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In the wake of the Enron Scandal in 2002, the global landscape of auditing practices radically changed, significantly transforming the UK regulatory system. University of Glasgow research into the high-level financial reporting interactions between UK companies and external auditors has influenced public debate in the House of Lords and prompted several recommendations of the Select Committee on Economic Affairs. It has also contributed to an ongoing Competition Commission investigation into the market concentration of audit companies, and shaped the working practices at Deloitte, one of the Big Four international audit firms, influencing the industry at a global level.
The financial crisis has prompted a public policy debate about the appropriate regulatory framework for financial reporting and audit. Evidence produced by this research on the current regulatory system has informed and influenced this debate in the House of Lords, particularly regarding the respective roles of auditors and audit committees. Furthermore, findings have had a significant impact on the audit procedures of Deloitte, one of the Big Four global audit firms. Their National Audit Technical Partner stated that it had prompted a reconsideration of the timing of their audit processes and the nature of interaction with their audit clients.
Research on International Financial Reporting Standard 8 `Operating segments' (IFRS8), undertaken by academics in the University of Dundee's School of Business, has been used to frame the international debate concerning listed company reporting of disaggregated (segmental) information about business unit and geographic activities. Three bodies involved in regulation and compliance, have drawn on the research to inform their positions and strategies in relation to the standard. Firstly, the IASB's review of IFRS8 was informed by the research. Secondly, the key findings were fed into the Financial Reporting Council's proposals to amend IFRS8. Thirdly, the research underpinned the Institute of Chartered Accountants of Scotland's (ICAS) response to the IASB's request for information on how the standard was being applied, what challenges were encountered and associated costs.
This case study details influence on professional accounting education, practice and policy on a global and national stage. The research team has undertaken a stream of research which has critically examined access to Chartered Accountancy training and subsequent assessment. Internationally, their work has underpinned the policy development of International Federation of Accountants (IFAC) in the education area. Nationally, the work with IFAC has led to further research for the Institute of Chartered Accountants of Scotland (ICAS) who have implemented a number of their recommendations. In this case we will focus on their influence on ICAS' policies for a) the development and assessment of non-technical skills in Chartered Accountants and b) the introduction of a school leaver route into the profession.
The perceptions of key user and auditor constituencies on contemporary issues in audit and assurance may differ radically. The research carried out in this critically important area impacted directly on proposals put forward by the Institute of Chartered Accountants of Scotland (ICAS) on The Future of Assurance (henceforth FoA). Ian Fraser was a member of the ICAS working party which developed FoA. Several research findings impacted on the FoA proposals; key examples include the proposals that assurance should be provided on annual corporate report content other than the financial statements and that audit reports should contain judgemental and entity-specific information. Subsequent to the publication of FoA, ICAS has published a further discussion paper, Balanced and Reasonable (henceforth BaR), which further progresses the public discourse on a key element (namely the provision of positive assurance by the external auditor on management commentary and on the general narrative information in the annual report) both of FoA and of the underlying research.
Impact: Improved awareness and development of professional practice related to the financial accounting of carbon, including: its addition to the Climate Disclosure Standards Board (CDSB) work programme and its designation by the International Accounting Standards Board (IASB) as a priority research project (both during 2012).
Significance and reach: The CDSB is a consortium of eight business/environmental organisations (including the World Economic Forum and the World Resources Institute). The IASB is the independent standard-setting body of the International Financial Reporting Standards Foundation.
Underpinned by: Research into corporate carbon accounting practices, undertaken at the University of Edinburgh (2008 onwards).
This case study focuses on the impact of research studies and their influence on International Financial Reporting Standards (IFRS) carried out by Manchester Business School (MBS). International accounting harmonisation is currently the most topical issue debated in the accountancy world. These studies have attracted the attention of practitioners, e.g. Association of Chartered Certified Accountants (ACCA), and policy makers, e.g. the UK Accounting Standards Board (ASB). The research has informed the policy debate of whether IFRS should be mandated further, and been taken up in the negotiating position of several key bodies. It has been used to justify the continued application of IFRS among UK quoted companies.
Aberdeen public sector accounting research into adopting accruals accounting, the application of international accounting principles and standards, the treatment of privately financed public assets and the basis of Whole of Government Accounts was used extensively by the principal researcher in advisory work for UK and devolved governments, international agencies, professional bodies and regulators. It contributed directly to changes in the way governments budget, manage and report the performance of resource use, to increased stakeholder awareness of public accounting issues nationally and internationally, and to improved public understanding of these complex issues. It mainstreamed accounting research into the public policy process.
Kingston University research into auditing and accounting regulation for small and medium-sized companies influenced the decision by the UK government to increase the size thresholds for these companies to the EU maxima in 2008. Subsequently the mandatory audit thresholds were also increased in 2012, aligning them with the accounting thresholds. This change exempted approximately 36,000 companies from compulsory audit.
The research was also used by regulators in Denmark, Sweden, Norway and Finland to inform their decisions on audit exemption thresholds, and by the UK government in lobbying the European Commission on the regulation of micro-companies.