The finance and accounting professions were undergoing a sea change in the early 2000s. New regulatory demands stemming from accounting scandals like Enron and WorldCom, combined with tech innovations, were changing what was expected of finance and accounting professionals.
But the early 2000s was also an era of globalization and rapid advances in communication technology (can you say high-speed internet?). Business was becoming more interconnected and transnational, which meant that finance and accounting needed to go international too.
The creation of the Global Accounting Alliance in 2005 was a formal acknowledgment of what many in the profession had known for some time: There was a clear benefit to information-sharing in a profession that had already gone global.
As Chartered Accountants Australia and New Zealand, one of GAA’s founding members, explains on its website, the organization was formed to “bring together leading professional accounting bodies in major world markets in response to the emerging challenges of globalisation.”
Its primary objective was information-sharing and collaboration, according to Jim Knafo, CEO of GAA and director of global alliances at AICPA & CIMA.
“There was a consensus view that the accounting profession is very international—it was already at that point, and it was going to become even more so,” Knafo told CFO Brew
How we got here. What precipitated the globalization of the accounting profession? To answer this, CFO Brew went back to school. According to the textbook International Accounting, authored by Shirin Rathore, it was the rise of multinational corporations.
Many members of AICPA and its counterparts in other countries around the time of GAA’s formation were part of multinational corporations, Knafo explained.
“We’ve got major international accounting firm networks and associations springing up to serve their clients, which were multinational corporations,” he said, “and the members of these professional accountancy organizations…were both employed and working in these multinational corporations in their finance teams, and also assuring them, consulting, advising, providing all those additional ancillary services on the outside.”
International trade between companies, or even moving resources from one branch of a multinational company to another overseas, presented complex issues, according to Rathore. Companies found themselves, for instance, needing to reconcile fluctuations in exchange rates between the day a transaction takes place and when a payment is actually received. There are also “differences in legal, social, cultural, and economic environments” to consider, Rathore wrote.
Knafo pointed to two key developments in previous decades that led to the “internationalization of the accountancy profession. The first was in 1973,” which marked the formation of the International Accounting Standards Committee—the group eventually became the International Accounting Standards Board in 2001. The second event occurred just a few years later, in 1977, with the birth of the International Federation of Accountants.
“Those two things together gave rise to more and more leaders from the professional accountancy organizations getting together as the profession was becoming more international,” Knafo said.
Shortly thereafter, the AICPA and its counterpart in the United Kingdom began meeting annually, according to Knafo, “just to have informal conversations.” The two added more associations to the club, and that’s how the world ended up with the GAA in 2005.
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The European Union adopted the International Financial Reporting Standards in 2002, and the standards went into effect in 2005, Martin Farrar, associate technical director at AICPA & CIMA, told CFO Brew. “So that could have been a catalyst,” he said.
Another thing happening around this time, Farrar noted, was an effort by Prince Charles (now King Charles) to have accountants think more about sustainability. This effort could’ve been another influencer for the GAA, he said. Prince Charles formed Accounting for Sustainability in 2004 and held a forum four years later.
In 2008, the Journal of Accountancy wrote that Prince Charles formed the group to “research and develop systems to help public- and private-sector organizations account more accurately for the wider social and environmental costs of their activities.”
“Prince Charles would have been working very closely with CEOs of accounting bodies to press them to come together to help with the sustainability issue,” Farrar said. “And he was quite a drawing force of bringing people together to discuss global solutions.”
Outlining the issues. It was clear early on what type of perspective GAA would take on cross-border accounting issues.
A 2008 report penned by GAA focused on “the twin subjects of principles and complexity in financial reporting,” which the group wrote was “a timely contribution to worldwide developments.”
In the report, GAA connected the dots to what was going on in multiple corners of the globe. The SEC had announced a “proposed road map” for adopting international financial reporting standards. Both the UK Financial Reporting Council and an SEC committee had “been considering the complexity of financial statements.” GAA proclaimed its role as “assisting in the debate on these issues with all stakeholders in the financial reporting community.”
“We’re always focused on advocacy at the international levels for the improvement or improved regulation of the accountancy profession,” Knafo said.
Fast forward. Today the GAA has its sights set on modern international issues. (Were finance folks thinking much about artificial intelligence in the early 21st Century? They sure are now.)
“We’re dealing with sustainability both on the reporting and the assurance side,” Knafo said. “We’re focusing on…AI and the impact of that on the profession. And we have regular conversations and meetings with international regulators, so we want to know what’s on their mind.”
GAA also keeps tabs on the efficiency of capital markets, since accountants have a role to play “to keep those working as well as they need to work,” Knafo added.
And of course, there’s the accounting pipeline—the future of the profession—to monitor. The shortage of upcoming accounting professionals is a concern globally, he said.
In short, there’s no shortage of issues for GAA to tackle now and into the future.
This is one of the stories of our Quarter Century Project, which highlights the various ways industry has changed over the last 25 years. Check back each month for new pieces in this series and explore our timeline featuring the ongoing series.
