CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Recently, globalization has become a significant issue which practitioners and researchers play much attention in itself and its antecedents and consequences. It has an important influence of how firms have been doing businesses in a competitive market. For the national perspective, globalization seems to affect how national governments add values of skill premium, solve unemployment obstacles, conduct independent social policies, and utilize exogenous technical change (Ethier, 2005). It outstandingly connects with the opening nature of the world economy via the rapid diffusion of information and communication technology (Levy, 2007). To clearly address the global concerns, globalization potentially involves economic and financial integration through the abolition of capital controls and the dismantling of barriers (Oxelheim, 2009). Thus, the impacts, influences, effects, and roles of globalization have been intensively debated, discussed, and criticized in the diversified fields of businesses, economics, sociology, political sciences, information technology, communication, and others, in both micro and macro levels, and in the national and international views. In the light of the globalization aspect, globalization is related to the growing mobility of goods, services, commodities, information, people, and communication across frontiers (Arnold and Sikka, 2001). It refers to a process through events and decisions in one part of the world can have significant consequences for individuals and societies in distant parts of the world. Increasingly, globalization definitely focuses on a political, economic, technological, and cultural process that is especially characterized by the growth and spread of suprastatism, supranationalism, and supraterritoriality (Gallhofer and Haslam, 2006). Under the globalization conditions, firms have easily moved and transferred all business activities to other parties in national, international, and globalize societies, and smoothly accepted and received them from others.
To outstandingly understand a view of the globalization, globalization herein, consists of three dimensions, namely, barrier reduction, quick response to changes, and multilateral trade liberalization (Ethier, 2005). Accordingly, it has played important roles in explaining economic, technology, culture circumstances, and others. However, it tends to have a significant effect on business activities, especially accounting practices and functions. Interestingly, accounting has been forced and affected by the possibilities and processes of globalization. They potentially impact the harmonization of accounting and audit standards, financial reporting, and financial services, and the financial coordination and control of dispersed subsidiaries of multinational firms (Cooper et al., 1998). For example, accounting practices of transnational corporations, transfer pricing, and international taxation are evidences to the debate on globalization (Arnold and Sikka, 2001). To indicate accounting in relation to globalization, firms have gained the globalization pressures in order to report their environmental activities and responsibilities. They are willing to voluntarily disclose accounting transactions through foreign capital, product, and labor markets, and environments and social responsibilities even though a country has a weak legal environment (Webb et al., 2008).
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