TABLE OF CONTENTS

Issue 1: Preparing the consolidate for the multinational company .......................................... 4

Solution .................................................................................................................................. 4
Issue 2: Unclear basis for divergent reporting requirements ................................................... 5
Solution .................................................................................................................................. 5
Issues 3: Lack of control ............................................................................................................... 6
Solution .................................................................................................................................. 6
Issue 4: Dependency ...................................................................................................................... 7
Solution .................................................................................................................................. 7
Critically discuss the current issues in reporting and the proposed solutions.

Issue 1: Preparing the consolidate for the multinational company

The consolidated financial reporting is compulsory to prepare for all multinational companies. The
process of merging all the different entities reporting into one can be very difficult and costly.
However, all the subsidiary companies in different countries that need to be consolidated prepare
their individual financial statements using different accounting standards based on the country
requirement, using different currencies as well as represented in different language. There is no
single universally accepted financial reporting standard. GAAP change from country to other. For
instance, IFRS, SFRS, US GAAP and mas. In additional, not only the regulations on accounting
are different among all countries, and also the legal matters, taxes, etc., vary in almost all countries
of the world, affect accounting and even the profitability of an organization operating in different
geographical regions. And also, the company must be aware of the frequent changes of those
regulation and policies in the country that should be consolidated to don't be on the other side of
the law (Deloitte,2015)
In addition, the financial reports of each entity will be prepared in accordance with the currency
price report of the country in which the company is located, as well as in a different language.
Therefore, the currency price of the subsidiaries' financial statements must be translated into the
parent currency and adjusted to the parent company's accounting standards. The company will also
have difficulty in choosing the appropriate method for translating foreign currency balances into
local currencies. As this affects all aspects of the entity, ie fixed assets, current assets, expenses,
revenues and liabilities, invested capital, loans, etc., the exercise itself comes with its own set of
challenges and takes time (Deloitte, 2015)

Solution
It is recommended that the Global Accounting System be implemented to prepare the financial
statement for multinational corporations. The costs and difficulties imposed on MNCs emphasize
the importance of defining one set of accounting standards and the only universal language. This
global accounting system should be based on a principle that reflects the reality of the economic
substance of the transaction in exchange for the letter of law. In addition, efforts are being made
to eventually integrate the Generally Accepted Accounting Principles (GAAP) and the
International Financial Reporting Standards (IFRS) as these two financial measures are the
dominant groups. Moreover, the need to adopt a global accounting framework is very important
to help foreign investors not only facilitate an understanding of the financial statements of
multinational corporations but also help to prepare financial statements for foreign companies.
It is very important to track changes in regulations and the environment, starting with changes in
legal, economic and political aspects to ensure that the financial statements of a company are
spread across different geographic regions in the correct order (Meneer, Kelly, Goodman, 2017)

Issue 2: Unclear basis for divergent reporting requirements

One of the current issues in reporting is there is always unclear basis for the divergent reporting
requirements. These reporting requirements are legislative difference between different types of
organization and regulated regions. The inconsistent reporting and audit requirements do not
appear to be the results of different risk characteristics, or public interest in the account of entities.
(Spasic et al, 2014) The reporting legislation of government on its own does not often require
accounts to be prepared in accordance to the accounting standards however the treasures are the
one who directs the enforcement of accounting standards, hence different treasurers will come out
with different standard of reporting and different requirements too. The inconsistency of reporting
and audit requirements may cause the confusion to the auditors because some information may be
neglected by the accountants and the auditors may confuse which standard to follow during
auditing process. (Issues in Financial Reporting, n.d)

Solution
With the end goal to give consistency going ahead to maintain a strategic distance from the
expansion of considerably greater multifaceted nature, that the Financial Reporting Council
suggest that the Federal Government makes game plans to build up an online one-stop-shop
revealing necessities entryway, including the mapping record, which traces the conceivable
detailing and affirmation commitments to think about while deciding prerequisites and which
makes proposals for various sorts of substances (counting illustrating levels of announcing), and
possibly cross-references back to current administrative necessities. (Procedure for Reporting
Financial Risk in Islamic Finance, n.d) The financial reporting council should also exercise and
benchmarking the requirements of Malaysia against other jurisdiction such as New Zealand,
Australia, Singapore, the US and Canada in determining the reporting requirements for non-listed
entities and also to further inform the following recommendation.

Issues 3: Lack of control

The second issue of reporting is the lack of control over daily financial reports. The financial
reports often go wrong and many mistakes will be detected during analysing at the end of month
this is because there is no proof checker in charge of double checking financial figures frequently.
When the figures went wrong during reporting, it may lead to the false information and confusing
the auditors. Therefore, crosschecking the financial reports more frequent can avoid the possibility
of error to be happened. (Weakness in Financial Management Internal Controls, n.d)

Solution
To solve this problem, the finance department can reduce the number of surprises and
investigations in end of month if they could view and analyse the financial report on a daily basis
because the error occur can be detected instantly and corrected simultaneously. Besides that, the
manager can assign one assistant in the department to help on checking and ensuring the figures
inserted in the financial reporting system are all correct. By carefully handling the reporting
process, the chance of misreporting can be prevented. The management team, line of business
owners, branch managers and account officers should also be given the access to financial
performance software that can automatically product their bank performance ratios for them.
Therefore, managers need to be concern of the technology advancement of the reporting system.
With better system technologies, the control of the financial reporting can be more efficient and
reducing the errors.
Issue 4: Dependency
Lastly, the issue incurs during reporting also involved key man dependency because the financial
reporting often controlled by the Chief Finance Officer and business controllers. Dependency on
single bunch of people can be extremely problematic because if these persons hopping to the
competitors company, the financial information of the company would be at risk. (Moves to
Manage ‘Key Man Risk’, n.d) Besides that, too dependent on the key persons will also lead to the
convenience of conduct fraud. The authorities of checking and looking into the company overall
financial reporting often granted to the C-Level management especially the Chief Financial Officer
and the other C-Level always busy with their own responsibilities may giving the Chief Financial
Officer to conduct fraud like hiding the real financial condition of the company with changes of
figures on the reports. (Mayston, 1992)

Solution
In order to solve this problem, the company should set up an independent audit department or
outsourcing the audit process to the accountancy firm. These financial reporting should be audited
and proofread at a more frequent basis. The independent audit department can avoid the Chief
Financial Officer to fully control over the audit process because the independent audit department
can direct report to the Chief Executive Officer if fraud was found.
References

 Issues in Financial Reporting.” Corporate Financial Reporting: Theory & Practice Corporate
Financial Reporting: Theory & Practice, pp. 1–17.
 Deloitte. (2015, December). Retrieved from Global Trends in Corporate Governance:
https://www2.deloitte.com/content/dam/Deloitte/in/Documents/risk/Corporate%20Governan
ce/in risk-global-trends-in-corporate-governance-4Dec2015-noexp.pdf
 Mayston, David. “Financial Reporting In The Public Sector And The Demand For
Information.” Financial Accountability and Management, vol. 8, no. 4, 1992, pp. 317–324.
 Meneer, E., Kelley, J & Goodman, A. (2017). Global and Regional Trends in Corporate
Governance. Retrieved from http://www.russellreynolds.com/en/Insights/thought
leadership/Documents/Global%20and%20Regional%20Trends%20in%20Corporate%20Gov
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 Moves to Manage ‘Key-Man Risk’ | Financial Times. www.ft.com/content/f7609528-4c0b-
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 “Procedures for Reporting Financial Risk in Islamic Finance.” Islamic Finance : Instruments
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 Spasić, Dejan, and Ksenija Denčić-Mihajlov. “Transparency of Financial Reporting in Serbia
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 Weakness in Financial Management Internal Controls Chron.com.
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