Internal control is designed and implemented by an entity’s management, those charge with governance of the entity, and other personnel to provide reasonable assurance regarding the achievement of objectives. In addition, internal control is also can be refer to a process wherein the structure of the organization, the information system and authority are designed in such a way that it can helps the organization achieve its objectives and goals. Internal control plays an important role in how management meets its stewardship or agency responsibilities. For example, internal control for a bank is the systems, policies, procedures, and processes effected by the board of directors, management, and other personnel to safeguard bank assets, limit or control risks, and achieve a bank’s objectives. Strong internal control may helps a company to meet their objectives and goals, and to maintain a healthy, successful operations. For a bank, Good internal control can help a Continue reading
Management Accounting
The Role of the Management Accountant in Organizations
A management accountant’s duty is to provide information to users who are part of the organization from various levels. However, different levels of management has different information needs. Thus, a management accountant has to tailor the information for them. The first step that should be taken before the management accountant provides any type of information is that he should be clear and understand the company vision as the top, middle and bottom management of an organization. The top-level management is responsible for the long term strategic plan with strategic decisions for about 5 to 10 years time. Therefore the top management will create a mission, which will consist of a more specific goal that unifies company’s efforts. So, the management accountant should prepare budgets for top management accountant to decide which projects have to undertaken to achieve the company’s goals. Budget is a strategic plan that details the action that Continue reading
The Importance of Accounting Information Systems
Generally, the day-to-day running of a business organization comprises several transactions which the firm engages in. As a result, there is a need to always keep the records in a systematic manner for decision-making and for reference. Accounting is a systematic way of recording business transactions. The data of all the transactions are recorded and kept mainly for future use. These data are tracked and recorded in a computer-based system (financial accounting system) to facilitate the accuracy of the data. The main users of the accounting information are the shareholders, creditors, financial analysts, vendors, and government agencies. There are various categories of books and documents in which the accounting information is kept. For instance, the books of original entry which comprises of various journals such as cash journal, general journal, purchase journal, and sales journal; and the source documents like, cash receipts, bank statements, and cash statements. The information from Continue reading
Ethical Issues in Cost Allocation
A cost is generally understood to be that sacrifice incurred in an economic activity to achieve a specific objective, such as to consume, exchange, or produce. All types of organizations- businesses, not-for-profits, governmental- incur costs. To achieve missions and objectives, an organization acquires resources, transforms them in some manner, and delivers units of product or service to its customers or clients. Costs are incurred to perform these activities. For planning and control, decisions are made about areas such as pricing, program evaluation, product costing, outsourcing, and investment. Different costs are needed for different purposes. In each instance, costs are determined to help management make better decisions. When incurred, costs are initially reviewed and accumulated by some classification system. Costs with one or more characteristics in common may be accumulated into cost pools. Costs are then reassigned, differently for specified purposes, from these cost pools to one or more cost objects. Continue reading
Audit Quality – Meaning and Factors Affecting It
The major accounting scandals occurred worldwide has brought the focus of public to the audit profession and the audit quality. Enron and WorldCom cases in United States and Parmalat case in Europe are the example of major scandals as a result of the failure of audit services. These examples of corporate and accounting scandals that happened worldwide have indicated that the audit quality of the audit profession is not at an appropriate and acceptable level. Over years, the audit quality issue has been discussed and debated globally. Several actions have been taken by international and domestic authorized agencies to address the audit quality issue. For example, the government of United States has introduced and enacted the Sarbanes-Oxley Act in 2002 as a response to the audit failure in big major corporations, such as Enron and World Com. In addition, the Center for Audit Quality has been established in United States Continue reading
Direct Costs, Indirect Costs and Overhead Costs
Direct Costs In finance, direct costs are those costs that are associated with a specific project, department, or activity. Sometimes referred to as hard costs, expenses of this type are found with just about every type of business activity, beginning with research and development, moving through sales and marketing campaigns, and into the production of different types of goods and services. A direct cost is often some type of fixed expense, but there are some situations where a variable expense may also fall into this category. The key to understanding what does and does not constitute direct costs is to identify costs that apply only to a specific project, and have nothing to do with any other activity that is taking place concurrently. In order to be a true hard cost, the expense must be for resources that benefit that one project. For example, if the project is to construct Continue reading