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Dr.Gholamhossein Davani )Chairman of Dayarayan Auditing &Financial Services Firm )RSMi Iran Member of High council of Iranian association of Certified Public )Accountants )IACPA IMA,IIA,AAA,BAA,EAA,CAAA,AIA
Ladies & Gentelmen. I am very glad to have the opportunity to speak at this conference, as it gives me the chance to stress the importance of the relationship between Globalization & auditor's social responsibility.
World at a glance 2006
Population=6,525,000,000 GDP= $43,920,000,000,000 Oil Product= 79,650,000 (BBI/day) Oil proved reserve (BBI)= 1,349,000,000,000 Purchasing Power Party (PPP)= $ 59,590,000,000,000 Export= $ 10,320,000,000,000 Import= $ 10,270,000,000,000 Labor Force (Person)= 3,001,000,000 Oil Consumption (BBI/Day)= 80,100,000 Internet users= 1,018,057,389 Telephone- mobile cells= 1,752,183,600 Debt-external= $38,540,000,000,000 Natural Gas- Proved reserves (Cu-m)= 174,600,000,000,000 Natural Gas-Export (Cu-m)= 667,600,000,000 Daily transaction= S 1,300,000,000,000 (60 times of industrial goods) CHIP= Clearing House Inter-banks Payment System Every Minutes 2 B.US Every day = $1,000,000,000,000 Daily transaction= $ 1.300.000.000.000 (60 times of industrial goods) CHIP= Cleaning house inter banks payment system every minutes 2 B. US Dollars Everyday= $ 1.000.000.000.000
World at a glance 2006
Oil Consumption 80,100,000 bbi/day Oil production bbi/day 79,650,000 Oil- Reserve bbi 1,326 Telephone 2,168,433,600
Internet users 1,018,057,389 Airplane 49/024
Gas- consumption (Cu-m) 2,820
Gas Export 810,900 (Cu-m) Gas Import 828,000 (Cu-m)
Railway 11,115,205KM World’s import 12,080 Millyard Dollars World export 12,450BB USD
Gas Reserve (Cu-m) 828,000
World economic powers
Description Export GDP GDP (Per capital) PPP World 10,320 USA 927 EU 1,318 China 752 1,790 ---
43,920 12,470 13,310 --42,000 ---
Globalization is an umbrella term which refers to complex of economic, trade, social, technological, .culture and political
Global village idea is Electronic interdependence when electronic media replace visual culture
Global village (one – world (list
Global village is a term coined by Wyndham lewis in his book “America and comic man” (1948) but Herbert Marshall Mcluhan (1911-1980). Mcluhan also wrote about this term in his book “The making of typographic Man” (1962)
Elements of Global village (one(wordlist
Timeline of Globalization
Age of Imperialism (World Economic Forum (WEF Dwellers land General Agreement on Tariffs and Trade ((GATT Montreal Protocol Fall of Berlin Wall Collapse of Soviet Union Union European Un World Conference on Human Rights North American Free Trade Agreement ((NAFTA (World Trade Organization (WTO International criminal court Euro adapted 12 countries 10
What does ?Globalization
2006 (GDP (Billion (Export (Billion (Import (Billion Population ((Billion % Inflation 47,77 6 14,46 4 14,28 2 6/5 3/8 2005 44,45 4 12,68 4 12,58 5 6/4 3/7 1990 22,72 1 4,256 4,283 5/3 26/1 1980 11,74 1 2,408 2,422 4/4 16/9 1950 4,28 5 304 309 2/5 13/2
Source: IMF GDP, Export, Import, Population, and Scale is Billion-1 GDP- Current price at US. Dollars -2 11
World Great Transformation
Fire Discover Invention of Gun Invention of Printing Invention of Machine Invention of Computer
Invention of Internet
Effects of Globalization
World Governance E-governance E-trading E-bank E-learning
Economic effects of Globalization
Instability Economic-Increase risk Development role of financial & monetary market E-trade development Decrease raw material /increase product & services
Intensive competition & consider Increase of services & supportadvantage important consanguineous works
Outlook of world 2006
GDP Official rate Billion World Euro USA Japan German y UK France China Iran India 43,920 13,310 12,470 4,848 2,747 2,218 2,067 1,790 178 720 Export Billion 10,320 1.318 927 550 1,016 327 443 752 55 77 GDP Percent Current price 47,766 --42,000 30,700 29,800 30,900 30,000 6,300 8,100 3,400 GDP Purchas e per capital 59,590 12,180 12,410 3,914 2,454 1,869 1,822 8,182 552 3,669 Populatio n 6,525 486 298 127 82 60 62 1,313 68 1,095 Oil product BBI/Day 83,000,000 3,172,000 7,610,000 120,600 167,400 2,075,000 77,690 3,631,000 3,979,000 758,000 Oil BBI/Day Oil reserve Gas reserve
82,590,000 14,700,000 20,730,000 5,353,000 2,650,000 1,827,000 1,977,000 6,534,000 1,510,000 2,450,000
1,326,000,000,00 0 7,335,000,000 22,450,000 29,290,000 39,600,000 4,500,000,000 144,300,000 16,100,000,000 135,500,00 5,600,000,000
172,200,000,000,00 0 7,335,000,000 5,451,000,000,000 39,640,000,000 279,100,000,000,00 0 589,000,000,000 12,770,000,000 2,350,000,000,000 26,620,000,000,000 835,000,000,000
World Military expenses
USA 51 8 China 81 France 45 Japan 44 UK 42 German 35 y India 19 Iran 4/3
Source: CIA Fact book 2006 16
What is Globalization
Globalization as a decoupling of space and time, emphasizing that with instantaneous communications, knowledge and culture can be shared around the world simultaneously.
“Sociologist, Anthony Giddiness”
Globalization in the era since World War II has been driven by trade negotiation rounds, originally under the auspices of GATT, which led to a series of agreements to remove restrictions on "free trade". The Uruguay round led to a treaty to create the World Trade Organization or WTO, to mediate trade disputes. Other bi- and trilateral trade agreements, including sections of Europe's Maastricht Treaty and the North American Free Trade Agreement have also been signed in pursuit of the goal of reducing tariffs and barriers to trade. “Source:Wikipedia” 18
:Economically,socially, and ecologically negative ;"" As an engine ofcorporate imperialism one which tramples over thehuman rights of developing societies, claims to bring ,prosperity yet often simply amounts toplundering andprofiteering. Negative effects include ,cultural imperialism via cultural assimilation the export of artificial wants, and the destructio or inhibition of authentic local and global ,community .ecology and cultures
What is Globalization
How Globalization Birth
The end of the Second World War brought another great expansion of capitalism with the development of multinational companies interested in producing and selling in the domestic markets of nations around the world. The emancipation of colonies created a new world order. Air travel and the development of international communications enhanced the progress of international business.
New world Discipline
The fall of the Berlin Wall and the collapse of the Soviet Union ended the cold war between the forces of capitalism and socialism with capitalism triumphant. The development of the internet made possible the organization of business on a global scale with greater facility than ever before.
One of the main sources of globalization is the view among activists that "international capitalism is nothing more than a byword for oppression, exploitation and injustice by rapacious multinationals. In their view, companies will stop at nothing to maximize profits even if it means degrading the environment, abusing workers, exploiting third-world markets and committing a host of other sins. “Social responsibility is defined as a framework of measurable corporate policies and procedures and resulting behavior designed to benefit the workplace and, by extension, the individual, the organization, and the community.
Multinational companies face special issues in relation to ethical auditing. It is, though, precisely these special issues which can make ethical auditing so valuable to multinationals. Executives of such companies are well aware of the added complications which operating across a number of cultures brings. But problems tend to multiply when differing value bases are permitted to take hold within different cultures. It may have seemed acceptable for Shell to apply differing environmental standards to their drilling in Ogoniland decades ago to those they applied in Europe or North America - but in an era of acute global consciousness of the interdependence of the world eco-system the same standards are rightly expected in every continent.
The currency and general relevance of social responsibility and sustainable development (SR/SD) to society is seen in such areas as investor interest in ethical mutual funds, government lists of threatened or endangered species, and pollution control mandates established by public policy setters. Indeed, business, government, and society are caught up in a debate over how this planet’s scarce resources are to be preserved and used.
What are SR/SD
These are voluntary initiatives with a global constituency that can also be defined as multi-sect oral, in that they can be applied in a wide range of industries. They have all evolved through social partnerships involving some elements of business, governments, labor organizations and non-government organizations. They all take a multi-stakeholder approach to corporate citizenship issues.
• • • • • • •
Community Diversity Environment Ethics Financial Responsibility Human Rights Safety
The Global Eight
1-The UN Global Compact 2- ILO conventions 3- The OECD Guidelines for Multinational Enterprises 4- ISO 14000 Series 5- Accountability 1000 6- The Global Reporting Initiative 7- The Global Sullivan Principles 8- Social Accountability 8000
The objective of accountability towards stakeholders requires information about general issues such as product safety, the environment, employee relations, etc. An ethical bookkeeping system collects data systematically about the organization's ethical behavior, which is relevant for stakeholders. This process is most likely to include "hard" information, including for instance complaints of stakeholders, business accidents or fines for unethical behavior .
The good corporate governance needs to address not only boards of directors, committees, and legal and regulatory issues, but also business practices and ethics, disclosures and transparency, enterprise risk management, monitoring, and communication. That it's a whole set of systems and processes. “It's not just narrowly focused on compliance with Sarbanes-Oxley.”
The systems and processes of corporate governance also should consider a diverse group of stakeholders, not solely shareholders. "Most corporate governance focuses just on shareholders. But a shareholder's interest is different than an employee's interest, which is different than the interest of a community, creditor, or supplier. And too often, the focus of shareholders, management, and everyone else in the .company is on increasing shareholder value Furthermore, this responsibility is often on the backs of the community or the employees or .the suppliers, and that is not in their interest
It is possible for standards to have several of these :characteristics
• Principles (Global Compact and Global Sullivan Principles) • Standards (GRI, OECD Guidelines, SA8000, AA1000S, and ILO Conventions) • Foundation (ILO Conventions, AA1000S) • Process (SA8000, AA1000S, ISO 14000S) • Performance (SA8000, OECD Guidelines, and ILO Conventions) • Certification (SA8000 and ISO 14000 Series)
History of Global Reporting
The Global Reporting Initiative (GRI) was conceived in 1997 by the Boston-based Coalition on Environmentally Responsible Economies (CERES) in collaboration with the Tells Institute. Over the past five years, the GRI has evolved into a set of reporting criteria on all aspects of a company’s performance. The initial draft standard was ‘field-tested’ in 1999 by over 20 companies and released in June 2000. A revision was published in 2002.
What is GRI
The GRI has been adopted by the UN Environment Programmed (with funding from the UN Development Fund) and is becoming an independent organization. The GRI is built on a simple premise. By providing a broadly-agreed mechanism, reached through negotiation between the partners in the process, to measure environmental and social performance, the GRI aims to assist investors, governments, companies and the wider public to understand more clearly the progress being made towards sustainability. The use of a common framework is seen as a way to improve related analysis and decision making.
Elements of SR/SD
Each initiative is described below and compared with the others. Many of the initiatives have a common starting point: either convention of the International Labor Organization (ILO) and/or The UN Declaration on the Rights of the Child and/or the Universal Declaration on Human Rights. Most of the ‘Global Eight’ reflect a northern perspective. This is balanced only partially by the inclusion of ILO conventions, which are developed in a multilateral setting. While there are standards developed in the South, they tend to be 34 national and/or regional in application.
After Enron Clops some terminologies same Social audit (SA), corporate social responsibility (CSR) have been relief. These days, corporate social responsibility (CSR) is common currency but a “currency” that is rather devalued. The phrase is so over- and poorly used that it begins to lose any meaning. Any proper definition of CSR would require a categorical standard of values. This is lacking. In fact CSR now means many different things to many people.
partnerships with voluntary local organizations, with financial donations, donations in kind (computers for education, food and clothes for the poor), and employees involvement. The company may initiate or participate to a major project such as the regeneration of a poor neighborhood plagued with unemployment, poverty, low education and racial tensions. “The Community Policies will not only create roots in a local base for the company, it will also increase the productivity of the work force involved in the projects (by developing their leadership and customer service skills, building pride and loyalty with the feeling of being useful).”
Investment in its local community. Policies include
Monitoring and reduction of the damage caused to the environment. For instance, policies of reduction of emissions and waste. “The Environmental Policies will attract customers interested in the protection of the environment, and investors who fear the risks linked to bad environmental practices, while sometimes reducing the costs with costeffective modifications of production processes. As for most other components of the Social Policy, serious Environmental Policies will attract Socially Responsible Funds and a qualified workforce (nobody likes polluters!).”
Values the company vows to respect. Policies include the pledge not to participate in (nor engage in business with people involved in) a series of activities that are deemed offensive. This list of unacceptable activities often includes exploitation of children, unethical treatment of animals, damage to the environment, and dealings with undemocratic regimes or with "bad guy" industries (fur, tobacco, guns, etc.). “The Ethics Policies will attract long-term investors, increase market shares for the ethical product, strengthen partnerships, and make the employees “.proud
Making sure the company does not violate human rights nor appears as supporting human rights violators. “The Human Rights Policies, also, will attract Socially Responsible Funds and a qualified workforce. Its most important role, however, is defensive: to prevent boycotts or campaigns of protest that could seriously tarnish the reputation of the company accused of practicing (or being an accomplice of) human rights abuses, and the resulting falling stock prices, loss of market shares, and low-moral work force.”
Creation of a working environment allowing all employees to develop their potential. Policies include training, career planning, remunerations and advantages, rewards linked to merit, balance between work and family life, as well as mechanisms that ensure non-discrimination and non-harassment. “The Labor Policies will attract and keep a qualified workforce, and increase productivity, while opening new markets (ethnic minority customers are sensitive to the antidiscrimination policies in the work place).”
Investment or partnership beyond the community. For instance, Cause Related Marketing (partnership with a charity to market a product while giving a small percentage of the sales to the charity). “The Society (or Extra-Community) Policies boost not only the products linked with the policy but also the image of the company. Cause Related Marketing is extremely appreciated by customers because it makes them feel good (allowing them to support charities without spending their time or money), as long as the charities are well chosen and the percentage is not too small (or the ceiling too low).”
Identification of all legal obligations and of the means to comply. Policies must deal with changing rules related to its work force (Labor), its products (Health, Environment, Intellectual property, specific regulations), its administration (Business, Tax), its dealings (supplier and customer liability, Criminal actions). The phenomenal growth of Socially Responsible Funds (now 20% of funds invested in the US), the growing difficulty to attract qualified employees, and the rise of non-governmental organizations able to sue or boycott unethical businesses, demonstrate the vital importance for any business of a well designed Social Policy. “The Compliance Policies are part of the Social Policy for two reasons. First, by complying with the law, the company demonstrates it is socially responsible. More importantly, Compliances Policies often go beyond the legal requirements, in order to show concerns for social matters (health, labor, environment, etc.).”
The ILO has defined core Labor :standards, which include
Freedom of association (Convention 87) Right to collective bargaining (Convention 98) Prohibition on forced Labor (Convention 29 and 105) Prohibition on child Labor Freedom from discrimination (Convention 111)
In the globalization area auditors' responsibilities have changed to corporate social responsibility that main basic is related to Ethics. Although many auditors are burning the midnight oil to familiarize themselves with the new regulations and to prepare for their role in the compliance process, the scope and complexity of change has made the learning process a significant challenge.
Creation of a Social Policy
Most companies (if not all) already have elements of Social Policy. Often, these are independent pieces of regulation and practices. Most of the time, they are not part of a unique strategy, they are not managed by powerful senior executives, they are not reviewed before any business decisions are made, and they are not used in ways that would produce their full benefits.
Principles and standards
The Global Eight may be divided into principles and standards. Principles are a set of overarching values that underpin behavior, and so by their very nature are non-specific in behavioral terms. Standards are specific and advocate a set of benchmarks to be attained. There are several different types: process, performance, certification, and foundation:
Process Performance Foundation Certification
Process standards define the procedures a company should put in place, such as how to conduct stakeholder dialogue, how to communicate with stakeholders or to develop management systems.
Process standards define the procedures a company should put in place, such as how to conduct stakeholder dialogue, how to communicate with stakeholders or to develop management systems. Performance standards define what a company should do or not do, such as pay a living wage or prevent discrimination. Foundation standards seek to lay the foundation for a new field, describing what constitutes best practice in an emerging area. Certification standards establish a system under which certificates of compliance are awarded to companies that comply and have passed an independent (third party) audit.
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