As firms and governing bodies roll out regulatory changes in accounting, strengthening financial resilience takes on a whole new level of importance in today’s fragile landscape.
The economic recovery remains bleak at the moment. Different regions around the world are finding ways to strengthen their financial resilience until recuperation gains its momentum.
Regulatory compliance in accounting
Regulatory compliance happens when an entity strictly adheres to the state, federal, and international legislation relevant to their operations. Depending on their size and the industry they fall under, companies can be subject to business and tax code, fiscal, or environmental regulations. But why do financial services notches the top among the sectors most impacted by these regulatory laws?
The financial landscape is one of the most renowned fields where lapses in moral judgment and misconduct happen, which became the rationale of creating regulations and laws surrounding monetary affairs. To this day, different financial regulations are created and imposed on businesses from all verticals for accurate reporting.
Accounting firms with international clients have their work cut out for them as regulations remain to be ever-changing these days.
Role of accountancy regulatory bodies
Accounting standards have become more exigent through the years, and agencies and professional organizations ensure these regulatory laws meet the best interest of the companies, and of the public. These offices help firms understand the laws they must comply with domestically and internationally.
Get to learn some of the regulatory bodies in accounting and their functions.
Securities and Exchange Commission (SEC)
The US SEC regulates the securities market and implements laws that protect investors.
Internal Revenue Service (IRS)
The IRS is responsible for the collection of tax and enforcement of tax legislation on organizations and individuals.
American Institute of Certified Public Accountants (AICPA)
AICPA represents the Certified Public Accountants (CPA) in the US. They monitor the compliance of accounting professionals in the field’s technical and ethical standards, alongside providing standards for private company audits, and guiding its members through the trends of the profession.
Financial Accounting Standards Board (FASB)
FASB is the appointed office by the SEC to govern the accounting profession. They are the sole authors of accounting and financial reporting standards in the US, following the Generally Accepted Accounting Principles (GAAP).
The constant changes in regulatory compliance
In European states, there have been more stringent laws tackling tax matters and data privacy. On the other hand, the Asia Pacific [according to Deloitte] is focusing on building macroeconomic developments, such as low-interest rates and fiscal policy support.
In the US, there have been massive changes in the regulatory laws in President Joe Biden’s term. There have been executive orders implemented to enforce consumer protection, and the government pushes its modernization capabilities to meet new and more complex challenges.
There is already a serious amount of pressure in the financial sector to balance compliance demands with profitability goals. The changes in regulations are perceived as ‘imminent changes’ in the field due to the issues of tax avoidance, money laundering, or financial fraud. If anything, these guidelines serve as a transparency channel between the government and the financial services firms.
They may come off as a burden to some, but they actually protect you from risks beyond fines and penalties. Failure to comply would open you up for lawsuits and financial liabilities. On top of this, compliance of accounting standards builds your reputation as an esteemed organization that holds ethical behavior high, which in return boosts your relationship with clients, stakeholders, and prospects.
How accounting firms handle regulatory compliance changes
An intensive approach is needed to make sure you are adhering to regulatory compliance. These steps can include the following:
- Staffing - If you’re short-handed in staff to handle your compliance requirements, consider hiring professionals who have wide experience in handling regulatory work relevant to your field.
- Holistic approach - Assess your internal functions. Challenges in compliance are met in an integrated manner through governance, risk, and compliance (GRC) programs. Through GRC, you support your sustainability, and open doors for future opportunities and growth.
- Maximizing technology - Big data plays an important role here. Useful and accurate information can be harnessed to create important decisions, and identify possible pitfalls along the way.
Now that you understand how the regulatory changes affect your business’ accounting, reshaping your business’ operational and financial resilience will be easier since you know how it will impact you and the organization in every possible way.
We understand the taxing process of undergoing a new shift right after you have just achieved full compliance with a regulation. With the D&V Philippines team, you can ensure you have full operational control while we make sure your operations are compliant with the law.
Get our latest whitepaper Finding the Right Talents: D&V Philippines’ Solutions for Modern Accounting Firms to know how we can create an efficient back-end support for your firm.