Role Of Accounting In Global Market

The purpose of accounting is to communicate the organization’s financial position to company managers, investors, banks, and the government. Accounting standardsprovide a system of rules and principles that prescribe the format and content of financial statements. Through this consistent reporting, a firm’s managers and investors can assess the financial health of the firm. Accounting standards cover topics such as how to account for inventories, depreciation, research and development costs, income taxes, investments, intangible assets, and employee benefits. Investors and banks use these financial statements to determine whether to invest in or loan capital to the firm, while governments use the statements to ensure that the companies are paying their fair share of taxes.

As countries developed different cultures, languages, and social and economic traditions, they developed different accounting practices as well. In an increasingly globalized world, however, these differences are not optimal for the smooth functioning of international business.

In 1990 the IMF, the World Bank and the US Treasury produced what is referred to as 

the Washington Consensus which forms a major part of “the free market mantra” 

(Stiglitz, p 16). There are several points worth noting. First, it was originally designed to 

relate to distressed Latin American economies but was later used to relate to all countries 

wishing to borrow from the IMF or World Bank. Secondly, although these institutions are 

supposedly global this policy emerges from the USA – as its name graphically signifies. 

Thirdly it marks a definite shift in the agenda of the IMF and the World Bank to further 

neoliberal interests to deregulate markets around the world. 

The ten points of the Washington Consensus are: 

• Fiscal discipline to curb budget deficits; 

• A redirection of public expenditure priorities toward fields offering both high 

economic returns and the potential to improve income distribution, such as 

primary health care, primary education, and infrastructure; 

• Tax reform (to lower marginal rates and broaden the tax base); 

• Financial liberalisation with interest rates determined by the market; 

• Competitive exchange rates, to assist export-led growth; 

• Trade liberalization (including abolition of import licensing and reduction of 

tariffs); 

• Liberalisation (promotion) of inflows of foreign direct investment 

• Privatisation of state enterprises; 

• Deregulation of the economy (to abolish barriers to entry and exit); and 

• Protection of property rights. 

The conditions imposed by these financial institutions on a borrowing nation are referred 

to as the conditionalities. Supporters of the new direction taken by these financial 

institutions point to statistics indicating an overall increase in global wealth and 

employment in developing countries and there is little doubt, that taken at face value, 

these are indicators of an improving global economy. However, very often these are 

macro-measures or averages which ignore the micro-level inequalities and other 

damaging consequences of so-called trade liberalisation. There is considerable evidence 

supporting Chomsky’s claim that these 

. . . ‘reforms’ restore colonial patterns, bar national planning and 

meaningful democracy, and undermine programs which benefit 

the general population, while establishing the framework for a 

world of growing inequality, with a large majority consigned to.

However, the importance of accounting in the globalisation debate is clear when the 

broader social, political and economic implications of accounting are considered. There is 

little doubt that accounting impacts on organisations and society. Despite the traditional 

belief that accountants present a neutral economic reality it is now generally realised that 

accounting presents an economic reality shaped by the dominant economic power groups. 

However, because of its technical nature this is not at first obvious to many. Thus, it 

provides organisations with a seemingly objective basis for decision making. While this 

may more easily be recognised in respect of large international corporations it is also true 

of other international institutional organisations such as the IMF and the World Bank If 

the conditionalties imposed by these institutions create misery then accountants must be 

aware that their discipline contributes to this. 

Accounting has long been used by large international corporations to create a “convenient 

economic reality”. For example, costs within these corporations are allocated to show that 

no profits have been made in countries in which they have been operating resulting in no 

taxes being paid in those countries. This is referred to as the transfer pricing problem and 

it has been a concern for many years. It is now just one way in which TNCs, with 

revenues larger than the GPDs of many countries, yield massive economic power. There 

has been a considerable growth in TNCs with about 7000 in 1970 to well over 50 000 by 

the turn of the century. They account for over 70% or world trade. All maintain 

headquarters in North America, Europe, Japan or South Korea. A recent development is 

that these TNCs now wield monopsony power in additional to the traditional monopoly 

or oligopoly power. That is, they dictate to suppliers the prices they are prepared to pay 

and failure to meet these prices often results in cancellation of contracts for supply and 

inevitably the ruin of the supplying company. For example the world’s biggest retail 

corporation, WalMart Inc has demanded prices for products which proved to be below 

the suppliers’ costs. Failure to meet these prices resulted in suppliers going out of

An accountant performs financial functions related to the collection, accuracy, recording, analysis and presentation of a business, organization or company's financial operations. In a smaller business, an accountant's role may consist of primarily financial data collection, entry and report generation. Middle to larger sized companies may utilize an accountant as an adviser and financial interpreter, who may present the company's financial data to people within and outside of the business. Generally, the accountant can also deal with third parties, such as vendors, customers and financial institutions.

• An accountant can be anything from a simple bookkeeper to a strategic adviser, interpreting financial information for senior decisions makers in the business.

Financial Data Management

The accounting structure of a company is an essential component to business operations. One of the primary roles of an accountant usually involves the collection and maintenance of financial data, as it relates to a company or firm. The accountant ensures that financial records are maintained in compliance with lawful and accepted procedures and policies on the corporate level. The financial information for any organization should be kept in a pristine system because it is a key component used in operating and managing any business.

Managing the financial data of an organization can also include more sophisticated duties, such as developing, implementing and maintaining financial data bases, as well as establishing and monitoring control procedures.

Analysis And Advice

As analysts, accountants may perform certain types of analysis using financial data that is used to assist in making business decisions. From deciding which kinds of supplies to order, payment of bills to payroll, the accountant handles many intricate financial details on a daily basis. Advising on business operations can include issues, such as revenue and expenditure trends, financial commitments and future revenue expectations.

The accountant also analyzes financial data to resolve certain discrepancies and irregularities that may arise. Recommendations may also involve developing efficient resources and procedures, while providing strategic recommendations for specific financial problems or situations.

Financial Report Preparation

Accountants typically prepare financial statements that may include monthly and annual accounts based upon the financial information that is compiled and analyzed. The preparation of financial management reports can include accurate quarterly and year-end closing documents. Reports compiled may be used in connection with the continual support and management of budgetary forecast activities.

The financial reports may be used by a financial director or officer for the development, implementation and operation of a company's financial software and systems, such as Hyperion, Excel and CODA Financial Management.

Regulatory and Reporting Compliance

An accountant may also be responsible for ensuring that all financial reporting deadlines are met, internally and externally. For example, quarterly, semi-annual and annual reports all have specific deadlines, as well as some tax implications. Monitoring and supporting taxation issues and filings can also be a responsibility of an accountant. The accountant also usually coordinates the audit process by assisting with financial data preparation.

External Business Affiliations

Often, accountants must work with financial professionals from the four major fields of the industry: public, management, internal auditing and government accounting. Accountants may provide data to a public accountant, who acts as a consultant, auditor and tax service professional.

Corporations, nonprofits, organizations and governments use management accountants to record and analyze financial information of the businesses in which they are employed. They usually advise company executives, creditors, stockholders, regulatory agencies and tax personnel. Accountants may also work with government officials who are examining and maintaining the financial records of the private business for whom an accountant is employed, in connection with taxation and government regulations.