Global convergence of financial reporting of accounting standards aims at coming up with uniform rules to be used internationally. As per Grays model, the connection between the cultural dimensions, accounting values, and financial reporting rules makes it difficult to achieve the global convergence. Because of the connection between the social culture of the local community and the culture of the subculture of the accounting sub-community within the large community, removing differences in financial reporting is negatively affected. The accounting reports have to make sense to the users of the information and to reflect a true and fair view of events within the businesses, and therefore requiring to have an ingredient of the local culture to reflect all activities as they appear. Because of the differences in the cultural practices, the global convergence has become a hard task to accomplish.
The comparability of financial reporting statements is affected when global convergence is not achieved. Financial statements from two countries applying different standards have a different meaning. For examples in a country that ranks high in conservatism, the income may be underestimated than the expenses as compared to one ranks low and, therefore affecting the accurate comparison. For a successful comparison, two statements should follow the same rules and standards in preparation to come up with more accurate and acceptable comparisons. Some of the cultural differences leading to differences in accounting standards may include religious beliefs that may affect the valuation of assets and liabilities. For example, Muslims do not allow borrowing at an interest and this may lead to differences in valuing future assets of a financial institution.
The internal auditors of Cancan Enterprises would face challenges in assessing whether the consolidated financial statements of the company were a true and fair reflection of activities that have taken place. The main reason behind the challenge in executing the internal audit activities is because of the difference in the standards that need to be applied to preparing the statements. The recommendation that the internal audit team would give as the watchdog of ensuring that true and fair statements are prepared becomes also difficult to draft because of the different cultures for the multinational organization. The team would be forced to come up with a standard way of consolidating the statements that may partially violate the internal audit standards in order to ensure a harmonious way that is consisted can be used in consolidation to meet the Canadian GAAPs.
IAS 1 provides the framework for the presentation of the financial statements in an organization. It requires an organization to prepare all financial statements that reflect and true and fair view of the financial activities of the organization. The financial statements required include, comprehensive statement of financial position, comprehensive cash flow statements, comprehensive income statement, a statement of changes in equity, notes to the statement and comparative information about the standards used. The Jardine Matheson group prepares all the financial statements required as per IAS 1. The statements comply with the required standards set. For example, the statement of the financial statement reflects shows the assets, liabilities, and equity as the requirements. Each component of the balance sheet well documents to show the particular components joint to make a certain class such as the assets. The income statement shows the breakdown of the income, expenses, and net comes and how it distributable to the owners and non-controlling interest as per the requirements of the IAS 1. The comprehensive cash flow and the statement of changes in equity meet all the required standards and represent and true and fair reflection of the organization as per the set standards by meeting all the minimum disclosures required. There clear and comprehensive notes to the statements and an explanation of all the standards used to in the preparation of the financial statements. All the assumptions employed are also disclosed as per the requirements of IAS1.
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