The accounting world is in the process of merging multiple cultures, procedures and policies into a great universal system, International Financial Reporting Standards or IFRS. The goal of this new system is to create a universal method of accounting. Some experts suspect that the new rules will ignore previous rules that prevent fraud and that fraud will be more difficult to detect.
The IFRS is a new set of accounting standards developed by the International Accounting Standards Boart, which will ultimately become the global standard for the preparation of financial statements in public companies. The purpose of this new system makes sense, especially for companies. "A company can present its financial statements in the same way as its foreign competitors, facilitating comparisons. In addition, companies with subsidiaries in countries that require or authorize IFRS can use accounting language throughout the company … benefit from the use of IFRS if they want to raise funds abroad "(AICPA). Using this new system will facilitate the accounting process because a uniform system will help in the processes of interpretation and auditing of some companies. Given that the world faces a financial crisis, many nations are willing to create "a unique set of high quality global financial information standards" (Cancino). The main problem with the new international standards, however, is compliance and audit problems. Some experts believe fraud will be rampant between foreign and national countries.
Auditors around the world have offered many arguments against the new international information system. The first issue of many auditors is the basis of current and future principles. The current system of generally accepted accounting principles (GAAP) is a system based on rules and principles. Potential IFRS are based only on principles. This difference will require that the management change the approach based on the fulfillment of an approach of economic value with respect to the financial information. With greater human involvement, many auditors believe that the risk of fraud and incorrect expression will increase. Another problem with the new system is the change in the revision and the adaptation of the existing accounting policies and procedures. The senior management will have to adopt a new approach based on the criterion of certain problems. For example, they will decide "the time and proportion of the income recognition, the time and the value of the recognition of the expenses based on shares … (i) the time, the value and the notification of the recognition of expenses of the benefits of employees "(Cancino). The valuation element will be an important problem for companies and consumers in the financial statements. This element will be the center of any fraud scheme that occurs after the adoption of IFRS. Companies are likely to take advantage of this decision and deceive all readers of financial statements. Some of the possible problems and schemes include "altering the valuation of the accounts receivable by not establishing adequate reserves and bonuses and recognizing the related expenses, manipulating the methods to evaluate the inventory, creating an overvaluation of inventory amounts and unit costs ; the value exists, overvaluing the value of the assets and recognizing inadequately income and expenses "(Cancino). Companies and businesses will assume the new system and will abuse them, making them commit tax frauds and other schemes of fraud that will inevitably affect their reputation.
Prevention is the key thing in many minds of senior management individuals. How would companies, with the new power to control their financial statements, manage the risk? "Not only the reporting bases will change, internal controls on financial information must also change. The old accounting methods and procedures may not be effective in the light of the new accounting bases, Be prepared to make changes to the internal controls if they want their numbers to be credible and trustworthy "(Coenen). Prevention of risk will be the most difficult problem that will be derived from the adoption of IFRS.
The world is in the middle of an accounting hurricane, since companies and organizations try to combine the accounting systems of the world in a uniform process, the standards of international financial information. Many auditors believe, even with the benefits of change, that fraud will be rampant among companies. There will be less focus on procedures that allow companies to create their own statements. Evaluation and prevention of risks will be more essential than now for inhibiting fraud. The IFRS are similar to those of glass. It is a beautiful and beautiful idea, but it can be done quickly.
AICPA. Frequently asked questions about IFRS. 2011. 2011 – http://www.ifrs.com/ifrs_faqs.html#q1.
Cancino, Fernando. "Fraud under the surface". Internal Auditor (2010): 33-36.
Coenen, Tracy. AICPA Store 2011. 2011 – http://www.cpa2biz.com/Content/media/PRODUCER_CONTENT/Newsletters/Articles_2011/CorpFin/IFRS iFraudMoreChallengesMoreRisks.jsp.