CHAPTER ONE 1.

0 Introduction

This chapter contains the back ground of the study, the statement of the problem, the purpose of the study, the objectives of the study, the research questions, scope of the study and the significance of the study. 1.1 Background to the study.

Many countries use or are converging on the International Accounting Standards, established and maintained by the International Accounting Standards Board. In some countries, local accounting principles are applied for regular companies but listed or large companies must conform to IFRS, so statutory reporting is comparable internationally, across jurisdictions. This move, according to various scholars Botosan, 1997; and Lang and Lundholm, 1993 has been viewed as a chance to increase the level of transparency in business, a statement which stretched to include quality assurance, pricing and financial reporting all of which had increasingly deteriorated over the past decades.

Guided by generally accepted auditing standards (GAAS), the CPA conducts the audit examination and renders a report stating an opinion about whether such financial statements were presented fairly in conformity with generally accepted accounting principles (GAAP). However, the management of the business enterprise is primarily responsible for the preparation and presentation of financial statements that conform to GAAP. Any changes or adjustments to correct material misstatements discovered in the audit need management approval. If not obtained, the CPA practitioner is obliged to make the necessary modification in the "Independent Auditor's Report" (Racasa, 2003). Annual reports are the primary mode of communication used by the company to correspond with stakeholders (Botosan, 1997; and Lang and Lundholm, 1993). Through these reports, companies transparently disclose relevant information which plays a crucial role in the decision making processes. As stakeholders rely heavily on these pieces of information when making different
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types of decisions, Cooke claims that it is important to assess the level of transparency of disclosures made by a corporation (Cooke, 2011). UGANDA is ranked among the countries most affected by petty bribe, according to the 2009 Global Corruption Barometer of Transparency International, an international watchdog. Uganda scores the third-highest among 69 countries in Asia, America, the Middle East, Europe and Africa sampled. It shares the third place with Cameroon. Despite that, the media and the private sector are perceived the least corrupt, with 1% and 4% respectively marking it as topping the list of corrupt institutions. (http://www.newvision.co.ug/D/8/13/683669) Various views were brought forward to the low level of corruption in the private sector of Uganda. However, the message to the private sector from consumers is clear: being clean pays off, says the report. Not only does clean business create a level playing field while supporting long-term growth and productivity, it attracts customers.

(http://www.newvision.co.ug/D/8/13/683669) The purpose of this report therefore is to discover how the use of international standards can be used as a measure to enhance transparency. As Cooke, 2011 claims that it is important to asses the level of transparency so is it equally important to asses the level of relevance of international standards to transparency. 1.2 Statement of the problem

Worldwide, bribery has gone up, particularly in the Police and the judiciary, Transparency International concludes. People who reported paying a bribe to court officials went up from 8% to 14% in the last 3 years. In addition, 15% of all respondents who contacted land authorities in the 12 months prior to the survey reported paying a bribe. This figure confirms that corruption in the land management sector is a widespread problem that has been increasingly recognized as a government challenge, the report notes. UGANDA is ranked among the countries most affected by petty bribe, according to the 2009 Global Corruption Barometer of Transparency International, an international watchdog. Uganda scores the third-highest among 69 countries in Asia, America, the Middle East, Europe and
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Africa sampled. It shares the third place with Cameroon. Despite that, the media and the private sector are perceived the least corrupt, with 1% and 4% respectively marking it as topping the list of corrupt institutions. (http://www.newvision.co.ug/D/8/13/683669) On the other hand, many countries use or are converging on the International Accounting Standards, established and maintained by the International Accounting Standards Board. In some countries, local accounting principles are applied for regular companies but listed or large companies must conform to IFRS, so statutory reporting is comparable internationally, across jurisdictions. The purpose of the study is to determine why despite the embracement of International standards, the level of transparency is still low evidenced by the increasing corruption. 1.3 Purpose of the study

The purpose of the study will be to establish the effect of the level of compliance with the international accounting standards on transparency. 1.4 Objectives of the study

The study will be carried out with the following objectives; a. To establish the compliance procedures which can be followed in auditing. b. To discover the various international accounting standards used by organizations. c. To find out the impact of compliance with the international accounting standards on transparency.

1.5

Research questions

a. What are the compliance procedures which can be followed in auditing? b. What are the various international accounting standards used by organizations? c. What is the impact of compliance with the international accounting standards on transparency?

1.6

The scope of the study

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1.6.1 Subject scope

The study will focus on the effect of the level of compliance with the international accounting standards on transparency.

1.6.2 Geographical Scope The research will be carried out in Kisakka and Company certified public accountants located Kimathi Avenue in Kampala District.

1.7

Significance of the study

Findings from the study are expected to be used by various organizations in financial distress as information contained therein is hoped to include ways of how they can get out of it.

Firms that are mainly start ups are expected to benefit from the information provided as it may help to show them how to enhance their financial performance through adhering to the accounting standards.

Institutions and organizations are expected to benefit from the information that will be provided on how to use their internal audit to enhance financial performance.

Companies are expected to reduce their operational costs. This is because the study will highlight how they can comply with the standards effectively to enhance financial performance without necessarily hiring financial consultants.