Category: Accounting

Executive Summary

The purpose of this report is to see whether the firm would be better off switching to cloud accounting software instead of staying with the traditional accounting methods. It includes a comparison of both cloud and traditional software and various cloud options. Different research was done to find out which accounting software was the better of the two. Different types of cloud accounting software were researched online to find out about what they included and prices. SWOT analysis was also done on both cloud accounting software and traditional accounting methods.

Introduction

A report has been requested by Martin Moir, Chief Accountant at North East Scotland Financial on Cloud Accounting and whether the firm would be better off switching to Cloud Accounting software instead of the traditional accounting software. This report includes a comparison between the two types of software and a comparison between the different Cloud options. A recommendation will be included on whether the firm should:

(a) approve and use the Cloud Accounting Software

(b) the reasons behind the recommendation if approved.

The report comprises of the following research methods:

• Internet research was conducted to find out more about Cloud Accounting and traditional accounting methods
• Different types of Cloud Accounting software were researched on the internet
• SWOT Analysis on both Cloud Accounting Software and traditional accounting methods.

Conclusions and recommendations will be made on which type of software the firm should choose.

Findings

The research found on Cloud Accounting and traditional accounting software revealed the following:

Cloud accounting software

Cloud accounting software can be accessed from anywhere if an internet connection is provided to log in to the accounts. It allows accounting teams to access each other’s documents and files, with them all being in the one place. Costs are usually monthly or annually and this includes as much storage as needed. It also provides automatic software updates.

Traditional accounting software

This software needs a company to have a hard drive where the software is installed, and data is recorded on it. The user accesses their data through an app on their desktop, which can not be accessed from any other device, which restricts a person’s mobility. Companies are responsible for maintaining the servers and increasing their own storage capacity with investing in new servers. Software needs to be updated manually too. It is very secure as companies have control over who access their financial data.

2.2 The research on cloud accounting providers revealed that:

Xero

Xero offers a wide range of accounting features including invoicing, payroll, financial statements etc. Tasks are done in an automated style. There is an app available to smartphone users. There are different packages available to choose from depending on the type of business you have.

The standard package costs £22 per month which includes sending invoices and quotes, entering bills, reconciling bank transactions and submitting VAT to HMRC. It only handles one currency. It offers optional extras, which includes payroll which is free for the first three months and then £5 per month after that for up to 5 employees. Every employee after that adds an additional £1 onto the package.

The premium package costs £27.50 per month which includes sending invoices and quotes, entering bills, reconciling bank transactions and submitting VAT to HMRC. It can handle multiple currencies. It also offers the same optional extras as the standard package at the same prices.

2.2.2 QuickBooks

QuickBooks offers a program which businesses can use to manage sales and expenses and keep track of day to day transactions. It can be used for invoices, paying bills, reports, tax filing etc. QuickBooks offers a free 30-day trial of a fully functional version of the software. It is used to generate month and year end financial reports. There are different packages available to choose from depending on the type of business you have and what features you need.

The essential package costs £18 per month and it includes sending unlimited invoices on the go, storing receipts, managing bills and payments, calculating and filing tax. It is available for 3 users, can support multiple currencies and track employee time. There is also a free mobile app for on the go management of finances.

The plus package costs £27 per month and it includes all the same features as the essentials package with some added on extras. Some of these include a feature that can create budgets and purchase orders, manage stock and track costs by project, location or budget. It is also available for 5 users.

There is also a package for the self-employed, this costs £8 per month. This package includes sending invoices on the go, storing receipts, downloading bank transactions, estimating tax payments, sorting business and personal transactions, tracking mileage automatically and it is available for 1 user.

Sage 50

Sage accounting systems are computerised packages that have several different features to process a company’s finances. The system collects data, classifies it and then summarises it to let the user see their financial information in a simple way. Sage systems can print out invoices, updating customer and supplier records, making payments, automatic update of the general ledger, valuation of stock, VAT returns etc.

The standard package costs £60 per month plus VAT and is available for one user to use and up to two companies. For an extra £20 per month this package can be upgraded to ten users and up to ten companies. It can manage cash flow, income and payments, create invoices and quotes, connect to your bank, manage VAT, cloud access and backup, track and manage stock, manage multiple departments and budgets.

The professional package costs £125 per month plus VAT and is available for one user and up to ten companies. For an extra £55 per month, this package can be upgraded to 20 users and an unlimited amount of companies. This package does everything that the standard package does and also can track income, expenses and profit, it can create sales and purchase orders and can trade in multiple currencies.

SWOT Analysis on both cloud accounting software and traditional accounting methods

Cloud Accounting Software

Strengths Weaknesses

• Easy access 1. Internet access needed
• Costs are low 2. Data security
• Easy use 3. Limitations in security
• High data storage
• Easy transfer of data
• Easy backup

Opportunities Threats

• Mobile apps 1. Data Protection
• Growth in cloud services

Traditional Accounting Methods

Strengths Weaknesses

• System errors 1. Hard copies
• Access is quick 2. Costs are high
• Easily understood 3. Labour intensive

Opportunities Threats

• Internet access not required 1. Data can be lost
• Business own the software

Conclusions

Cloud Accounting Software

Since it can be accesses from anywhere, it is helpful for doing accounts on the go when travelling for business or otherwise. However, since internet access is needed, it makes it hard for businesses to access accounts if the internet is down. Updates are done automatically therefore the business do not have to do it themselves. Costs are split over the monthly of yearly basis therefore costs are usually not too high, allowing the business to spend money on other costs.

Traditional Accounting Methods

All the data is stored on a hard drive therefore if the hard drive is lost or destroyed then there is no backup. The data can only be accessed through an app on desktop, so the accountant’s mobility is restricted which makes it harder for on the go accounting. Since the company must increase their own storage, costs will increase the more space needed and they also must update software manually which increases labour time. The companies have control over who accesses their financial data therefore very unlikely that there would be a breach of security.

Xero

The costs of both these packages are of a reasonable price, however if the company deals with international businesses then the standard package is not good enough as it does not deal with multiple currencies, but the premium package does. Xero also gives the option of increasing the package to more employees therefore it gives the option to companies to have more than one employee working on accounts. The app available for smartphone users is useful for on the go updating of data.

QuickBooks

The costs for these packages are also of reasonable price, with the most advanced package costing only and extra £9 per month which is not steep. QuickBooks is good as it also offers a 30-day free trial so if after the 30 days a company is not fully satisfied with the service, it does not have to go along with this accounting software. It also has a free mobile app for on the go management of finances which is great for a company’s mobility. The self-employed package is at a great price and includes the essentials for a self-employed person.

Sage 50

The cost of the Sage 50 packages are very expensive monthly, starting at £60 per month and going as high as £180 per month. Although these packages are quite expensive they do a variety of different tasks and can be made available for up to ten employees and up to ten companies for added cost to the standard packages, which is very useful for bigger companies who manage various companies and employ more than just one employee. The professional package which costs £125 per month is essential for companies who deal with clients who have international customers and suppliers as they would need to deal with multiple currencies. This is a great tool to have however it does add quite a huge cost on to the package.

Recommendations

It is recommended that the company go with cloud accounting software instead of traditional accounting software as with cloud software it works out cheaper, is easy to use, has high data storage and can be accessed from anywhere in the world if an internet connection is provided. Overall cloud accounting has more advantages as it is more modern and more on course with new technology as all companies nowadays need more mobility when it comes to management of finances.

The recommendation is that the company goes with the plus package from QuickBooks for £27 per month, as it includes sending invoices, storing receipts, managing bills and payments, calculating and filing tax, can store multiple currencies, track employee time, create budgets and purchase orders, manage stock and track costs by project, location or budget. It also provides a free mobile app for on the go management of finances. The plus package is available for five employees which is essential for companies with multiple clients and employees. The 30-day free trial with QuickBooks therefore if the company is not 100% satisfied with the software after this trial they are not tied in to the package.

Why try to complete all the tasks on your own when you can receive additional help from others? It can be a hassle when everything is done on your own. Fortunately, there is a solution to that problem. In accounting, some companies have outsourced accounting tasks to other countries. In an article in Forbes magazine, Joe Mullich describes how companies “are exploring fresh ideas and seeking new answers” as well as “expanding outsourcing to new areas of finance and accounting, new industries, and new sizes of companies than in the past” (2). This states how companies are more willing to consider other options that they have not explored before. As an accounting major, I was interested in how outsource accounting works and learning more about the process. When companies send outsource accounting tasks overseas, this can create benefits and limits that can be the ultimate decision-maker for whether it may be suitable for them or not.

Before talking about the importance of outsourcing accounting tasks overseas, it is crucial to understand what exactly outsource accounting is. According to J. Anderson and Richard Vita, outsource accounting has been around for a long time in the American business environment and has become popular only recently. The CPA Journal describes outsource accounting as, “leveraging accounting data to provide meaningful insight that allows client businesses to run more efficiently and effectively”. Many countries are contributing to the process of outsourcing: India, China, Philippines, Brazil, and Mexico. Only up until recently, companies have pushed towards allowing third parties to help with contributing to reducing the amount of stress put on by businesses. Beginning in the 1970s, the movement of payroll accounting, accounts payable, and accounts receivable have gone up about 10 percent. As described in, “Should you outsource accounting and finance?”, the main goal businesses want to achieve is “an eventual reallocation of limited internal resources (particularly managerial time and investment dollars) into areas more directly related to profit making” (11). Rebecca Pomering and Larry Kammerer define and explain outsource accounting. J. Anderson and Richard Vita explain the history and the trend of where it is going. By taking the educational and historical approach, it is now clear to see that it is important to know what outsource accounting is and the background history of how it all began.

J. Anderson, Richard Vita, Yahya Kamyabi, Susela Devi, H. Höglund, and D. Sundvik all take a business and technological approach to talk about how outsource accounting is becoming more and more common among many small and medium-sized businesses. According to the Studies in Business and Economics, small and medium businesses use accounting outsourcing because “accounting is time consuming and difficult” (124). This source from Romania explains how it makes the process of accounting more manageable for businesses to handle by involving external accountants to handle the tasks. Many small and medium-sized businesses lack the resources and skills needed to run on their own which is one of the biggest reasons for companies to outsource. It is difficult for small and medium enterprises to succeed and grow especially without the skills and resources needed. Small and medium-sized enterprises compared to large firms cannot compete with others as effectively. Yahya Kamyabi and Susela Devi states, “SMEs face with resource gap and competitive pressures, they are forced to lessen their costs and create new opportunities” (81). Fortunately, technological advancements have allowed accounting tasks to be useful for CPA firms to be a part of the transaction process. Even though there are sources that took the business and technological approach in discussing how outsource accounting is becoming more acceptable in the business environment, there were others that took the economic approach.

Rebecca Pomering, Larry Kammerer, Joe Mullich, J. Anderson, and Richard Vita all take an economic approach to discuss both the pros and cons of handling tasks to other countries. Outsource accounting can reduce the cost of operating and allow efficiency to provide more towards getting positive results such as providing good service and money. When companies are focusing on helping clients, they can provide good business service which means they are not paying attention to accounting. Most authors agree that there are many things to be gained from outsource accounting, however, only a few sources have presented the limits. On the other hand, companies must think about whether they want to give up having the power to control over the tasks that they are given. According to the Studies in Business and Economics, some of the limits include, “the organization resistance; lack of acceptance within the company, cooperation risk (cooperation can fail); loss of control and know-how and dependency on an external provider; the appearance of suspicions in what concerns the information confidentiality;” (127). All the sources have different approaches to this topic because even though there are many benefits to outsource accounting, there are also downsides that can greatly affect whether businesses and firms decide to or not.

To conclude, many of the authors had similar thoughts on outsource accounting by saying that there are ways for companies to benefit from outsourcing. However, there were only a few that have touched on the problem with deciding to outsource. “Studies in Business and Economics” has proved that there are issues that hinder the company’s decision to outsource. It is important to look at both sides before thinking about implementing something to see if it would be the best decision. With that in mind, there are pros and cons to outsourcing companies overseas which companies must think about before choosing to begin giving tasks overseas. As technology is improving, we should take advantage of those opportunities to grow and enhance companies to become even more efficient than they already are. I am pleased that there are changes that are made in the accounting industry where I plan to be working in.

Executive Summary

This report undertakes analysing the effects of the changes in retail industry on the operations of Shopping Centres Australia Property Group (SCP). This report sheds light on the requirements of AASB 140 related to the investment properties. The discussion on management flexibility is another major aim of the report. Analysis shows that these changes in retail industry have certain negative impact and economic consequences on the financial statements of these two companies.

Introduction

The presence of certain changes in the Australian retail industry can be seen in the recent years leaving certain negative financial as well as economic impacts on the companies operating in this industry. The main aim of this report is to analyse as well as evaluate the impact of the changes in retain industry on the business operations of Shopping Centres Australia Property Group (SCP). First part of the report identifies as well as summarizes the standards of AASB 140 Property Investment. The next part discusses about the flexibility of the management in the determination of the investment property value. The last two parts of the report analyses the impact and economic consequences of the changes in retail industry on the financial reports of SCP.

Accounting Policies related to Investment Properties

The management of SCP has certain obligations to follows certain standards and principles related to the investment properties and their regulations. In Australia, the ASX listed companies are needed to comply with the principles of AASB 140 Investment Properties related to the investment properties and the same is applicable for SCP (aasb.gov.au, 2019). Different parts of this standard are discussed below.

According to AASB 140, Section 2, the management of SCP is needed to apply this standard for the recognition, measurement and disclosure of investment property. As per AASB 140, Section 3, among the other things, SCP can apply this standard in the lease financial statements of investment property. As per AASB 140, Section 5, Investment Property can be considered as the property that the companies held for earning rentals or for capital appreciation or both rather than for utilization in the supply or production of goods or services or for administrative purposes and for the sales in the ordinary business course (aasb.gov.au, 2019).

As per AASB 140, Section 6, a property interest that a lessee holds under an operating lease can be classified as well as accounted for an investment property in case the property meets the definition requirement of investment property and leases uses in the fair value model mentioned in paragraph 33-55 for the recognized assets. For the management of SCP, recognition of the investment properties is a crucial aspect that they needs to consider (aasb.gov.au, 2019). According to AASB 140, Section 16, the company is needed to recognize as asset as investment property when there is a probability that the associated future economic benefit associated with the investment property will flow to the company and it is possible to reliably measure the cost of the investment property (aasb.gov.au, 2019).

At the same time, measurement of the recognition of investment property is considered as another crucial aspect for the management of SCP. According to AASB 140, Section 20, the company is needed to measure an investment property initially at cost. In addition, it is needed to include the transaction costs in the initial measurement (aasb.gov.au, 2019). At the same time, AASB 140, Section 32A (a) states that SCP can chose either the cost model or the fair value model for their all investment property. Under the fair value model, after the process of initial recognition, SCP will be needed to measure all of their investment property at fair value and gain or loss due to the alteration in the fair value of investment property needs to be recognized in the profit or loss statement. As per AASB 140, Section 56, under cost model, the company is needed to measure all of their investment property at cost model (Yao, Percy & Hu, 2015).

Flexibility of Management

Management Flexibility is considered as the ability of the management team to adapt investment decisions that includes timing and scale, to the existing market condition as opposed to the existing assumptions and goals. It needs to be mentioned that the retail industry is subject to major volatilities in the prices as well as market demands for various range of products. For this reason, the management of SCP has the flexibility in investing different assets that includes investments in properties because it provides them the scope of diversification in investments (Trigeorgis & Reuer, 2017). Under the presence of this flexibility, the management of SCP has the option to analyse as well as evaluate different types of investment properties with the aim to assess their positive as well as negative impacts on their investment decisions. This particular aspect indicates towards the crucial aspect that there is sufficient freedom lies in the hands of the management of SCP for the determination of the values of different investment properties so that they can invest in those investment properties. These investments will lead to the generation of expected return that is needed for the success of their businesses (Karadag, 2015).

Impacts of the Changes in Retail Industry on the Financial Reports

In the context of this report, it needs to be mentioned that there are certain major changes taking place in the Australian retail industry. Some of the crucial aspects of these changes are increase in global competition, stagnant sales, major rise in the fixed costs and rapid revaluation of online sales (smh.com.au, 2019). It is crucial to mention in this aspect that these changes have certain impacts on the financial statements of SCP that are income statement and balance sheet. In case of the income statement or the consolidated statement of profit or loss of SCP, these changes will make the revenue of the company motionless which means there will neither be increase in sale nor decrease. In addition, increase fixed cost will lead to the increase in the overall expenses of the company in this particular statement (Easton & Sommers, 2018). It can also be observed that these changes in the retail industry will have a negative impact on the investments in the properties, for example, there can be change in the fair value of the investments in property of the company and this will create an impact on the statement of profit or loss of SCP. There will be changes in the EBIT as well as net profit of the company (scaproperty.com.au, 2019).

Certain impacts of these changes will be there on the balance sheet of SCP. Due to the volatility or changes in the investment of the company in the properties, investment properties under the non-current assets will be impacted (Robinson et al., 2015). Since sales revenue is stagnant, there will not be any purchase of fixed assets, moreover, the management may opt for selling their assets to cater to the need for funds. This will have a crucial impact on the balance sheet. The stagnant nature of sales and profit would affect the company’s ability in paying off their liabilities which can lead to the increase in the company’s liability and this will impact the balance sheet of the company. These are the major effects on the income statement and balance sheet.

Potential Economic Consequences of the Changes in Retain Industry

Apart from the impact on the financial statements of SCP, these changes in the retail industry have certain economic consequences on the company’s financial statements. In this context, the name of Positive Accounting Theory needs to be mentioned since it is related to the use of financial reports. The positive accounting theory is concerned with the prediction of the actions by the firms in the accounting policy selection and how the firm is going to respond to the prosed accounting standards (Christensen, Nikolaev & Wittenberg‐Moerman, 2016). This theory has connection with the provided situation of SCP.

It can be seen from the above discussion the revenue under the retail industry becomes stagnant and as a consequence, the revenue of the company will be affected. At the same time, the retail industry is witnessing increase in fixed expenses and the same will happen to SCP. As a consequence of stagnant revenue and increased fixed expenses, the net profit of the company will decrease along with the decrease in earnings per share. The decrease in profitability of the company will have certain other consequences. It needs to be mentioned that decreased profitability of SCP will leads to the cost-cutting activities for the companies. Some of the major consequences of cost-cutting activities are decrease in the quality of products, decrease in the wages of the employees and employee layoffs (Zygmunt, 2013).

At the same time, these changes have certain negative consequences on the balance sheet of SCP. Decrease profitability will lead to the decrease in assets base of SCP since the company would opt for selling their assets for funding the business operations (Zygmunt, 2013). At the same time, increased competition in the retail industry may lead to the decrease in the return from investment properties. In the presence of all these economic consequences, the management of SCP is needed to develop effective strategies to fight with these changes in the retail industry. For example, the company is needed to increase their presence to online market for tapping into the large market because it will provide them with the necessary competitive advantage. In addition, increase in sales and profitability will be possible due to these strategies (Zygmunt, 2013).

References

1. Aasb.gov.au. (2019). Investment Property. Retrieved 30 April 2019, from https://www.aasb.gov.au/admin/file/content105/c9/AASB140_07-04_COMPjun14_07-14.pdf
2. Christensen, H. B., Nikolaev, V. V., & Wittenberg‐Moerman, R. (2016). Accounting information in financial contracting: The incomplete contract theory perspective. Journal of accounting research, 54(2), 397-435.
3. Dunckley, M. (2018). ‘Marked down to clear’: Roger David collapses into administration. The Sydney Morning Herald. Retrieved 30 April 2019, from https://www.smh.com.au/business/companies/heartbroken-roger-david-collapses-into-administration-20181018-p50adk.html
4. Easton, M., & Sommers, Z. (2018). Financial Statement Analysis & Valuation, 5e.
5. Karadag, H. (2015). Financial management challenges in small and medium-sized enterprises: A strategic management approach. EMAJ: Emerging Markets Journal, 5(1), 26-40.
6. Robinson, T. R., Henry, E., Pirie, W. L., & Broihahn, M. A. (2015). International financial statement analysis. John Wiley & Sons.
7. Scaproperty.com.au. (2019). ANNUAL REPORT 2018. Retrieved 30 April 2019, from https://www.scaproperty.com.au/Resources/pdf/LCM448_AR_2018_Complete%20vFs.pdf
8. Trigeorgis, L., & Reuer, J. J. (2017). Real options theory in strategic management. Strategic Management Journal, 38(1), 42-63.
9. Yao, D. F. T., Percy, M., & Hu, F. (2015). Fair value accounting for non-current assets and audit fees: Evidence from Australian companies. Journal of Contemporary Accounting & Economics, 11(1), 31-45.
10. Zygmunt, J. (2013, March). Does liquidity impact on profitability. In Conference of informatics and management sciences, March (pp. 38-49).

The adoption of IFRS in both developed and developing countries in European Union, Australia and the rest of the world is deemed as the most significant regulatory change in the recent past. It is due to its common language which has encouraged more than 130 countries to adopt it as a standard for preparing and disclosing their financial and non-financial reports. However, due to its irrelevance in some countries as well as challenges which it faces, these sovereigns adopt it due to its network effect, to cope with effects of globalization, attraction of foreign investment and aids, and increased boarder listing. However, some countries tend to modify it to suit their accounting and reporting needs. For example, countries like China keeps its local accounting standards but makes effort to converge IFRS with its national standard over time. Therefore, the main aim of the report is to determine if the quality of corporate disclosure or reporting has been improved after the adoption of IFRS standards in European Union, Australia and other adopter countries, the challenges it faces and the reasons why it has not been adopted in US by FASB regulators. Besides, it covers my opinion on whether IASB will be successful in the harmonization of accounting standards throughout the world. The report will be very vital for the investors, companies and the policy makers since it will enable them to make a viable decision on the accounting or reporting framework to adopt to improve the quality of information disclosure over time.

Opinion on whether adoption of IFRS have improved the quality of reporting of the adopters. Even though quality reporting of a firm is pegged on other institutional factors such a nation’s legal and political systems, I tend to believe that the adoption of IFRS standards in European Union, Australia and other adopters have contributed to the reporting quality. The adoption of IFRS led to the change in GAAP with an aim of improving quality of the reporting in most of the European countries. For instance, the firms and business entities which has adopted this standard have experienced less earning management problems, more value relevance of earnings, and more timely loss recognition. These remains to be signs of high accounting and reporting quality among these entities. Besides, it removes the information asymmetry between the shareholders and the mangers hence elimination of agency conflicts. These can be evident since the standard enhances efficient earnings and assets management, and enable managers to properly and accurately forecast the entity’s future income.

Besides, due to its lower susceptibility to political pressures as compared to the national standards, the IFRS is not prone to manipulation hence encouraging transparency, quality and accountability of information disclosures. Through these, the firms’ rate of manipulating their financial statement by disclosing insignificant increase in the profit margin to avoid reporting losses have decreased immensely (Ogiedu & Odia, 2013).It thus means that the standard is important in ascertaining the firm’s going on concern. Therefore, it can be evident that the standard played a vital role in enhancing the quality of corporate reporting or disclosure of financial and non-financial information to the stakeholders for decision making.

Reasons for not adopting IFRS Standards by FASB in US

There are various reasons why the FASB failed to adopt the policies or standards provided by IFRS. They comprise of the following:

• IFRS standard was expensive to adopt- The FASB authorities stated that the transition from GAAP to IFRS was very expensive for the country to adopt and implement. It is due to the fact that for it to be implemented, there was need to engage in workforce training, system changes and user training (Ali, 2017).These were considered to be un-avoided expenses, a process which seemed to be very costly.
• It does not enhance efficient comparability of the financial statements- It is because America and other adopters come from different cultures, historical practices and backgrounds. These makes the comparison to be tedious and impossible.
• Lack of superior standards- The US claimed that the financial statement prepared by GAAP was more superior to the ones prepared by IFRS standards. Due to the fact that IFRS was to be improved to match the standards of the GAAP, the US decided to keep the GAAP standards due to its superiority (Michael, 2017).
• Lack of motivation to adopt new accounting standards- Even though GAAP was complex, it works for the US effectively and efficiently as compared to IFRS. Therefore, given that the existing system was good and meet the reporting standards, they lacked motivation to adopt the new IFRS standards.
• It was rejected due to myriad of challenges which the IFRS was facing during its implementation over time.

The Current Challenges Faced by the IASB

There are various challenges which is faced by the IASB authorities in the lobbying and implementation of its standards. These are linked to the difference in the mental models, cultural issues, legal impediments, political influences and educational needs. The key implementation challenges which it faces comprise of lack of timely interpretation of the standards and harmonization with the national standards (Felski, 2017). These affects its adoption by different sovereigns. Besides, it faces a continuous amendments and review to the standards which leads to cost implications to the implementers of these standards. It is a situation which causes confusion among managers, regulators and authorities in different sovereigns across the world.

Besides, the accountants, users, auditors and regulators’ lack sufficient knowledge and expertise to prepare, process and interpret the financial statements can bring a lot of problems over time. These makes it difficult to enhance efficiency and accuracy of the financial reports. For example the accountants can face challenges due to inability to prepare competent financial reports, the auditors cannot be in a position to detect both inherent and control risks while the users to interpret the information for decision making process. These can propagate fraud either in the short or long run

Due to historical differences in the accounting thoughts, ethos, contexts and practices caused by difference in continental Europe, Africa, Asia, Anglo-Saxon, and Southern Americans makes the harmonization of the IASB standards to become very difficult. Besides, the business and political differences are also factors which affects its structure, formation and implementation process (Wong, 2004). Other factors comprise of inconsistent IASB funding, staffing and government structures, dominance of the board by the developed countries, intense and unhealthy political lobbying and inability to regulate various accounting frameworks in different jurisdiction affect the manner it can harmonize the accounting standards in different sovereigns with the IFRS. These leads to problems in implementation process.

Will IASB successfully harmonize the accounting standards throughout the world?

In my opinion, I think that IASB will be able to successfully harmonize the accounting standards throughout the world. It is due to an incline in globalization which requires people to trade and invest in different countries hence pushing different sovereigns to adopt the international standards. Across the world, there are three main accounting practices which are in place and held strongly with their nationals. They include UK GAAP, US GAAP and IAS (Li, 2017). The practices can give the IASB a challenge in the harmonization given their hard stands in protecting their national standards. However, the move by the European Union to adopt the IFRS standards in all the entities across these regions gives the efforts of the IASB a backup in the harmonization process. Besides, the increasing need of global accountants to use a common standard accounting framework or language also plays a role in boosting the harmonization process.

In addition, the push for sovereigns to gain from global economies calls for standardization of the accounting policies among nations. It is because it will facilitate international transactions, limits the exchange costs, and improves the efficiency of the financial market information and boost government accountability (Pramanik, Das & Shil, 2009). These will help in laying ground for efficiency, transparency and reliability of the financial information across the world. Therefore, despite the challenges which the IASB is facing currently in its implementation, there is a future prospects for its effective harmonization over time.

Conclusion

In conclusion, it can be evident that the adoption of the IFRS in Australia, European and other adopters have boost the quality of the corporate reporting. For instance, it have enabled the entities to experience less earning management problems, more value relevance of earnings, and more timely loss recognition. However, US failed to adopt IFRS standards due to its expensive in nature, does not enhance comparability, lacks superiority over US GAAP, there was lack of motivation to do so and due to the myriads of challenges which it faces during its implementations. Besides, the key challenges which the implementation of the IASB are linked to the difference in the mental models, cultural issues, legal impediments, political influences and educational needs. However, despite the challenges which it faces in its formation, implementation and governance, there is hope that in a near future, the IASB will achieve its goals to achieve its set objectives either in the short or long term basis.

References

1. Ali.S.H. (2017). Why is the United States/Canada not adopting IFRS and are continuing with GAAP whereas most of the other countries are moving to IFRS? https://www.quora.com/Why-is-the-United-States-Canada-not-adopting-IFRS-and-are-continuing-with-GAAP-whereas-most-of-the-other-countries-are-moving-to-IFRS
2. Felski, E. 2017. How does local adoption of IFRS for those countries that modified IFRS by design, impair comparability with countries that have not adapted IFRS? Journal of International Accounting Research, Vol. 16, No. 3, pp. 59-90. https://aaapubs.org/doi/abs/10.2308/jiar-51807?journalCode=jiar
3. Gupta V.K.,& Patro A.(2012). Adoption of International Financial Reporting Standards (IFRS) in Accounting Curriculum in India-An Empirical Study https://www.sciencedirect.com/science/article/pii/S2212567112000834
4. Li.X.(2017). Harmonising accounting standards across the globe: Ten years after the EU adopted the IFRS, researchers review the evidence of its effects on firms and markets. https://blogs.lse.ac.uk/businessreview/2017/04/05/harmonising-accounting-standards-across-the-globe/
5. Michael S.(2017). IFRS and GAAP Convergence: Why the US Resists International Reporting Standards
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Importance of The Study

This research derives its significance from the significant of the topic which is researches are still conducted on challenges on aspects affecting the adoption of IT needs more depth and diversity, and we are interested through this study to pay part of this gap in addition to the integration of technology Information needs to be informed management and able to use the technology properly. The study will add knowledge to the existing literature, be helpful to the readers, and helpful to understanding about the challenges and the advantages from using IT and showing advantages and weaknesses of using IT and will be great relevance to the companies, and , banks, and organizations, and government, and accountants, and all users of accounting system, and researcher’s, etc.…

INTRODUCTION

There have many utilizes of Information technology in accounting from trading financial instruments to recoding individual budgets to reporting the earnings of a business and expenses, financial firms every day utilized computerized technology. One of the advantages of Information technology lets the fast calculation of financial statistics, other than electronic transfers of money. the accounting profession has improved by the development of technology and enter into the new software’s and applications have made the accountant’s task easier and simpler. this is so essential to learn about the area in today’s contemporary world If you want to prepare yourself for studying the accountancy in a college, passed those times when accountants utilize pens and paper and calculators to balance the books and verify the ledgers are accurate and correct. significance of IT in the decision-making process becomes visible in the instruments, for instance, Enterprise Resources Planning software and decision-support systems that support directors to look at business showing data in actual time so that they be able to make more efficient decisions.

This software provides an accessible and online information panel with information about the business’s funds, clients, liabilities, assets, equities, expenses, revenues and sales, and advertising directions and merchandise. the data be able to use by managers about deciding which products advertise or cut of expenditures and unnecessary costs, and where to remove expenses, when to position the supply and raw material orders and which customers require support. The information revolution is sweeping across our economy. It reflects all companies and organizations no firm can escape its impacts. Dramatic growing in productivity, data processing, and information transmission changes the way we do business. There are several kinds of abilities that a skilled accountant must hold sooner than he want to acquire a position with a famous company. Moreover, he should be educated in accounting procedures and communicating skills, accountants also must utilize processes taught and integrating these processes with computer programs. While there are many professionals that are not very good skills with the latest ERP Systems, all specialists in the area should be able to combine accounting and IT. However, several companies still do their accounting manually, most firms usually have too many transactions to support a not electronic accounting system.

The more complex and greater business activities of industry to guarantee successful financial reporting more expected that you need the information technology for your accounting tasks and business transactions, CAS (computerized accounting system) is the software packages that stored on the computer in the company, network server or remotely accessed through the Internet, employees’ productivity is exponentially improved by business software packages and Computers by providing data entry functions or review reports or invoices and statements. Businesses have automated some conventional processes instead of using human resources to manually.

Generating income or expense accounts by Computerized accounting systems, like rent or sales income, wages, administrate payments, advertising expenses, and raw materials payments. We can also control bank accounts, pay invoices. Depending on the program, a few accounting systems also allow you to prepare tax records, handle payroll, and control project costing. Enterprises are using sophisticated software programs to manage accounting and finance tasks. Certainly, enterprises commonly utilize programs that are synchronized accounting with POS (point of sales) computers and accounting programs, such as that each buy or sale transaction will be automatically taken in an accounting program. Employing technology to operate financial record-keeping and managing and reducing physical processes, supports protect against human mistake.

To meet the requirements of your business You can usually customize the software. It’s very critical to ensure about your team is being trained well, they taught to operate and utilize the whole system perfectly so your business can be successfully utilizing your accounting program, and more be secure.

We can say They are complete each other Technologies that are ever developing and in accordance with the American Institute of CPAs (certified public accountants), everyone who desires to become a certified public accountant must keep up with the new technologies. If you have always wanted to carry out and working in an area that frequently known the “language of business”, now it’s time to begin a college degree. While you don’t need to do the same boring job, gaining some basic skills and sophisticated skills in interpreting financial information is the key. When you are skilled in technology and accountancy and you had a good experience, you will be prepared to look for the opportunities to start your career.

If we are looking at the studies from over the past two decades, we can see the success story of so many businesses depend on several factors. For instance, how accurate your analysis? did you choose a good and appropriate technology? what is your vision for the future and your planning? Enhancing and growth the market share and the financial figures and general competitiveness of those businesses that invested in the technology and pick the innovation route in the information technology providing the opportunity to analyze the data and plan the company’s business appropriately. It’s also provided so many tools which might solve the complex and sophisticated (Afzal, 2015)

Information technology

Sisk (2018) Highlighted that employing of each computer, networking, storing, and other hardware substructure and procedures to produce, process, store, safe and transfer entirely kinds of automated information, IT, so, contains any machine-driven or digital way by which a commercial office gathers, saves, recovers or uses information..

According to (Beal, n.d.) IT is the wide subject involved with all aspects of managing and processing information, especially in a sizable association or firm. IT is Beyond Computers and Networks, Although IT is often employed to define computer networks and computers, IT, in reality, contains all tiers of all the systems within an association from the operating systems to physical hardware, databases, applications, storage, servers and more. Telecommunication technologies, such as the Internet and phones are also a portion of a business information technology substructure.

Accounting – is defining as the process of recording a financial transaction relating to a company. The accounting process consist of summarizing, and analyzing, and submission on these transactions to concern parties like the regulators, and income tax gathering units and the owners and the administration and financial markets, etc. (internal and external). The financial reports employed in the accounting are a brief of financial operations over an accounting cycle, brief a business’s operations, financial status, and cash flows (Tuovila, 2019).

The different explanations and definitions of accounting have presented different accounting experts regularly.

System- System is defined as a set of double or more related and dependent parts work together to reach a target or a particular goal. These parts can be referred to as a subsystem that works a critical function to a supportive part of the bigger system (Qamar, 2016).

Introduction

Accounting is basic of the business and without the accounting; it is not possible to run the business in the effective manner. Accounting determines the rules and regulations that determine the ways to record the financial transaction. In this way, the main aim of this report is to enhance the knowledge and understanding on accounting. This report is also significant in the context of developing an understanding the on the traditional costing system and activity-based costing system. This report also helps to identify the main deference in activity-based costing and traditional costing.

Schedule 1:

Resource Cost Categories and Resource Drivers

Cost category Cost (All Calculations to 4 decimal places)

Wages 74,81,250

Building costs 7,000

Depreciation 13,200

Consumables 590

Energy 10,04,000

Other 129

Total 1,07,96,800

From the overall discussion, it can be determined that the wages 74,81,250 of the firm is and building cost of the firm is that shows that it is high as compared to the all. At the same time, consumable is 590 that are better also. As well as, there are other costs that are occurred due to the energy and some other internal expenses also. In like manner, the total cost of the firm is1,07,96,800 that is occurred after doing calculation of the overall cost and expenses.

Schedule 2:

Cost categories (resource drivers) Wages Building costs Depreciation Consumables Energy Other

Activity centres (employees) (m2) (machine hours) (orders) (kilowatt hours) (employees)

Product Development 30000 3000000 0 100000 200000000 30000

Sales and distribution 130000 7000000 0 100000 120000000 130000

Inspecting 20000 7000000 0 100000 120000000 20000

Blending 330000 1,4000000 53000000 2000000 2700000000 330000

Boiling 330000 1,4000000 66000000 1300000 4000000000 330000

Moulding and packaging 260000 1,4000000 13000000 2000000 2700000000 260000

Administration 130000 7000000 0 200000 100000000 130000

Corporate management 60000 4000000 0 100000 100000000 60000

Total quantity of resource drivers across all activity centres 1290000 7,0000000 132000000 5900000 10040000000 129

From the overall table, it can be determined that there are different categories such as wages, building cost, depreciation, consumables and the energy. At the same time, there are also some categories such as blending, moulding and packaging, product development, sales and distribution, corporate management and many more. The wages are also different from the other also. So, it can be determined that there is the variation in the cost and the difference also.

Schedule 3:

Activities and resource drivers used – Blending

Activity Percentage of labour time Percentage of floor space Percentage of machine hours labour time floor space machine hours

Set up blender 10% 5% 0% 1121855 56092750% 0

Weigh and sort ingredients 10% 5% 0% 1121855 56092750% 0

Load blender 40% 70% 100% 4487420 785298500% 11218550

Operate blender 20% 5% 0% 2243710 56092750% 0

Unload and Clean blender 10% 5% 0% 1121855 56092750% 0

Move to filling room 10% 10% 0% 1121855 112185500% 0

Total 100% 100% 100% 11218550 1121855000% 11218550

This graph is presents the various activities such as inspect filling ingredients, disposal of substandard filling, move to mixing room, and inspect finished products, disposal of substandard product, reports to health dept. At the same time, these activities are calculated in term of parentage of labour, percentage of floor space, percentage of machine hours, energy, consumable and others. From the above finding are it can be stated that the percentage of labour time is 557419.3548 however, floor of space is n 186268.6567. In regards to disposal of substandard filling activity disposal of substandard filling is 185806.4516 and consumables is 6400. The labour of percentage of percentage time is similar for Disposal of substandard filling, Move to mixing room, Disposal of substandard product and Reports to Health Dept. Also, Percentage of floor space is also similar for all of the activities apart from Inspect filling ingredients. In addition consumable are same for disposal of substandard filling and Disposal of substandard product that is 6400.However, estimated energy Disposal of substandard filling and Disposal of substandard product. The table shows that the percentage of machine is equal for Disposal of substandard filling and Disposal of substandard product and it varies for Reports to Health Dept. Also the Consumable estimation is zero (0) for inspect filling ingredients, Move to mixing room and Inspect finished products. Thus, it can be stated that some of the activities are similar for their resource driving indicators and some are varied. Also, the energy and labour time reflect the high number.

Schedule 4:

Activity Activity cost Activity driver Annual quantity of activity driver Cost per Driver

Corporate management $3,47,965 Assigned directly to products

Process receivables $3,86,065 No. of invoices 6,700 invoices $58

Process payables $3,65,837 No. of purchase orders 3,300 purchase orders $111

Production planning $2,13,261 No. of production schedules 1,330 production schedules $160

Reports to Health Dept $31,652 No. of reports 1,330 reports $24

Process sales order $6,16,652 No. of sales orders 5,320 sales orders $116

Dispatch sales order $3,44,601 No. of dispatches 3,300 dispatches $104

Product Development $1,73,983 Assigned directly to new products lines $0

Inspect ingredients $1,34,856 No. of batches 1,330 batches $101

Disposal of substandard ingredients $31,652 No. of batches 1,330 batches $24

Move to mixing room $31,652 No. of batches 1,330 batches $24

Set up blender $36,524 No. of batches 1,330 batches $27

Weigh and sort ingredients $25,468 No. of batches 1,330 batches $19

Load blender $21,556 No. of kilograms 2,66,000 kilograms $0

Operate blender $22,458 No. of batches 1,330 batches $17

Unload and Clean blender $22,42,211 No. of batches 1,330 batches $1,686

Move to filling room $35,455 No. of batches 1,330 batches $27

Set up scales $1,16,491 No. of batches 1,330 batches $88

Weigh ingredients $2,13,032 No. of batches 1,330 batches $160

Load boiling vats $4,26,064 No. of batches 1,330 batches $320

Coagulate, Drain and Scald $19,95,737 No. of kilograms 2,66,000 kilograms $8

Drain and clean vats $2,32,982 No. of batches 1,330 batches $175

Move to moulding room $1,36,441 No. of kilograms 2,66,000 kilograms $1

Load hopper $4,80,063 No. of products 10,64,000 products $0

Set up moulds and packaging $1,72,075 No. of trays 21,280 trays $8

Move to moulder $96,013 No. of trays 21,280 trays $5

Mould products and package $11,88,764 No. of trays 21,280 trays $56

Unload moulder $96,013 No. of trays 21,280 trays $5

Inspect finished products $55,056 No. of trays 21,280 trays $3

Disposal of substandard product $31,652 No. of trays 21,280 trays $1

Move to truck $1,15,963 No. of trays 20,220 Finished trays $6

* All Calculations to 4 decimal places “??” indicates that these figures must be calculated.

The findings of the schedule 4 shows that the activity cost if the corporate management is $3,47,965. Moreover, it is also found that process receivable cost per driver is 58 per unit. The cost of the process payable is calculated is 111 and production planning cost per unit is calculated 16. Report to health depth 24 and process sales order value is calculated 104. Inspect ingredients cost per unit is also calculated by 101 per unit. The value of the Disposal of substandard ingredients is found 31,652 and the number of the annual quantity 1330. At the same time, it is also found that Move to mixing room is recorded by 31652 and the quantity value is 1330 and per unit price 24. Set up blender value is found 36,524 and per unit cost is calculated by 27. Load blender and Operate blender are calculated by 22,458 and 22,42,211 and per unit cost are following 17 and 1,686. In the additional of this, it is also determined that Move to filling room per unit cost is $27 and Set up scales cost is 88.

Schedule 5:

Activities consumed Annual quantity of activity driver

Corporate management $93,882 Assigned directly to products

Process receivables 700 invoices

Process payables 300 purchase orders

Production planning 170 production schedules

Reports to Health Dept 170 reports

Process sales order 670 sales orders

Dispatch sales order 500 dispatches

Product Development $0 Assigned directly to new products lines

Inspect ingredients 170 batches

Disposal of substandard ingredients 170 batches

Move to mixing room 170 batches

Set up blender 170 batches

Weigh and sort ingredients 170 batches

Load blender 53,250 kilograms

Operate blender 170 batches

Unload and Clean blender 170 batches

Move to filling room 170 batches

Set up scales 170 batches

Weigh ingredients 170 batches

Load boiling vats 170 batches

Coagulate, Drain and Scald 53,250 kilograms

Drain and clean vats 170 batches

Move to moulding room 53,250 kilograms

Load hopper 2,12,800 products

Set up moulds and packaging 2,130 trays

Move to moulder 2,130 trays

Mould products and package 2,130 trays

Unload moulder 2,130 trays

Inspect finished products – trays

Disposal of substandard product – trays

Move to truck 2,130 Finished trays

Direct Materials $3 per kilogram

Assigned directly to products

Current Market Selling Price $9 per unit of product

Batch size 1,300

Annual Volume 2,13,000

Schedule 6:

Activities consumed Annual quantity of activity driver

Corporate management $11,460 Assigned directly to products

Process receivables 200 invoices

Process payables 100 purchase orders

Production planning 70 production schedules

Reports to Health Dept 70 reports

Process sales order 200 sales orders

Dispatch sales order 100 dispatches

Product Development $88,348 Assigned directly to new products lines

Inspect ingredients 60 batches

Disposal of substandard ingredients 60 batches

Move to mixing room 60 batches

Set up blender 60 batches

Weigh and sort ingredients 60 batches

Load blender 13,000 kilograms

Operate blender 60 batches

Unload and Clean blender 60 batches

Move to filling room 60 batches

Set up scales 60 batches

Weigh ingredients 60 batches

Load boiling vats 60 batches

Coagulate, Drain and Scald 13,000 kilograms

Drain and clean vats 60 batches

Move to moulding room 13,000 kilograms

Load hopper 26,600 products

Set up moulds and packaging 540 trays

Move to moulder 540 trays

Mould products and package 540 trays

Unload moulder 540 trays

Inspect finished products 540 trays

Disposal of substandard product 540 trays

Move to truck 520 Finished trays

Direct Materials $4 per kilogram

Assigned directly to products

Current Market Selling Price $13 per unit of product

Batch size 500

Annual Volume 26,000

As per the given schedule 6, it is identified that it includes the different activities that were consumed by the firms and annual quantity of activity driver. In this table, it is identified that corporate management assigned $11,460 directly to products. This amount is competitively lower from schedule 5. In addition, product development assigned $88,348 directly to new products lines and direct materials assigned $4 per kilogram directly to products. Current market selling price is $13 per unit of product. In addition to this, it can also be said that process receivables include 200 invoices and process payables include 100 purchase orders in this schedule. The overall annual volume will be 26,000 for this schedule. The process sales order is 200 units in this schedule that are competitively higher than dispatch sales order because it has 100 dispatches. There are 60 batches in the inspect ingredients, disposal of substandard ingredients, set up the blender, move to mix room and weigh and sort ingredients in the consuming activity. In addition to this, there are some other things that also includes 60 batches such as operate a blender, unload and clean blender, move to fill room, set up scales, weigh ingredients and load boiling vats. Moreover, it is seen in schedule 6 that coagulate, drain and scald have 13,000 kilograms as well as a move to molding room also have 13,000 kilograms. The loading hopper includes 26,600 products in the schedule. However, it can be said that the activity based costing is effectively scheduled in the provided table.

Answer 5:

On the basis of the traditional and activity based costing, it is found that there is big difference in the allocation of the overhead cost. At the same time, it is also found that there is different base in the allocation of the cost.

Answer 6:

Computation of Traditional Cost

Particular Traditional Costing Activity Costing Difference

Total Indirect Cost 156000

Total Annual Units produced 26000

Per Unit Indirect Cost 6

Cost For Custard Tart 78000 112563 34563

Cost for Digitalgen 234000 265242 31242

Answer 7

Following are the reason of difference in cost

• Increment in the salary leads to increase in the product cost
• Inflection is also a reason of the increasing the production cost
• Increase in the material cost also increase production cost
• A increase in the electricity cost (Malmi, 2016)

Answer 8 and 9

Traditional costing system and Activity-based costing system

The traditional costing system and activity based costing system both are different. Traditional cost system is simple and activity cost system is complex. In this, it is also found that the traditional cost system is old method of accounting. According to this method, factory overhead are allocated as concerning of the products. In this, basically cost applied on the machine hours and labor hours. In this, it is also asked that overhead cost first related different departments then the products (Chenhall & Moers, 2015). Besides of this, activity cost method is new compared to traditional costing system. In this system, many activities and cost pools are centres are created to reflect difference activities. This cost method is helpful for the large manufacturing companies where it is easy to define the different activities cost separately (Otley, 2016).

The traditional cost system determines an additional part of overhead as compared to direct cost that help to measure the total cost the product. In this system, cost is only allocated for the production and non production cost only. Beside of this, activity cost system is known as the more accurate costing system as compared to traditional costing method (Cooper, 2017).

As increasing the theoretical knowledge and understanding on the traditional costing method and activity based costing system, it can be said that due to nature of the measuring the cost, there is big difference in the costing of given case study (Kaplan & Atkinson, 2015).

From the above points, it can be said that there is one rate for overhead allocation for the complete operations of the business in traditional costing approach. Thus, presence of one rate makes the traditional costing an easier approach for its implementation. On the other hand, there is multiple cost pool in costing in activity based approach which makes it a complex process and also increase its level of implementation. On the positive side, the Activity-based costing is useful to give detailed measures of costs as compared to the traditional costing method. At the same time, this costing method can be useful for the company in giving them a more precise product cost number to assist in forming correct decision with regards to pricing and also towards production for cost information of each activity. This would be effective for identification of cost-causing activities and management of production cost but it will require more effort in its record-keeping.

In addition to above, it is mentioned that traditional accounting includes the average of the several overhead rate in concern of the direct costs which is specifically for the manufacturing products. In this manner, it is also reflected that under this system, the overhead rates are applied on the behalf of the cost driver like the number of labour hours that are required for making the product at initial level. It is proved best for the company at the time of having low overheads of the company as compared to direct costs related to the production. With the help of the traditional cost system, the owner of the company gets the accurate facts and figures in concern of the costs while having the large production volume. At the same time, under the activity based costing system, all the specified overheads operations are connected with the manufacturer of each product.

References

1. Kaplan, R. S., & Atkinson, A. A. (2015). Advanced management accounting. PHI Learning.
2. Cooper, R. (2017). Supply chain development for the lean enterprise: inter-organizational cost management. Routledge.
3. Otley, D. (2016). The contingency theory of management accounting and control: 1980–2014. Management accounting research, 31, 45-62.
4. Chenhall, R. H., & Moers, F. (2015). The role of innovation in the evolution of management accounting and its integration into management control. Accounting, Organizations and Society, 47, 1-13.
5. Malmi, T. (2016). Managerial studies in management accounting: 1990–2014. Management Accounting Research, 31, 31-44.

1.0 Introduction

Accounting fraud happens in a many of ways that includes deliberate acts, including misappropriation or manipulation to financial reports or documents relating to things such as expenses, sales and profits. Accounting misconduct may be perpetrated by staff, accountants or the company itself. An organization may distort its financial reports by exaggerating its revenue or assets, not recording costs and under-recording liabilities. Accounting fraud has taken place during the Industrial Revolution 4.0, as companies are checking things on the Internet in a small way. The accounting scandal in the period of the 4.0 Industrial Revolution is on the rise as more and more technological facilities are available. Nonetheless, technology in the era of Industrial Revolution 4.0 has made it easier for accountants and auditors to detect accounting fraud.

2.0 Identification and Analysis of Issues

Industry Revolution 4.0 launched in 2011 and changes every aspect of government. Others are concerned about potential downsides, such as safety and on how employees will be impacted by new changes. But no matter what the term, the explosion of new technologies has taken place in the last several years. The Sharing economy, Data analytics and Automation can have an effects on how businesses operate and how CPAs perform their jobs. It is therefore important that accountants look at these technological developments, consider the resulting changes and see what part they will play in the new economy that will be developed.

2.1 ENRON Corporation

Accounting fraud has been rampant in the past. One of the biggest issues related to accounting fraud is Enron Corporation. Enron Corporation known as Houston Natural Gas Company that merged with Inter North Incorporated to form a gas pipeline company. In August 2001, CEO of Enron Corporation has received a memo with respect to accounting problems, the company was at risk of developing several accounting scandals. Regarding to the memo, the CEO persuaded the workers of Enron to buy stock because astronomically the value of the company was to increase. It has begun to rely on suspicious accounting practices, including the ‘mark-to-market accounting’ technique, to address these issues. Mark-to-Market’ accounting allowed the corporation to write down unrealized future gains from certain trading deals in current income reports, giving the illusion of higher current profits. However, A month later, Enron reported earnings of $618 million in its third quarter, which resulted in an investigation. As accounting fraud reports emerged, the share price fell from $90 per share in mid-2000 to very little than $1 by the end of November 2001, taking into an account the value of Enron’s 401(k) employee

compensation, largely related to the company’s earnings. The dispute resulted in a wave of new regulations and laws aimed at improving the performance of the funding of publicly traded companies financial reporting. The Sarbanes-Oxley Act (2002), the most critical of these measures, imposed harsh penalties for the destruction, modification or manufacture of financial records.

2.2 1MDB Scandal

1MDB scandal is one of the accounting fraud issue that occurred in Industry Revolution 4.0. 1Malaysia Development Berhad (1MDB) is a tactical technology company founded in February 2009 by former Prime Minister Najib Razak. as a foreign investment vehicle for the country’s long-term economic development. 1MDB invested in the production of energy projects in Arab countries, including Petro Saudi. At the beginning of 2015, media attention was drawn to 1MDB after payments were skipped and banks and bondholders owed $11 billion. 1MDB was investigated in July 2015 for suspected impropriety after investigators traced payments of some US$ 700 million to the personal bank accounts of Najib Razak. In 2016, Swiss and U.S. investigators disclosed purchases made using a 1MDB account. In 2017, US investigators named persons linked to 1MDB, such as former Singaporean banker Yeo Jiawei, Jho Low, Miranda Kerr and Leonardo DiCaprio. The suspected use of 1MDB funds to support the 2013 vote was a major campaign problem in urban areas during the 14th general election in 2018.

3.0 Application of Accounting Knowledge

Forensic accountants as auditors are individuals responsible for handling fraud cases in accounting. They are responsible for investigating how fraud is done based on their accounting knowledge. There is a study that show forensic accountants outclass financial statement auditors in fraud and fraud related case. Below example on how application of accounting fraud that used by some company throughout the year.

3.1 ENRON Corporation

Enron used ‘mark–to–market’ accounting method in its trading business. The company started funding billions of dollars into other business such as online energy trading of stocks and bonds and betting on future prices. This trading business then converted into outstanding contract,

which means a long–term contract that supposed to happen in the future, were sold to investors. One rule of this ‘mark–to market’ method is the company must adjust these unrealized future gains or losses to fair market value into their income statement. Its to assume that the company’s has high profit. The company was able to hide their huge debts from their investors’ knowledge by misrepresenting the earnings. Assets and profits were purposely expanded even some do not exist. After Enron’s investigation and collapse, the Securities and Exchange Commission adopted a statute aimed at preventing any further Enron-like accounting fraud scandals.

3.2 1MDB Scandal

1MDB cases investigation is still ongoing till date. It is believed that more than $4.5 billion dollars was stolen. This huge amount were borrowed via government bonds and transferred into bank accounts in different countries such as Switzerland, Singapore and The United States. A quite suspicious figure had flowed into personal bank account of previous Malaysian prime minister which is Mohammad Najib bin Abdul Razak and it was reported that the amount was used up to pay his politicians, credit card bills and for his wife’s shopping expenditure. However, Mohammad Najib bin Razak denied those allegations by insisting the money was a gift by a Saudi prince. Another important character in this scandal is Malaysian businessman, Jho Low who is literally enjoying a luxurious life with the state fund. This scandal was unmasked when a British journalist was handed over some 227,000 leaked documents containing the details of the fraud in depth. The investigation is still ongoing in order to bring both Jho Low and the stolen money from overseas back to Malaysia.

4.0 Suggestion

4.1 ENRON Corporation

Enron’s train wreck offers crucial lessons for strengthening corporate governance and financial incentives, as well as institutional structures that improve moral accountability. One of the key concept to prevent the Enron Scandal is release of evaluation processes by applying subjective judgement to any generic quantitative performance measures that may be needed by business plans, Designing and applying compensation programs that recognize successes other than economic performance and penalize mistakes is also how to prevent the Enron Scandal. There

have been many incentives at Enron to enormous personal benefit that have diverted top executives from the core duties of preserving organizational credibility and establishing stable relationships with investors and staff to make sure that we can avoid this issue during Industrial Revolution 4.0.

4.2 1MDB Scandal

Anti-corruption Malaysia had to use new application technologies in the 4.0 industrial revolution that can growing accounting fraud. Multilateral Development Banks (MDBs) are one of the systems. Multilateral Development Banks (MDBs) follow suit with a range of innovative software configuration and monitoring tools. Data gathering is used for tendering reviews to monitor policy tenders and to spot red flags, bribery patterns and false information. This event also used data visualization to define corrupt intentions in payouts or purchases. Successful integration of these resources into state e-government and e-procurement systems would not only improve policy making but would also increase transparency by program simplification. Other than that, Big Data application should be apply in the Accounting environment in Malaysia. It has traditionally been challenging to expose the truth Due to a huge amount of data. Nevertheless, digitalism and the emergence of big data also culminated in new data management techniques designed to prevent fraud and abuse in the public sector. Fraud analysis can now predict patterns of possible fraud in areas such as taxes, and organizations have been able to detect, deter and resolve fraud subsequent in billions of potential cost savings through real-time detection.

5.0 Conclusion

Accounting fraud happened since then. Even in this era of the modern revolutionary industry, accounting fraud is rampant. There’s no denying about the Industrial Revolution 4.0 made it easier for accountants to do their jobs. Moreover, there are also unethical accountants who use the 4.0 technology industry to conduct accounting fraud. This accounting fraud is due to human greed no matter who the officer or subordinate is. Therefore, every individual whether an accountant or auditor must be honest and transparent in their work using the industry revolution 4.0 to make their work easier, detect and eliminate accounting fraud. In nutshell, all parties must take their own initiative to reduce fraud to create a harmonious society.

Accounting can apply to many different fields in the business world, so it is a useful degree to obtain. So, what is accounting? In laymen’s terms accounting is the recording of a person or companies finances. Accounting has two main categories: managerial accounting, financial accounting.

Managerial accounting is mainly used for the internal users of a company and often does not require a special degree beyond a bachelors or masters. Financial accounting is for external users so they can make informed decisions about a company. Often to be in financial accounting you need to get a specific certification like the CPA (certified public accountant). Within these two categories there’s many subcategories. The main two that I am personally interested in is forensic accounting and auditing. In order to have a career in one of these fields I would need a CPA.

Achieving a CPA license goes well beyond getting a bachelor’s in accounting. On top of the bachelor’s, an additional 30 credits are required. I will most likely get my masters because it will fulfill that requirement and make me more valuable when looking for a job. Also, FIU has a master’s program for accounting that is only 10 months. While working towards the CPA, work experience is required. That’s something I personally need to focus on since I don’t have much work experience as of now. Another important thing to keep in mind for the CPA is the test itself. The CPA test is 4 sections, each totaling 4 hours each. All the test must be past within a certain amount of time of each other. I feel like time management will play a big role in passing this exam. So, I will be doing practice test and studying well before that exam when the time comes.

Forensic accounting is what interested me the most in the accounting world. When I first started college working for the FBI or CIA always interested me, but I didn’t want to do something dangerous. I have always been good at math and I am very observant, so when I found out about Forensic accounting, I got excited. I know that many companies have a forensic accounting department, but the fact that this may be important in the FBI or CIA was a plus. The only reason I am hesitant with this specific field is the opportunity for growth. I am not sure how much you could work your way up or what my main goal would be. Also, I don’t think the pay is as well as other jobs which is concerning for me because I would like to be able to have options based on how much time I want to work.

Another dream job of mine would be working for a company like Google. I would most likely go into internal auditing for them, but I’m not sure. I never knew what an auditor was until this past year. One of my teachers this semester used to work as an auditor and really enjoyed it, so it made me investigate it a little more. As I mentioned previously, I consider myself very observant, so I think a job where I’m checking over statements and looking for mistakes would be my strong suit. I think I would be more interested in working for a company like Google rather than the FBI or CIA, but I still have time to think about how I want to move forward.

I know a lot of people at FIU are looking at the big four accounting firms but speaking from my point of view I’m not sure how much I’d enjoy that. I feel that the big four is very competitive which makes me nervous. The only reason I’d consider working for one of those companies is the experience and knowledge you gain from working at such a massive company. FIU is very connected to a lot of companies and I’m aware many of them come to our campus to recruit for accounting jobs and internships. If there’s a chance I could work for such a well-established company straight out of college, I think it would make me a lot more valuable in the working world which is a plus. At this point in my life I’m still looking at all my options and deciding which path I want to take. I like how with an accounting degree you could work at a small company with not many hours, making a decent salary, or at a huge company working your way up to a great salary. I feel that I’d have options and could move towards whatever I feel is right at the time, which I am fond of.

The one thing I need to really focus on is experience because I don’t have a lot, and I feel it’s important to have some experience in the accounting field before I graduate. I still have some time, but not very much so I am actively looking for internships that have to do with accounting. Accounting has so many different career opportunities and pathways, and I haven’t researched all of them, so a rotational internship is the most attractive to me currently.

Overall, I am happy that I am in FIU’s accounting program. I have so many supportive classmates and family which is encouraging. At times it can be challenging but, in the end, it will be so rewarding, and I’m just excited to keep learning. Also, accountants will always be needed, and I will always have a job which is the most important thing to me. I feel very fortunate to be going to FIU with the reputation they have with the accounting program, and eager to see what the future has in store for me.