International Accounting Project

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Transfer Pricing Influence

Speaking about the various aspects that can affect accounting, it is worth mentioning economic factors. These include different economic policies and methods, such as, for example, transfer pricing. It is the sale of services or any goods by interdependent parties at prices established within the company. Such a scheme allows redistributing income and total profit in favor of the group of people who are in a more favorable tax situation. This system is quite simple and enables to plan tax policy, achieving the lowest tax costs. According to Hummel et al. (2018), transfer pricing as a method has traditionally been developed and formed in such a way as to facilitate decision-making within the organization. Thus, since this practice is directly related to the redistribution of income, transfer pricing is linked to accounting.

Because of the purpose of applying this method of accounting, one has to deal with international documentation reflecting international trade. Thus, it is necessary to take into account the laws of different countries that regulate such pricing. Nevertheless, the situation is facilitated by the fact that the sale is made within the framework of one group of persons. This implies that accounting should reflect transfers within the organization, which simplifies reporting and the transfer of information. The profit of legal entities that are part of multinational enterprises also depends on transfer prices, and they can be used to minimize taxes (Hummel et al., 2018). Thus, the procedure for tax payments and deductions is simplified, which has a positive effect on the accounting process as a whole.

Culture Influence

In addition to a variety of economic subtleties, the accounting process is also greatly influenced by the country in which the company is located. Companies always exist within society, which has a direct impact on both the outer side of the business and its internal aspects. It can be noted that accounting in its structure has social features, as it regulates the work of people and scientific ones since it deals with numbers and formulas (Tie & Zhao, 2016). However, to identify the patterns between culture and accounting, it is necessary to turn to cultural and economic theories and consider them together.

It is necessary to ascertain the values of each of the groups to determine the connection between culture and the economy. According to Tie and Zhao (2016), four groups of values are distinguished: individualism-collectivism, uncertainty avoidance, the strength of social hierarchy, and masculinity-femininity. Following these values, any culture can be analyzed and characterized. Moreover, there is a theory that puts forward four groups of accounting values, which are professionalism versus statutory control, conservatism versus optimism, uniformity versus flexibility, and secrecy versus transparency (Tie & Zhao, 2016). Their interaction can occur in different ways, but two options are especially noteworthy. In the first case, social values inherent in a particular culture can indirectly influence accounting standards (Tie & Zhao, 2016). The second level assumes that the values change not only a specific company but transform the entire national accounting system and the practices that are applied.

The qualities and values described above were combined into one theory, linking cultures, and economics. The principles or hypotheses with which they are connected compare the level of cultural values and identify their impact on the economy and, accordingly, accounting. The theory states that the more individualism is valued in a culture and the less the power of the social hierarchy affects society, the more the community will be prone to professionalism (Tie & Zhao, 2016). Conversely, the more a nation with a strong hierarchy is putting pressure on people, the more a high degree of uniformity manifests itself. Thus, it can be concluded that various aspects of culture and different cultural characteristics influence financial activities. Representatives of a particular culture will behave following it, which will affect the work of the entire company as a whole.

Importance of Ethics

In addition to cultural issues, ethical issues, also inextricably linked with society, are equally critical, as corporate values are an integral part of any enterprise. However, it is important to comply with these qualities in the field of accounting, since workers in this area interact directly with huge-scale money and property masses. The modern world, one of the central values of which is the transparency of all operations, imposes specific requirements on the observance of ethical standards. Since accountants are responsible for providing the most accurate financial data, this applies to them directly, and they must have high ethical guidelines (Jaijairam, 2017). The presence of these standards is necessary for the successful resolution of many problematic issues arising in the accounting process.

However, one should distinguish between personal values, a particular view of ethical models, and corporate ethics. Corporate criteria in the financial sector possess their unique character, and business principles are one of the most critical problems in the accounting profession. Despite the standards developed by specialized organizations, since the beginning of the 21st century, the world has seen a number of terrible accounting scandals (Jaijairam, 2017). Most of them occurred due to non-compliance with ethical guidelines by financial specialists. Such scandals include fraud, bribes, as well as non-legal changes in financial information. However, compliance with ethical standards is expressed in benefits for both the individual and the whole company. Strict adherence to moral rules leads to the formation of a formidable reputation, an increase in income due to the transparent operation of the system, and a decrease in crime (Jaijairam, 2017). The use of translucent and definite ethical standards can have a positive impact on the work of the company.

Thus, accounting depends on many factors, some of which are economical, and some are social. Economic factors, in particular the use of various methods such as transfer pricing, can significantly simplify the accounting process. Simultaneously, culture and society have a constant impact on the economy, therefore, it is necessary to act appropriately and take into account the cultural and ethical characteristics when doing business.


Hummel, K., Pfaff, D., & Bisig, B. (2018). Can the integration of a tax compliant transfer pricing system into the management control system be successful? Yes, it can! Journal of Accounting and Organizaional Change, Forthcoming, 15(2), 198-230. Web.

Jaijairam, P. (2017). Ethics in accounting. Journal of Finance and Accountancy, 23, 1-13.

Tie, J., & Zhao, W. (Eds.). (2016). 1st international symposium on business cooperation and development. Atlantis Press. Web.

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