External Auditing: A Case Study

Introduction

Accounting is the process of measuring, analyzing and communicating of financial information of an economic entity. The process is affected by variety of factors. Apart from accounting standards and legal regulations, the external factors, the culture, the internal factors, also plays an important role in affecting the process of accounting.

Accounting practices changes within a country in order to meet the needs of their own need. Therefore, different countries will have different accounting regulations. (Oluku & Ojeka, 2011) Even nowadays, the implementation of IFRS around the world still cannot replace the difference of standards around the world. The major difference between accounting standards across the world is due to

Uniformity versus flexibility: Preference of uniform or flexible practice

3. Conservatism versus Optimism: Preference of cautious or risk-taking approach in handling uncertainty

4. Secrecy versus transparency: Level of confidentiality of information

Purpose of this essay

The purpose is to study how the culture affects the accounting process, including financial accounting report, internal audits and external audits, using each of the four area of culture identified by Gray and explained the reasons with the help of Hofstede's culture classification. A case of Cancan will be used to explain how the culture affects a company’s internal auditing treatment.

Culture and financial reporting Culture of courses, can affect financial reporting seriously. It is not just affecting how accountants view an issue but also the government, by means of how to regulate accounting practices.

1. Professionalism In China, power distance is large. Since most of the population is not well educated, they consider the government as the helper of their living. The culture of government significantly controlling all aspects of society causes the financial reporting more statutory control. Also, most of the large enterprises are stately owned. Therefore, financial statements are compiled according to the needs of the government but not for

It is a way to improve a company’s corporate governance, risk management and management controls by analysing data and business processes. It also provides hits to board of directors and senior management on how to manage a company.

1. Professionalism

Individualism is better for internal auditing professional development. (Sarens & Abdolmohammadi, 2009) Internal auditors are supposed to be more independent, even they are not truly independent, due to they are employed by the company but audit that company. Yet, they don’t need to think of any relationship of each other. They are more critical and try to step into higher position to make investigation.

2. Uniformity

Power distance is positive towards the uniformity. (Sarens & Abdolmohammadi, 2009) In countries that have high power distance, such as Japan and Saudi, the senior staff need to be respected. To show that they are respected, a uniformity regulation is set to enable the managers to schedule their time in handling auditing staff and understand what they are doing