How Business Accounting Has Changed Over the Last 20 Years

accounting changed

Business accounting has changed significantly throughout the last decade, especially in the areas of standardization and regulation. All businesses should adhere to the Generally Accepted Accounting Principles (GAAP), a framework that includes the conventions, standards and rules that all accountants and bookkeepers are required to adhere to. This framework controls the recording, summarizing and preparing of all financial statements, which are the very basis for business accounting. In the last twenty years, there have been significant movements towards an overall international standardization, which has enabled improved financial communication between international companies and allowed accountants to easily transition between companies.

More regulation

The accounting industry has become more highly regulated, which has led to an increase in audits and audit staff. This change was largely implemented via the Sarbanes-Oxley Act of 2002, which promoted the necessity of auditing and accountability to protect investors in companies. This act was the direct result of several scandals which included WorldCom, Tyco and Enron. Tax regulations have also changed every few years throughout the last couple of decades, to suit a changing political climate as well as different social needs.

The full impact of the Dodd-Frank Act has not yet been felt, but can be anticipated. The Dodd-Frank Wall Street Reform and Consumer Protection Act was created in the wake of one of the largest financial disasters in U.S. history. It is intended to decrease the amount of risk that is inherent in the financial system, and also requires some additional regulation of the accounting industry.

Outsourcing accounting
More than ever before, this industry has also felt the impact of outsourcing. Many companies today are outsourcing to other countries, and this has been felt throughout both big and small domestic firms. Accounting has been outsourced primarily through India and the Philippines, where it can be done for extremely affordable prices. This increase in outsourcing has had a few consequences: accounting firms have needed to lower their costs, and they have also needed to work directly with international accounting firms.

Throughout all these changes, there have also been changes in the way that new accountants learn about business accounting. For instance, many are required to obtain an accounting degree. The Certified Public Accountant exam has also changed substantially in recent years to include more practical information, which in turn has led to more qualified applicants that understand the intricacies of the new systems for business regulation, auditing and general practices.

Increased computerization
All of this only covers the changes that have been made in accounting theory and practice. Perhaps the largest and most significant change in business accounting has been the introduction of comprehensive computer systems into the field. Not only do computer systems enable bookkeepers to manage a larger quantity of accounts at once, but it has automated many of the processes. Today, almost half of the training that an accountant will go through will involve the unique software systems that they need to use throughout their job. These systems have made it much easier to maintain an accounting ledger but more difficult to ensure its overall consistency. This means that auditors and forensic accountants have become more important than ever.

Universal international standards
While business accounting has changed significantly over the years, still more changes may be on the horizon. The government has taken some movements to eliminate GAAP entirely in favor of more universal, international standards. This may become a reality within the next decade. It’s likely that computers will continue to become more prevalent, and that the focus will continue to shift more on the verifying and auditing of information rather than the actual collecting and maintaining of it. Globalization will further encourage international standards and practices, and reporting regulations are likely to continue shifting from year to year. Business accounting isn’t likely to change completely, however, and it’s very unlikely that extremely drastic changes will be seen to the core mechanisms within the industry.

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