Two Tacos at 2 AM

I'm enjoying a nap on a hot day during my freshman year of college. Suddenly, I feel a nudge on my shoulder. I look up, right into my roommate's face and I watch her mouth moving as clueless as a newborn baiji river dolphin. My ears are slow to wake, "what is she saying?" and "why the hell did she wake me up?" I wonder . Just around the second my hearing recovers, she repeats herself "Don't you have an exam?" I look at the neon-orange figures on my alarm clock behind my head. It's 11:37am. Oh my fucking god. I do. "Why didn't she wake me earlier?" 

My physical geography exam was scheduled for 11.30am. I realize I have no time to panic or to be angry, in fact all I have is hope and my two feet. Already clothed in my pyjamas , I put on my stripped Keds and run as fast as I could out of my dorm and towards the lecture hall . Inconveniently, the hall is the furthest building from my dorm, but I manage to get to the door. I burst into the quiet lecture hall, all out of breath and panting noticeably. A number of students turn their heads to have a furious look at the me, the pitiful distraction in pyjamas. I awkwardly make my way down the stairs and beg the professor for an exam paper in a whimper. He looks at his watch, and then back at me "I am sorry, you are 10 mins late, there is nothing I can do". I feel my heart sink and my eyes full of water. I couldn't do it there, I pack up my hope and run back to my room in tears.

My roommate was at her desk eating some Maruchan instant cup noodles and listening to K-pop ,while I was thinking of ways to strangle her without alerting the neighbours. Immediately, a quote from Dale Carnegie emerges into my thought "Calmly devote your time and energy to trying to improve upon the worst, that could possibly happen as a result of this failure, which you have already accepted mentally". I pick up my folder and pull out my syllabus, it reads "There will be four exams plus the final exam" AND "You may drop the lowest grade of the first four exams." This is a relief and I am able to think calmly but I still want my lowest grade to be the previous exam and not a zero. I had studied really hard for this exam. As I am about to put the syllabus away, my eyes lurk towards the top of the of the paper which reads "Section 300 in Lecture Hall 2 Time: 2:30 - 3:45 pm". I am still in tears but now I am full of disbelief and joy, there is a second session in a couple of hours.

I message my friend, who is in the second session, to verify if she has an exam today. Bingo! She does! I arrive at the lecture hall several hours before the exam. When students start flowing in, I immerse myself into the center of the crowd and follow diligently. I choose a seat at the upper-left of the class as I figure it would garner the least attention. I silently, pray that the professor wouldn't notice that I am the dimwit who was late to the exam. He starts handing out the exam, and I panic as he approaches me. He looks at me and he says something , I can't quite make out what he says but I start to freak out. I look helplessly into his stern face. "Can you pass these papers down?" he says. "Oh" I look beside me and a student is impatiently waiting on me to receive his exam papers "right". The exam began.

I am not even a fan of tacos, those silly hard shell never seem to stay together. But as a result of my post-traumatic sleep disorder, it is 2am and I am just having some tacos. Legend has it that deep in the fall of the year twenty hundred and ten, a terrible event had occurred. This event possessed the power to reshape the world right through her brown eyes. And so it began that every period the treacherous exams were declared, the nights became her day, the days became her night and the sleep she knew no more.

Sarbanes-Oxley Act: A Necessary Evil

The Sarbanes-Oxley Act was introduced in July, 2002 as a reaction to the internet bubble, auditing failure of Arthur Andersen and a number of major accounting scandals such as Enron, and Worldcom in order to restore the confidence of domestic and foreign investors by improving the accuracy and reliability of corporate disclosures. The bill, supported by all senators with the exception of the abstaining Jesse Alexander Helms, Jr (Senate. Gov, 2002), detailed additional responsibilities and accountability of a public corporation’s board of directors, increased the severity of penalties for fraud and misconduct, and enabled the SEC to enforce stricter regulations and introduce the Public Company Accounting Oversight Board (PCOAB) to ensure the independence and compliance of auditing firms.

The economic consequences of the introduction of the act such as increased compliance cost (Eldridge et al 2004), de-registration and re-privatization of listed US companies (Engel et al 2007), increased auditing fees, loss of business focus and the increased political and regulatory implications has exposed the Act to large criticism and condemnation. Some of these arguments include the existence of markets for corporate takeover and managers (Jensen, 1986). They are stipulated to work by incentivizing the efficacy of corporate governance rules, and facilitate greater accountability of directors to their investors. In addition the market for lemons (Akerlof,1970), assume that the market would punish those corporations that withdraw financial disclosures. Another argument is the classic free-rider problem that ensues due to the availability of a public good (Baumo,1952), this might lead to oversupply of information as consumers do not bear the cost. In addition, the market is viewed as efficient (Fama, 1969) therefore the invisible hand (Smith, 1776) is assumed to ensure that optimal provision of accounting information is attained through supply and demand. Finally, the introduction of the Sarbanes-Oxley act is thought to limit companies from choosing the most representative accounting methods for their operations

Other researches tend to view the act as a necessity, they debunk the possibility of an oversupply of accounting information as free markets historically tend to provide suboptimal information (Beales et al 1988). Furthermore, free-markets tend to support those with resource power at the expense of the vulnerable. The argument that the market is efficient on average ignores the right of those that may lose everything and those vulnerable to fraudulent organizations. Lastly, the Sarbanes-Oxley act enhances uniformity and comparability of accounting information.

The benefits of the Act to individual investors and corporations is difficult to accurately quantify due to their indirect and preventive nature however, studies from Butler/Ribstein (2006) assert that investors could diversify their stock investments, efficiently managing the risk of a few catastrophic corporate failures, whether due to fraud or competition and when each company is required to spend a significant amount of money and resources on SOX compliance, this cost is borne across all publicly traded companies and therefore cannot be diversified away by the investor. A number of senators have expressed that the at SOX was an unnecessary and costly government intrusion into corporate management that places U.S. corporations at a competitive disadvantage with foreign firms, driving businesses out of the United States (Paul & Huckabee , 2005) . It can however be expected that the constant revision of SEC and PCAOB requirements and technological improvement would drive down the compliance cost and the corresponding reduction in cost of equity across the capital market would justify the enactment of the act.

Evaluating IFRS Plans for Global Standardization

The long-run goal of the IFRS is to standardize accounting practice across the countries of the world. According to IFRS , their objective is "to develop a single set of high quality, understandable, enforceable and globally accepted financial reporting standards based upon clearly articulated principles" (IFRS, 2015). This is based on the one-size fits all principle and rigidity that standardization of accounting practice embodies. Harmonization on the other hand, seeks to set limits on how large the accounting practices between countries may vary in order to accommodate the national influences that shape each nations accounting process.

Harmonization of accounting standards may support a reduction in information asymmetry that international investors typically face, better analyst forecast and coverage (Pae et al 2007), an increase in capital flows, global comparability of financial statements and improved transparency leading to reduced cost of capital globally (Barth et al 2009). However, this does not come without huge implementation costs, rent extraction activities (Hope et al 2006) and loss of diversity in domestic accounting shaped by value dimensions.

The interrelation of the four value dimensions, shapes the differences in culture, religion, business ownership and financing systems that influence the information needs of investors in countries and hence the differences in accounting practices adopted (Deegan, 2000). The four value dimensions considered are power distance (equality vs inequality), gender equality(masculinity vs feminity), uncertainty avoidance (risk adverse or risk loving) and social integration (individuality vs collectivism) (Hosfsede, 1983). This was adopted into accounting research by Gray (1988) into four similar value system's professionalism versus statutory control, uniformity versus flexibility, conservatism versus optimism and secrecy versus transparency. The value dimensions are particularly effective in highlighting why certain accounting methods would be chosen over others in different countries (Ball and Brown, 1968)

These value dimensions translate into barriers to harmonization. A main barrier to harmonization of accounting standards are the differences in the taxation system between Anglo-American nations and Continental Europe nations, for example, in Germany companies are influenced by the principle of Massgeblichkeit which dictates that taxable income is the main purpose of accounting, meanwhile the United States and the UK have no similar principle this leads to significant differences in accounting for profits (Nobes, 2006). Another main barrier is differences in the political and legal system, countries can be categorized into Roman law countries and Common law countries. Roman law countries (Germany, France) are dominated by accounting practices based on government-run accounting regulations and codified laws while, common law countries (US, UK) emphasize the concepts of "reasonable man" and "true and fair value" with limited amount of government control (Pagell, 1994). Furthermore, differences in economic system affect the possibility of true harmonization, for example the US reporting entities usually become public traded companies in order to raise capital,  whereas German entities, mostly derive funding from banks, family and government, as a result accounting information tends to be of a nature to protect the interest of creditors and differs from US accounting information which tends to protect the interest of institutional and individual investors (Deegan, 2000).

Unlinked to value dimensions, but equally important are the varying implementation and enforcement of the standards that occur across countries that adopt IFRS. The IASB is a standard setter and does not have an enforcement mechanism for its standards. This leads to developing countries such as Nigeria with lax accounting, low liquidity, insider dealings and share price manipulation (Pagell, 1994) adopting IFRS, in name, due to the reputation attached to IFRS while failing to fully implement the standards. This leads to countries with developed accounting standards such as the US GAAP questioning the value of global standardization, such doubts are further compounded by the uncertainty of IASB's future financial stability.

IFRS must first adopt the appearance of harmonization before the transition to reach global standardization of accounting practices.The possibility of international harmonization is constrained on the standards set being flexible and favorable to those regulated, however this reduces the possiblity of realizing the benefits of harmanization. For example, IFRS 7 designed to improve the transparency of off balance sheet securitisations and similar transfer transaction (IFRS, 2015) has proved to be quite lax in enhancing comparability between firms that employ window dressing and offsetting of derivative contract tactics to those that do not. Given the highly political nature of IFRS and the private economic interest of western countries in play,  adopters should be skeptical about the promises of high quality standards under the IFRS conceptual framework.