Question

Choose an emerging country and research the strength of enforcement of financial accounting standards and reporting. Is there a lax attitude towards financial reporting, or weaknesses in the administrative mechanisms for enforcing standards? Is there government support or an inadequate level of organization for the accounting and auditing profession? Is there an effective government or quasi-government agency that monitors compliance of pertinent regulations to discourage widespread violations of extant regulations?

Answer 1

I have selected India as the country as it is considered as one of the fastest growing economies of the world. It has companies like Infosys and Tata which are considered as corporate giants. These companies have offices throughout the world. Similarly, many foreign companies have established their operations/offices in India. All the companies operating in India are required to comply with the provisions of companies act. They are also required to prepare their financial statements and get them audited as per the applicable rules and regulations. It is important to note that big 4 auditing firms have their offices in India as well. Various professional bodies (responsible for ensuring compliance) have been established by the government. The professional body of chartered accountants (The Institute of Chartered Accountants of India) is responsible for formulation and providing guidance on the implementation of accounting standards. Further, financial accounting records and statements are required to be audited by chartered accountants. Similarly, cost accounting records are audited by cost accountants. Public limited companies are required to declare their results on a quarterly basis and also on an annual basis. Private companies, on the other hand can submit results annually with the relevant authority. While there appears to be no laxity in the attitude towards financial reporting, or weaknesses in the administrative mechanisms for enforcing standards, some companies have always been found to violate the regulations established by different authorities. Such violations may include misrepresentation in financial statements, tax evasion, financial frauds, money laundering activities, etc. To deal with such issues, government has various agencies such as Enforcement Directorate (ED) and Securities and Exchange Board of India (SEBI). These agencies can filed criminal cases take appropriate action against the perpetrators.