Introduction In recent decades, globalization has become more powerful than ever, and now plays an important role

in the modern economy all around the world. The most notable feature of globalization is the increasingly growth of international transaction. Thus, international accounting plays an important role for multinational companies since the rapid growth of international transactions. This essay was divided into three parts. Firstly, talk about the relationship between capital market and financial reporting. Secondly, discuss the development and use of International Accounting Standards, and more focus on American accounting standards and European accounting standards, and their cooperation. Lastly, elaborate the importance of cooperate governance and internal controls. Link between financial reporting & capital market
The capital market provide a place for all the investors doing the international transactions. Simply to say, the capital market is a place for people doing the capital borrowing and stock exchange, it combines various transaction among morden global economy. Therefore, capital market plays an important role in the global economy.

"Audit, corporate governance, accounting standards, enforcement and internal controls" (Tweedie, 2005), these are the important factors if a market want to make
the business process smoothly and efficient. While the perfect smoothly and

efficient is hard to achieve since financial reporting requirements, histories and

legislation are vary from country to country. Thus, investor should use financial reports to access their investments depend on the various accounting standards, which can effectively reduce the investment risks and have more success rate. From the business dictionary we can see the capital market is defined as "a conduit for demand and supply of debt and equity capital. A capital market is not a compact unit, but a highly decentralized system made up of three major parts: (1)stock market, (2) bond market, and (3) money market. " From the point of view of investor, in order to invest in capital markets, the financial reports were need to provided to investors who want to doing the

investment in capital markets, and the financial reports can help the investors to decide whether their target companies are worthwhile to invest or not. A financial report is a report of accounting information which includes about financial information, liabilities, expenses and assets. Thus, it is good for investors making decision if they want to invest some companies in capital market. Moreover, it can also stimulate the dynamic of the market. From the point of view of the company, the real purpose of a company is occupy the capital market. "Capital market is Different markets provide unique opportunities and risk for investors"(European Capital Markets Institute - ECMI, 2005). The majority contents of financial reporting is accounting information, the company can capture the shares of capital market through analyse the accounting information of themselves and their competitors. In general, financial reporting can stimulate the efficient development of capital market, and capital market is the main platform for financial reporting spread the accounting information. Accounting information has already become to a tool to help the company make strategies to against its rivals and a sign for investors doing the investment in the capital markets. The development and use of IAS

Actually, there are different accounting standards for a company to choice. IFRS (International Financial Reporting Standards, which known by the older name of
(IAS) International Accounting Standards) are widely used in European countries, while the most companies of the U. S. are more likely use U.S. GAAP (United State Generally Accepted Accounting Principles ) system.

We have seen that the U.S. capital market is well established and prevailing around the world, especially in the Europe. So in 2002, IASB (International Accounting Standard Board from the UK) cooperates with FASB (Financial Accounting Standards Board from the United States) to achieve convergence of accounting standards. The cooperation can definitly improve the effectiveness of capital markets for several investors and listed companies.
The SEC (Stock Exchange Commission) Proposed Adoption Of IFRS (International Financial Reporting Standards) Financial Reporting, to abandon the GAAP

(Generally Accepted Accounting Principles) and use the IFRS. This marks various accounting systems are moving toward to become a single global accounting system of regulations. "Created with a mandate to produce a single set of high quality, understandable, and enforceable International Financial Reporting Standards (IFRS) and to encourage convergence on these standards. "

(Source: http://www.allbusiness.com/accounting/550776-1.html#ixzz1f5foKdbl ) For companies, the various accounting standards can make them to issue two different kinds of financial reports. One report is required for domestic use, and another is made for foreign stock exchange markets. It is very costly for those small sized companies who should takes a lot of time to finish the reports, this directly led many companies to abandon listing on the stock markets. While for investors, this differential can help them to compare their target companies more quickly and make the decision to invest the most appropriate companies to invest. Generally to say, it is a trend that different accounting standards will integrate into one single one. A single international accounting standards can definitly enhance the capital market and against all the obstacles, improve the communication between companies from different regions. Nowadays, even though GAAP standards has already wildly used by many companies, there are still many people against the adoption of IFRS. The first reason they against the adoption is the GAAP is rule-based while IFRS is principle-based. According to the legislation environment of America, the problem is the IFRS will more likely become to a rule-based as GAAP did. Another argument is time-consuming and costly waiting for the transformation from GAAP to IFRS. "If the SEC (Stock Exchange Commission) had initially planned the implementation of IFRS by the U.S. companies in 2014, it is more likely to become integrated in 2016. After that, the IFRS will become to a single financial reporting worldwide (Tweedie, 2005)." It is against by those companies who didn't use IFRS

yet, it is hard and complicated for them learn it, and easily lose competitiveness and market share. Even though there are still many criticisms, but the this global adoption of these different standard systems is still necessary since there are many countries has already harmonizing with IFRS at present. The only thing we should do is modify the IFRS system and try our best to make it easy and useful for every one. Corporate governance & Internal controls Corporate governance is very important for a company since it can reflects on the international financial reporting. The major part of corporate governance in a company is doing the strong internal controls. From business dictionary, internal controls defined as systematic measures (such as reviews, checks and balances, methods and procedures) instituted by an organization to conduct its business in an orderly and efficient manner, safeguard its assets and resources, deter and detect errors, fraud, and theft, ensure accuracy and completeness of its accounting data, produce reliable and timely financial and management information, and ensure adherence to its policies and plans.
(Source: http://www.businessdictionary.com/definition/internal-control.html)

The most obviously function of internal control is avoid financial risks and prevent the fraud from occurring. For instance, the case of WorldCom are caused by accounting frauds. From the timeline of America, the case of WorldCom is one of the biggest accounting fraud in Amercian history.
"WorldCom has revealed a further $3.3bn in accounting errors, doubling the size of the accounting scandal at America's second largest long distance phone company to more than $7bn. Mark Tran explains ."(WorldCom accounting scandal, 2002)

After the financial crisis all round the world, investors are become careful and scupulous with capital market, since investors don't know who to trust. This directly led the slump of American financial market. In order to make investors regain their confidence to the capital markets. The company should keep the strong internal controls in the company. For example, try the best to keep the good relationship with shareholders, stakeholders and governments, etc. What's more,

the company can also modify the disclosure rules of the financial reports. For instance, the company can choose their accounting company, audit company, even the press with very professional and reputation. Keep the high transparency information of financial reporting, attract the concentration of potential investors. In order to play the internal controls perfectly and avoid fraud happened again, there are three areas the company should recognize during they doing the internal controls in the company. "In order to avoid fraud, the company should keep high internal controls of these three areas, therefore the company can avoid fraud in an effective way. These areas are "effectiveness and efficiency of operation, reliability of financial reporting, and compliance with applicable laws and regulations (from Regulation Library, the University of Utah, Policy 3-018: Internal Controls,2010). A strong internal controls can also keep a good relationship between shareholders and managers in the company. It is easily to stay away from fraud and information manipulation. Simply to say, a strong internal control can effectively protect the shareholders' rights, and guarantee the fair treatment of every single shareholder. In order to balance the rights between manager and shareholders, the company should enhance the internal governance structure. All the processes and regulations are made to ensure the management of the firm is service for the interest of its shareholders. According to the OECD (Organization for Economic Cooperation and Development) Principles, regimes of corporate governance should ensure the strategic guidance of the company and effective monitoring of management by the board of directors, as well as responsibility and loyalty of the board concerning the company and its shareholders. (Governance and their relevance to non-OECD countries, by Fianna Jesover and Grant Kirkpatrick, 2005)
(Source:http://en.oboulo.com/summary/addToCart? id=82018&docId=82018&navid=&do=ADD_CART&cm=n)

Conclusion To sum up, it is very hard to have a perfect and efficient market according to recent situation of financial crisis. The development of IAS (International Accounting

Standards) seems to become more appropriate and useful by integrating many different accounting standards into a comprehensive one. Thus, not only this development can ensure the IAS can applicable in many countries with different culture, legislation, etc. But also can satisfy investors to know the real situation of the company they want to understand. It is already become to a trend that IAS will become more globalize. Corporate governance plays an important role of ensure the investors get the most reliable financial reports. In order to get the reliable financial reports, the enterprise should have a strong internal control since these two factors are the premises if the company want to become better. Lastly, IAS will have reconsider their standards frequently, since the dynamic market is also
developing constantly. It needs changes of regulations according the situation of these

markets have, and reach the maximization of efficiency. Make sure the market have a sustainable growth.

References
Fianna, J and Grant, K (2004), The Revised OECD Principles of Corporate Governance and Their Relevance to Non-OECD Countries, pp. 4-10

Tran, M. (Friday 9 August 2002) WorldCom accounting scandal, The Guardian Tweedie, S., Seindenstein, R. (2005) The Case for Accounting Convergence, Vol.25 (25:589).

The link between financial reporting and capital markets: Evaluating the extent of development and use of International Accounting Standards [online], available from: http://en.oboulo.com/summary/addToCart? id=82018&docId=82018&navid=&do=ADD_CART&cm=n, [Accessed 28/11/2011]

Cooperation between FASB and IASB to achieve convergence of accounting standards.

[online], available from: http://www.allbusiness.com/accounting/550776-1.html [Accessed 28/11/2011]

Financial

Reporting

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Capital

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from:

http://www.lse.ac.uk/resources/calendar/courseGuides/AC/2011_AC420.htm [Accessed 29/11/2011] Financial Statement, availalble from:

http://www.referenceforbusiness.com/encyclopedia/Fa-For/FinancialStatements.html#b [Accessed 29/11/2011] Speech by SEC Staff: Financial Reporting and the Global Capital Markets [Online], available 29/11/2011] from: http://www.sec.gov/news/speech/spch363.htm [Accessed