W3

Discussion # 1

Find a minimum of two peer-reviewed publications about managerial accounting that you can relate to your research paper topic. Briefly summarize each article plus have a sentence or two as to how the article topic and/or concepts do or could impact your research paper topic. Attach copies of the articles that you use for this discussion. One place to look for publications is IMANET.org plus the Big 4 CPA firms websites can be good sources of peer-reviewed publications.  You can use articles that you included in your Week 2 Assignment.

Comment # 1

Managerial accounting deals with information that is necessary for decision making in businesses. The two publications I found, address the impact of tax reforms on managerial decisions of U.S. companies. The first one titled, Post-tax reform, US companies plan to pour tax savings into growth, provides de results of a survey carried out by PwC (PricewaterhouseCoopers) though an online poll of C-Suite executives in the U.S. in 2018. The provisions of the Tax Cuts and Jobs Act (TJCA) are expected to provide companies with a significant reduction of taxes and many companies are planning how they will use those tax savings to improve different aspects. It was found that 89% of the executives believe that the tax savings from this tax reform would have an impact on their businesses (Caglar et al., 2018). Over 70% of the executives also expressed that the tax reform allowed them to make strategic investments that they would have not made before and that it made their companies more competitive (Caglar et al., 2018). The executives plan to spend the tax saving in many different aspects of the company, the most significant being paying off debt, research and development, long-term strategies, hiring, and raising wages (Caglar et al., 2018).

The second publication titled, Why tax reform gives US firms more cash flexibility, also addresses the effects of tax savings and other incentives of the tax reform on companies’ spending. The effects of the reduction on corporate tax rates on investment by local and foreign companies are addressed. A survey conducted by EY (Ernst & Young) to 500 C-suite level executives revealed that 75% of the respondents were likely to use tax savings to expand their manufacturing in the US and 47% to use the savings for research and development (Barton, 2018). It was also discussed that some provisions such as the deduction of 100% of certain capital expenditures will influence companies’ decisions to move forward with projects, capital investments, and acquisitions (Barton, 2018).

These two articles provide insight into the plans and considerations of managers and executives of companies that can result from changes in the tax law and tax reforms. Tax reforms can have an effect on multiple aspects of businesses and is an important topic of consideration for managers in making decisions and for both short-term and long-term planning and budgeting. These articles reveal how tax reform is considered from a managerial accounting perspective and how its effect on decisions and planning can ultimately have an effect on businesses.

Comment #2

I selected two articles about managerial accounting from Strategic Finance Magazine of IMA:

1. “New global standard for disclosure of illegal acts” by Curtis C. Verschoor, CPA, CMA;

2. “Wells Fargo scandal continues” by Curtis C. Verschoor, CPA, CMA.

The first article “New global standard for disclosure of illegal acts” informs that the International Ethics Standards Board for Accountants (IESBA) expands its guidelines to address illegal activity in the interest of motivating more ethical behavior (Verschoor, 2016, para. 1). IESBA guidance applies to both professional accountants in public practice and those in business. IESBA is an entity of the International Federation of Accountants (IFAC). Institute of Management Accountants (IMA) is an IFAC member. “IFAC has judged the provisions of the IMA Statement to be substantially equivalent in all material respects to the provisions of the IESBA Code” (Verschoor, 2016, para. 5).

The goal of the new standard is to guide on appropriate courses of action in the case of actual or suspected NOCLAR. Also, the new standard contains two objectives for senior-level professional accountants in business. “First, they should help management set the proper ethical tone at the top of the organization, and, second, they should work to establish appropriate policies and procedures to prevent NOCLAR from occurring” (Verschoor, 2016, para. 9).

The second article “Wells Fargo scandal continues” informs that “on August 31, 2017, Wells Fargo announced that the number of fraudulent checking or other accounts opened without customer approval or authorization was 3.5 million, a two-thirds increase from the 2.1 million reported last year” (Verschoor, 2017, para. 1). The blame was put on lower-level employees that were eventually fired. The two questions arise from this situation: why the bank did not disclose this problem, and why external auditors did not address this fraud.

Wells Fargo senior financial managers may not have complied with some of the IMA Statement of Ethical Professional Practice. They did not disclose the nature of fraud and blame lower-level employees violated standards. By these actions, the managers put the company's reputation at risk.  

KPMG, the external auditor of Wells Fargo for over 85 years, “stated to the Senate committee that it did become aware, as early as 2013” (Verschoor, 2017, para. 7). However, the company assured the auditors that “not every illegal act has a meaningful impact on a company’s financial statements or its system of internal controls over financial reporting” (Verschoor, 2017, para. 7). And each year, the auditor had given an unqualified opinion because of relying on auditing standards that focus exclusively on determining whether the financial statements contain material misstatements.

The two articles described above directly related to the selected research topic because they involved elements and situations associated with the ethical decisions regarding NOCLAR. Also, auditors and accounting managers as other professional accountants have to follow the global Code of Ethics issued by IESBA.

Discussion #2

Find a minimum of two peer-reviewed publications about international accounting that you can relate to your research paper topic. Briefly summarize each publication plus have a sentence or two as to how the article topic and/or concepts do or could impact your research paper topic. Attach copies of the publications that you use for this discussion. You can use articles that you included in your Week 2 Assignment if they related to international accounting aspects of your topic.

Nearly every discipline and/or area of interest has an association. For all aspects of accounting, the American Institute of Certified Public Accountants (AICPA) website is an excellent source and it is highly recommended that you join this organization while you are a student as the cost of joining is much higher after you cease to be a student. The Big 4 CPA firms websites are excellent sources of current peer-reviewed publications regarding all aspects of accounting.

The International Accounting Standards Boards (IASB) is a source of peer-reviewed publications regarding international accounting.

Comment #1

The first publication I found titled, US tax reform creates challenges for IFRS preparers, presents the effects of the Tax Cuts and Jobs Act on financial statements and challenges faced by companies that prepare financial statements according to International Financial Reporting Standards. It is explained that challenges arise with the accounting of deferred taxes due to the change in corporate tax rates (Bogle, 2018). The article continues to mention other challenging provisions that can affect IFRS preparers such as changes in the net operating loss carryforwards, executive compensation limitations, global intangible low-taxed income tax, base erosion anti-abuse tax (Bogle, 2018). These changes might affect the procedures used to record operating losses and how share-based compensation is arranged (Bogle, 2018). Another important provision that will significantly affect U.S. companies with foreign subsidiaries is the tax on mandatory repatriation as it could be challenging to calculate the tax liability resulting from this change (Bogle, 2018). The effect of this provision will be more significant for those companies with large non-US subsidiaries (Bogle, 2018). Many estimates will be required to be made by IFRS preparers to account for the effects of this tax reform.

The second publication titled, Tax reforms in the United States: implications for international investment, addresses the effects of the Tax Cuts and Jobs Act on multinational enterprises and foreign affiliates. It is stated that almost 50% of global foreign direct investment stock is affected by the tax reforms (UNCTAD, 2018, p.1). The effects of the tax reform on the investment climate in the U.S include an increase in the attractiveness of the U.S for investment, reduction in investment costs, and a reduction in debt financing and intra-firm loan (UNCTAD, 2018). Another important provision that affects multinational enterprises is the 100% deductibility of received foreign dividends by companies (UNCTAD, 2018). It is also explained that many provisions of the tax reform are aimed to persuade companies to bring assets and activities back to the U.S such as the reduction in corporate taxes, the tax on global intangible low-taxed income, and foreign-derived intangible income deductions (UNCTAD, 2018). All these changes in tax provisions that affect foreign operations of U.S companies will result in the need for changes in the accounting of transactions with foreign subsidiaries.

These two articles provide insights into the effects of tax reforms on the accounting and operation of companies that currently trade internationally. The changes in tax provisions need to be accounted for by companies that prepare financial statements following both U.S. GAAP and IFRS. Since a significant number of the tax provisions of the TCJA are aimed at attracting foreign investments, this reform is expected to have a significant effect on businesses that operate internationally

Comment # 2

I selected two articles about international accounting that related to my research topic:

1. “Reporting illegal acts externally” by By Kurt Pany and Jian Zhang;

2. “AICPA Proposal Raises the Ethical Bar: Incorporating International Standards into the Code of Professional Conduct” Cathy Allen, CPA, and Lisa Snyder, CPA, CGMA.

The first article “Reporting illegal acts externally” describes details of an exposure draft issued in Agust 2012 by the International Ethics Standards Board for Accountants (IESBA) “that attempted to resolve the conflict in favor of the public interest by outlining a situation in which an auditor who suspected an illegal act would be required to report it to an appropriate authority” (Pany & Zhang, 2013, pp. 64-65). The exposure draft with the description of an illegal act is consistent with both US and international auditing standards.

The draft elucidates the steps the auditors will take if they suspect illegal acts. It also includes the determination of suspected illegal act for further decision for appropriate disclosure such acts either by the client or by the auditor. The draft also explains the possible advantages and disadvantages of the changes issued by the IESBA, and their impact on the US and international reporting requirements.  

The second article “AICPA Proposal Raises the Ethical Bar: Incorporating International Standards into the Code of Professional Conduct” describes the scope and objectives of the IESBA standard, and illustrates the steps in the NOCLAR framework with case studies. “It emphasizes the significant differences between the IESBA standard and the AICPAproposed standard when applicable. Otherwise, one may assume that the IESBA standard and AICPA proposal are substantially similar” (Allen & Snyder, 2017, p. 1).

The IESBA has provided a framework to help professional accountants navigate “the IESBA Code of Ethics for Professional Accountants— especially the conflict between communicating non-compliance to the right people and keeping the client or employer's information private—when learning of illegal acts within the scope of the new standard” (Allen & Snyder, 2017, p. 1).

The two selected articles directly associated with my research topic because they both contain explanations of how to act in case if accounting professionals suspect illegal acts. The last article “AICPA proposal raises the ethical bar: Incorporating international standards into the code of professional conduct: Certified public accountant” provided case studies with the situations that any accountants including auditors can face the dilemma regarding reporting about NOCLAR and complying with the Code of Ethics.