Accounting

In this article, the author talks about the need for transparency in the organization. The author tells us that there is a need for the organization to be transparent to its clients so that they can have some trust in it. However, the problem is that very few companies are transparent and this means that when some information about the company finally comes out, some clients can no longer trust the company and the flee to other companies that they trust.
The author opens up the article by telling us that external auditors are now being scrutinized as they do not seem to be doing their work in the right way. This is after an energy company was declared bankrupt in December of 2001. The main reason as to why the company was not able to detect and then deal with the problem is due to the existence of some directors who were non- executive. The author tells us that these directors are out of reach and they make decision making and implementation in the company difficult. (The Economist)
Another problem came from the auditors’ tools of trade that is the accounting standards. Auditors seem not to properly utilize the basic accounting principles. Some of the recommendations that are raised to deal with this problem are first by splitting consulting business from the auditing business. This would eliminate the conflict that exists between the two. This is a move that is appraised by the big international auditing firms such as PricewaterhouseCoopers, KPMG and Deloitte. However, some firms felt that auditing firms should be banned from offering consulting services.  (The Economist)
There has been a number of recommendations that has been raised that needs to be implemented so as to ensure that there is effective auditing. There is a suggestion that single universal sets of accounting standards should be adopted. This call for the use of GAAP and this should not be weakened so as to accommodate the foreign companies in the New York Exchange Listing. There is therefore the need to set rules which would ensure that these recommendations are implemented. These rules can be set using two broad approaches. The first one is to define how to deal with all the situations and then to spell out the principles and leave the auditors to decide how to implement them.
Some of the areas where accounting rules is not in effect are the employee share options, in the off-balance sheet activities, in derivatives, intangible assets and revenue recognition. It is possible to manipulate figures in these areas as there are different methods or arguments for doing them. This has also been complicated by the growing use of pro-forma accounting that is non standard especially in high-tech industry. The reason behind this is that some people especially those in the IT believe that this gives a more accurate figure than the GAAP numbers.
The other problems is said to come from the people. That is the quality of the auditors themselves as some of them are not able to attend to accounting duties diligently. The other problem with the people lies in the reading. It is required that all the information be written in the legalese language. This language should be the normal English as it is easy to understand for everyone.
In our corporate world today, there is a need that an organization makes the best decision and implements the best recommendations so that it can remain in operation in these difficult economic times. This calls for proper financial information and activities being conducted. This is the main work of an auditor and therefore, they are the ones who will determine the survival of the organization.
I therefore fell that this article really presents the information that would be useful to any organization and which would help it to realize its goals. The article provides a comprehensive analysis of auditing activities and how one can deal with the various problems that are associated with them. Through following what has been discussed in the article, it is possible for an organization to realize and then correct the mistake that may be there.