Challenges in Accounting in Global Finance-Samples for Students

Question: Discuss about the Challenges in Accounting in Global Finance. Answer: Introduction The primary functions of financing have always been trying to control costs, making and maintaining proper budgets. Finance department of any organization is laden with the task of planning a budget which will dictate the financial transactions and operations of the companies. Another important role of finance is internal auditing. This is an essential aspect of business running, which ensures the organisations are operating in a correct manner (Burns Needles, 2014). However, in the age of globalization, as organizations are expanding rapidly and are operating business overseas the finance departments and auditing firms are being faced with new and more intricate challenges every day. Their tasks and responsibilities transcend from being burdened with simple capital structure making to profit repatriation policies of the companys subsidiaries. Capital budgeting decisions should reflect not just the divisional differences, but also has to show the complicacies that arise due to the d ifferent currencies, exchange rates, taxation policies and the different laws and regulations in different countries (Prencipe, Bar-Yosef Dekker, 2014). The companies incentive system must be able to assess, acknowledge and reward the actions and operations of the managers who work under different economic and financial settings across the globe. This paper will be aimed at 3xamining the role of the accounting strategies in the environment of globalization and try to identify the challenges that are faced by the accounting firms. Project objective The prime objectives of this paper are: To understand the impact of global trends in the globalization setting To observe the changing accounting practices in todays integrated world, and To indentify the key challenges of accounting in todays global economy Project scope The paper would try and identify the challenges of accounting in global finance and then go on to give probable solutions that would help firms to execute auditing and accounting for the global companies in a smoother way. The paper, once completed would have a scope of delivering new strategies to the global companies that would make global finance accounting easier and devoid of complicated hassle. Literature review The rise of the ideas and theories on globalization has brought with it many other dimensions and new parameters were introduced which had a significant impact on the accounting practices as well as the accountants in the globally functioning organizations (Rathee Kapil, 2015). Compared to the traditional accounting, modern auditing and financial accounting firms have taken on new identities and new roadways have opened up. While the traditional form of accounting was concerned with simple auditing and financial management, modern financial accounting has sprouted new branches and a lot more aspects have been included in the whole process, some of which are corporate governance, anti-corruption laws, regulation standards, accountability in large multinational corporations (MNCs) and many more (Bebbington, Unerman O'Dwyer, 2014). The factor that makes all of these even more complicated is the fact that, all these parameters have to be adhered to under different laws and regulations in every country, hence no uniform code of conduct or action plan cannot be devised easily. Accounting is a neutral take on the financial and economic conditions of a given organization or industry. The economic powers and factors that are at play in the setting of different countries all are incorporated in these financial reflections (Johnson, 2014). The accounting practices and the outcomes give an organization the necessary insight to make vital economic and budgeting decisions. The figures that are presented by the accounting departments of the organizations, shape the decision making process of the companies. Internal audits help companies to understand and identify the areas or countries which would offer them cheap but skilled labors. Knowledge like this is important to make decisions which would enable companies to curb costs and increase their profit margin (Gereffi Fernandez-Stark, 2016). If the companies wish to stay ahead of the competition in the fierce market conditions of todays world, they must make the right decisions that would enable them to optimize their operations which would keep them on top of the industry. To make these decisions, it is vital for the organizations to keep innovating and be creative about the operations in order to be sustainable (Ebrahim, Battilana Mair, 2014). While making the decisions it must be kept in mind that the organization has all the necessary information that are generated by the accounting department. Even excluding the aspect of globalization, there a number of other factors that affect the role of accounting in organizations. The advent of modern technology and its applications have affected every aspect of business operations, including management and financial auditing. In the era of free information and technology, the ideas about how products and services are delivered to the consumers have changed drastically, forever altering the business operations of every organization. Evolving market competition has prompted organizations to adopt new methods of management accounting which comprises of innovative ways like Just In Time (JIT), Total Quality Management (TQM) and other similar methods. Previously, organizations were only faced with competition from local or at most, the national markets, but today every company has to overcome the obstacles that are created by overseas companies as well (Stauffer, 2015). There are several trends that are practiced in managerial accounting processes in the context of glob al organizations. Green accounting: With the threats of global warming and environmental pollution becoming apparent every day, it is increasingly becoming a popular concept of a business organization that will take care and maintain a balance between the environment and the operations. It has become of paramount necessity to keep its operations clean and environment friendly if an organization aims to keep a good relation with every customer and even the governmental bodies of the country it is operating in (O'Connor, Sexton Smart, 2013). this new aspect and requirement of the customers have put accounting and analytics departments in an even more challenging position as they are tasked with coming up with a budget and economic plan that would enable the companies to attain Green GNP (Bodie, 2013). Investing in projects and other areas which facilitate protection of the environment has become one of the key features of every global organization. Harmonization: In a time where many companies run several businesses in many countries, it is very important to have a uniform accounting measure and process for every organization which would help every company to keep track of their own financial operations more easily. It prime objective of international harmonization is to make the different financial information from different countries comparable so that companies can efficiently assess their own performances in every country and identify where they need to work on. Literature gap Although the previous work has been successful in identifying the different challenges that create an obstacle while accounting for finance in a global context, the work is mainly focused upon the statistical interpretation of the data. The ethical and moral grounds of the issues have been barely talked about in depth, even though these issues are just as important to understand how the behavioral pattern of the accountants are affected. This research would be more concerned with the ethical aspects of operating a business in the global context and financial accounting under the setting of a globalized era which makes the accountants face situations of moral dilemma. This particular gap will be aimed to be solved in the following paper. Hypothesis Null Hypothesis: The challenges faced by accounting in global finance are going to help the business organizations if properly met with Alternative hypothesis: The challenges faced by accounting in global finance are not helpful for organizations even if they are met with the right solutions Research design A number of tools and methods can be used to make sure that the research reaches its desired goal of identifying the challenges of global finance accounting. Two different types of research methods are given most importance in a broader sense: Qualitative research: This is a set of methods that are non-numerical in nature and are used for social science researches. These methods target specific populations and help to interpret the collected data that gives a comprehensive idea about the social life. Qualitative research methods help researchers to derive behavioral pattern from the results of the surveys, which help to predict actions and behavior of the individuals and organizations in the future. This type of research helps the researchers identify the parameters and the attributes that shape the general behavior of the subjects and the population behavioral pattern is derived based on that approximation (Liamputtong, 2013). The qualitative methods that are to be used in the current research have been selected to be: Direct observation: This is the simplest method of qualitative research which involves the researcher to observe the activity of the subjects without interfering in the process. The research at hand would be employing the researcher to first understand how the accountants of the global companies operate and what are the methods and tools that are used as well as the limitations of those methods. Questionnaire: The accountants will be given a set of questions that will talk about different issues that they face while working: the issues regarding international laws and regulations and the drawbacks of the current methods of global finance accounting. Interviews: The research will then be followed by in depth interviews which would help the researcher to understand the issues each individual faces while working as a management accountant in global organizations. It must be remembered that qualitative data can be tampered with very easily and may yield biased results. Moreover, since this type of research method is the primary focus of this paper, these will be used extensively and a behavioral pattern will be tried to retrieve by trying to understand how the accountants react to certain situations (Clemence, Doise Lorenzi-Cioldi, 2014). Quantitative research: This type of research method deals with statistical interpretations of the gathered data through using mathematical tools which categorize answers and coming up with definitive patterns which back up the qualitative results. This research method deals with numerical data and the results are solidified by computational techniques. Specific conditions and phenomenon are given logical explanation through scientific research. The current research would take and apply a number of quantitative research methods to observe and identify a pattern that the accountants feel are the biggest challenges in global financial accounting process. In many cases, secondary data are the only source of collected data which form the basis for quantitative research analysis. Surveys are also used to gather data which would provide with the necessary parameters to calculate and analyze. The accountants and the organizations will be asked to provide data regarding the biggest and the most frequent issues that they have faced while making internal audits or managerial accounting, in order to understand and decipher a pattern for the problems and the most difficult part of the process (Elo et al., 2014). The statistical results will be immensely helpful in terms of establishing the assumptions in a firmer way. Research limitations The biggest limitation of the research is, which is a problem for almost every survey ever, is that the sample population size is too small (Brinkmann, 2014). While it may be easier to calculate the smaller size of data, the opinions and perspectives of every individual cannot be known from just a few. Small sample size can often lead to results being riddled with misinterpretations and laden with false conclusions (Geppert, Matten Williams, 2016). On the other hand, it is virtually and physically impossible for any research to survey entire populations and collect data from everyone on the planet. The problem of random sampling will always remain and the current research is not devoid of the same problems. Time schedule Figure: Time schedule chart Source: created by author Conclusion From the above discussion it can be concluded that the problems faced by the global companies in the context of financial accounting are very much an issue and the current research would come in handy to identifying the most important and biggest problems. The research has selected the methods in such a way that will facilitate in this regard and would most definitely help to come up with probable solutions that would be of use to reduce the challenges. 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