Authorities.............................................................................................................8
Major Beneficiaries of Move and the Bodies Who Get Benefited from the Move ..................................8
Audit Case Backing Murph’s argument....................................................................................................9
Lapses, Oversights, Consequences in Audit Profession .........................................................................10
Conclusion ..................................................................................................................................................11
References ..................................................................................................................................................11
2. Introduction
In this paper, we have answered the questions, which were raised from the case study of Richard
Murphy. Where Murphy has criticized the International Financial Reporting Standards (IFRS) and
suggests that it is under the influence of the top 4. Further, it facilitates them not the public.
Similarly, Murphy is not happy regarding its implementation on the local authorities of the UK.
Furthermore, lapses in Audit judgment. All above and other related asked questions are answered
here, while each answer is backed by literature. (Palmer & Scott, 2021).
Does IASB not act in a Public Interest?
Murphy does not believe that IASB provides any support or facility to public service, he thinks,
its all about entertaining cartel or its top sponsors. However, what I believe, his argument is false
since the IASB was created to ensure that accounting standards and disclosures are in the best
interests of investors and the public. IASB established IFRS to ensure tighter controls, rules, and
oversight so that businesses and organizations cannot deceive their stakeholders. Further to
guarantees transparent accountability in financial reporting and disclosure (Ramirez, 2012).
If we can recall its history, prior to implementing the IFRS scheme, the IASB met with all
stakeholders, including investors and organization and, the IASB examined the effect and
addressed some issues. Likewise, before enforcing the method, an adequate testing area was
developed. Thus, the board has established regulatory to ensure appropriate representation of
stakeholders. These bodies ensure that stakeholders' views are taken into account. Therefore,
appraisal process improves the credibility standards even further.
3. Murphy’s Assertion of Existence of Cartel
As a result, Murphy's assertion of the existence of a cartel is somewhat inaccurate, since the board
has made efforts to fairly serve all stakeholders and to safeguard stakeholder interests.
Furthermore, as long as the big four firms are concerned, which are, PricewaterhouseCoopers,
Deloitte Touche Tohmatsu, Ernst & Young, and KPMG , all four have an influence on IASB, The
question is not easily answered. It should be remembered that the guidelines for corporate
compliance have been laid down, ensuring greater financial disclosures. Although the firms can
exert some influence and make recommendations, there is no cartel structure since they are major
competitors. Hence, they are not in position to have a major influence on its decisions.
Implication for accounting in different countries
The rate at which various countries adopt the system is dependent on their regulatory authorities.
In addition , Because of the globalization of economies, businesses and coutries prefer a universal
structure to ease dealing with financial matters (Callao et al., 2009).
Empirical research and real-world implementations have shown that the IFRS framework provides
a higher level of financial transparency. It has been discovered that system adopters have
encountered effects on their cost of capital, liquidity, and mark adopters. It has also been shown
that since the implementation of the IFRS, the accuracy of financial statements has increased.
Many studies by experts suggest that its implementations brings an improvement in the company's
worth relevance and earnings. It depends on the country whether voluntarily or enforced by the
regulator, but empirical studies have demonstrated the system's success.
Furthermore, depending on the strength of the regulator, the implementation and application of the
standards has varied from country to country. Countries with strict regulators, such as China and
4. India, may be wary of implementing the scheme. However, the United Kingdom, the United States,
and the European Union have all effectively embraced the scheme. The adoption of the
International Financial Reporting Standards (IFRS) by large countries made the scheme widely
acceptable. The United Kingdom has also given its public sector divisions more time to effectively
implement the scheme.
Since most companies and government agencies work with organizations all over the world, using
a widely accepted accounting system is critical. A universal system ensures easy communication
between different organizations around the world, which is especially important for global
businesses.
Different accounting systems for local authorities, for different countries
To make the system transparent and make businesses easy, it is best practice to have a uniform
systems in local authorities and countries (Pilcher & Dean, 2009).There may not be a paradigm
change, as Murphy claims. However, all local governments and the central government would
have to make significant efforts to switch to IFRS accounting, but this will not be a pointless or
fruitless process since the accounting system for the entire world will be aligned in this way.
If we give a glance at the nature of local authorities, which provide different nature of services, in
different countries. Where the prime purpose of their existence is to provide timely assistance and
services to the general population. The central government's minimal intervention and hindrance
in the work of local governments has been a key factor in their progress. As a result, the quality of
service and productivity can be impacted, as more effort is required. However, IFRS would
undoubtedly be beneficial because it will provide greater transparency on the account of services
rendered and the costs associated with them (Pilcher & Dean, 2009).
5. As they planned for the implementation of IFRS, local governments faced a huge challenge. The
International Financial Reporting Standards (IFRS) have been influential in enhancing financial
statement reporting (Pilcher & Dean, 2009). Many who support the introduction of the
International Financial Reporting Standards (IFRS) for local governments argue that it would help
provide transparent, easy-to-read, and interpret financial information. Similarly, Local
governments faced a major challenge as they prepared for the introduction of IFRS. International
Financial Reporting Standards (IFRS) have had a major impact on financial statement reporting
(Pilcher & Dean, 2009).
However, many supporters of the International Financial Reporting Standards (IFRS) for local
governments claim that it would help them provide open, easy-to-read, and interpretable financial
information. In addition, local governments will have more time to prepare these reports, allowing
them to provide information more quickly. Another explanation why local governments would
have little difficulty implementing IFRS is that they already have guidelines and expertise from
the federal government.
Furthermore, the key issue with moving to IFRS for local governments, according to Richard
Murphy, is that it will raise workload while also failing to achieve the target of making local
authorities accounts easy to read Pilcher & Dean, 2009). Local authorities must be discussed and
shown that adopting IFRS would make it easier for them to determine whether their investments
have yielded results or what measures need to be taken(Pilcher & Dean, 2009).
The main concern is with several service units, which could have more complicated transactions
and a higher amount of relevant data, necessitating more expertise in order to prepare reports. This
can placed pressure on those authorities, making implementation more difficult. It may be easier
for fire and rescue authorities to execute, and police authorities may believe it is not one of the
6. most difficult tasks (Pilcher & Dean, 2009).Another problem local governments can face is
determining the value of the land as well as the plant and equipment in use. The key issue is to
revalue the property using the latest IFRS revamped categories. For starters, estimating the worth
of properties is becoming increasingly difficult for authorities. Second, re-categorizing and
calculating the meaning based on the reclassification is becoming more difficult (Pilcher & Dean,
2009). This, on the other hand, can be overcome by implementing IT skills and thus managed
when certain accounts are maintained on a regular basis. Other problems included obtaining
finance-related values from other agencies, as well as the ongoing monitoring of the asset registry,
which is currently not being done. Another problem that the authorities are dealing with is part
accounting. This is the part that necessitates accounting for each form of plant and machinery in
each department. Local governments must also deal with the issue of leasing, which requires them
to determine if a lease exists or not, and if it does, to review, classify, and locate embedded leases.
The authorities are often confronted with the problem of transparency, the most serious of which
is the segmental reporting disclosure.
Another explanation, as previously mentioned, is that there would be fewer opportunities for
confusion on the part of both investors and local small and medium enterprises when it comes to
investment.
The single accounting method would result in actions that favor the whole planet rather than a
single economy. As a result, the world will take consistent steps in the same direction, with the
help of experts from all over the world, benefiting more economies.
Although aligning local governments with the IFRS can be an expensive and time-consuming
process, it can be avoided thanks to significant technological advancements that aid in a uniform
7. and consistent transition, reducing, if not fully eliminating, the time needed. As a result, technology
has made the transition easier and will therefore help it.
In conclusion, IFRS would increase the reliability of accounting reports, making them more
investor-friendly and cost-effective. While this will necessitate additional effort, it will
undoubtedly change the way the world views investment decisions and the system's complexity.
Stewardship and transparency are not explicitly stated as a goal of financial reporting by businesses
under the International Financial Reporting Standards (IFRS). To comprehend the explanation for
this, we must first comprehend the meanings of stewardship and accountability.
Stewardship is derived from the base word steward, according to the dictionary meaning. A
steward is a person who, on behalf of his employer, manages the affairs of an estate. The word
"stewardship" has been used in a variety of ways. It is often used to distinguish between the
administration of the reporting entity and the operation of the entity. It is also used to refer to the
asset's custodianship or safekeeping.
Accountable is described as (a) "needed to make account: answerable" and (b) "capable of being
explained" in Webster's II New College Dictionary. In accounting literature, the term
accountability has a variety of meanings. Citizens have the right to know how their hard-earned
money is spent in their country. Government accountability is solely dependent on this right. In a
democratic state, the government must fulfil its obligation to be accountable to the people.
Financial reporting plays a significant role in this regard.
Stewardship has been described as an indicator of management performance under the
International Financial Reporting Standards (IFRS). According to the International Financial
Reporting Standards, determining the stewardship burden for an asset based on historical expense
8. is not an adequate measure. Asset stewards are responsible not only for the custody and
safekeeping of properties, but also for making efficient and productive use of those assets. The
performance of an investment is a significant indicator of the efficacy of stewardship duty. To
assess the effect of stewardship, one uses the International Financial Reporting Standards (IFRS)
to monitor improvements in the fair value of an asset.
IFRS and UK’s Local Authorities
As long as its implementation on UK is concerned, Such accounting standards are in the best
interests of the UK, not the Big 4 audit firms, since they would help with tighter regulation and
open up investment opportunities for local businesses, resulting in a boost to the economy
(Ramirez, 2012). In addition, since it has been adopted by the majority of countries around the
world, it would be in line with other countries that have already adopted similar policies. Take the
example of the implementation of IFRS in the United States. Despite the issues raised, the
implementation of IFRS was not hampered, due to the uniformity and stability in the system that
IFRS will provide, as well as the opportunities it will provide in terms of business growth and
insight into investment opportunities (Emily, 2009).
Major Beneficiaries of Move and the Bodies Who Get Benefited from the Move
Following several attempts to harmonies accounting requirements, the European Union (EU)
parliament and council endorsed the International Accounting Standards (IAS) legislation, which
made it mandatory for specified groups of companies to prepare their consolidated financial
statements in compliance with the international standards provided by the International
Accounting Standards Board (IASB) (Callao et al., 2009). They believe not on this benefit the
investors, but the public and governments too, which make the total system transparent.
9. Furthermore, , if IFRS is introduced, it would aid in enabling comparability at the grass roots level
and provide investors with more information for investment (Pilcher & Dean, 2009). While, as
Murphy said, investors will not invest in local governments, the information provided by local
governments would simplify the analysis of information provided by other small and medium
enterprises because they are all linked to each other. This would increase accountability, lowering
investor costs and reducing the chaos in the market environment caused by inconsistencies that
cause ambiguity in the system (Callao et al.,2009).
If it is not adopted, organizations other than local governments would be required to prepare
various reports, some to comply with local government reporting requirements and others to meet
international expectations for investors(Pilcher & Dean, 2009). As a result, it will take more time,
create more uncertainty, and demand more awareness and time from investors. This may not be
optimal for the economy as a whole, as well as for small businesses that need more funds to expand.
Which would minimize the costs associated with audit firms, as if it is not made necessary, the
audit firms will be charged higher fees to get the two systems into harmony (Yoon, 2009).
However, the transition costs are high; many of the costs are one-time and therefore would be more
useful.
Audit Case Backing Murph’s argument.
Deloitte Consulting is working on a project for Rhode Island called the Unified Health
Infrastructure Project (UHIP). This initiative was intended to make eligibility testing for the food
stamp programme, now known as SNAP (which offers nutrition benefits to low-income families
10. to help them buy healthier food and move toward self-sufficiency), Medicaid, affordable child
care, and cash assistance are some of the programs available (Mara, 2020). This project went live
in September 2016, but there was no contingency plan in place. This caused a slew of issues for
the company and its employees. Deloitte was never compensated for its work as a result of these
issues. There was a backlog of 15,000 applicants for help at the height of the crisis in February,
ranging from cash and food stamps to medical treatment (Mara, 2020).
Governor Gina Raimondo extended the state's contract with Deloitte for two years in April, as the
company's contract was about to expire, and decided not to sue the firm because she did not want
the state to be "tied up in expensive lawsuits for years." (Mara, 2020).
Deloitte agreed to pay Rhode Island $50 million under the terms of the agreement: The state of
Rhode Island will receive $30 million, while the Centers for Medicare and Medicaid Services and
the United States Food and Nutrition Service will each receive $20 million (Mara, 2020).
Lapses, Oversights, Consequences in Audit Profession
Furthermore, Auditing provides customers with the ability to monitor, regulate, and deter threats.
A steady stream of audit errors, on the other hand, demonstrates that it hurts people and
organizations. Failures of audits are often blamed. Not only, it has it has been the reason for lost
in jobs Deposits have been lost, jobs have been lost, and people's livelihoods have been lost.
Furthermore, auditor lapses included when auditors do some serious distortion in the audit report.
There are many practicle examples, where audit failure has affected many individuals.
Audit deficiencies have been seen to do significant harm to people's lives. Audit delays contributed
to a disaster for 30,000 Maxwell retirees. Audit deficiencies contributed to the closing of Polly
11. Peck, which resulted in the loss of 17,227 employees and 11,000 Sound Diffusion Plc investors (
MailOnline, 2002).
Similarly, Auditors overlooked frauds that resulted in the arrest of five Baptist Foundation of
Arizona officials on 32 counts of fraud, racketeering, and robbery. Around 11,000 investors lost
£400 million. Likewise, "There should be no doubt that the auditing process failed to perform,"
the US Senate concluded in its opinion on the closing of the Bank of Credit and Commerce
International (BCCI). The audit errors resulted in the loss of 14,000 employees and liabilities to
one million bank depositors with $1.85 billion in deposits ( MailOnline, 2002).
Conclusion
The questions related to International Financial Report Standard refereed by the case study of
Murphy were answered. Where it was concluded with the evidence from the literature, that IFRS
not facilitates the government but also the Public. Moreover, the claim was rejected that it only
serves or works under the instruction of the cartel by facilitating Big 4. Moreover, it was suggested
the uniform system helps entire businesses and countries in the world to have one finical system
globally, though, a tough ask to implement at the start. Moreover, in support of Murphy’s point of
view, a case was presented by literature to highlight the failure of audit judgments.
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