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MBA Accounting For Managers - Discuss the extent to which the legal and professional regulatory framework of accounting ensures that corporate reports provide relevant, objective and comparable information to users?

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Introduction

MBA ACCOUNTING FOR MANAGERS ASSIGNMENT By Jonathan Simpson Contents Pg No Contents 3 - Discuss the extent to which the legal and professional regulatory framework of accounting ensures that corporate reports provide relevant, objective and comparable information to users? 8 - Critically evaluate the contribution of budgets and budgetary control in ensuring maximum performance from employees and the extent to which this contribution depends on the level of employee participation in the budget setting process. 15 - References 17 - Bibliography Word Count: 2494 Discuss the extent to which the legal and professional regulatory framework of accounting ensures that corporate reports provide relevant, objective and comparable information to users? Each year companies produce a series of reports aimed at providing information that can be used by users to make decisions. There exist a number of users that can be determined of these accounts, who rely upon these reports to provide accurate information so as to make decisions. These users include the following: Equity investors; Loan creditors; Employees; Business contacts; Government; General Public; and Analyst-advisors1. Groups as diverse as these will have differing information requirements, and this is reflected in the detail contained within the accounts. Some of the needs of these users may include: shareholders exercising governance functions; creditors who need to have a clear picture of the position and the prospects of their debtor; investors (shareholders and creditors) both actual and potential, who wish to know whether to acquire, retain or sell, a stake in the business; other stakeholders (including employees) and the wider public, who have a variety of relationships with the business2. To ensure that the information provided in the accounts and reports reflect the users needs there are a series rules that govern their content. ...read more.

Middle

Critically evaluate the contribution of budgets and budgetary control in ensuring maximum performance from employees and the extent to which this contribution depends on the level of employee participation in the budget setting process. Planning and control are major activities of management in all organisations. Central to these activities are budgets14. Over the years most organisations have accepted without question the principle that costs should be kept within budget and as low as possible, but not so low that key business goals are put at risk. However, in practice, managers often face unremitting pressure to increase resources to meet objectives such as better customer service and product quality. The importance of these objectives is reflected in the steadily increasing proportion of total costs accounted for by the overheads15. This up-wards pressure requires effective management of overhead costs, rebalancing resources to reduce costs and improve services and quality. To do this management has embraced and promoted the principles and methods of budgeting and budgetary control as a part of normal business life. This "historical" view of the importance of budgets is in contrast to emerging evidence published in a recent European survey that suggests annual budgeting cycle adds little value and takes too much management time16. It is also known that relying too heavily on budgetary control in managing performance has an adverse impact on manager and employees behaviour. That said, it is probably unfair and na�ve to lay the blame for these weaknesses (and many others) at the door of `budgeting', as the management functions now demanded were never intended to be delivered by budgets. Nevertheless the weaknesses are real; they are damaging to company performance and employee motivation and need to be addressed. ...read more.

Conclusion

Most companies have not yet made radical changes to their budgeting practices, but a small number are now looking at alternatives. In the main, companies are continuing to use budgets in not only the way they were originally designed, but increasingly to perform functions for which they were never designed. Since these new methods of budgetary control attempt to ring-fence departments within organisations they are diametrically opposed to modern day management concept of a unified entity. In doing so, these budgets, whilst created to influence and control the performance of employees are causing power and political conflicts within the ranks of the organisation. There is evidence to suggest that the conflict ensures that the most critical operations of the organisation survive, yet there is emerging clear and strong evidence to suggest that not only do the conflicts damage the quality of the product, but also wastes valuable time and effort, as budgetary padding appears to be the norm wherever top management demand that a budget is met. Theorists advocate that there is a need to move towards consultation and co-operation between employees and the organisation to ensure greater utilisation of the scarce resources budgeted. In doing so, overall employee motivation will be enhanced and therefore performance will improve. The development of co-operation regarding budgets is not the only solution to the problems posed by budgets and budgetary controls. It appears that the budgetary cycles as businesses knows them will be faced with radical change over the coming years as companies grapple with ensuring that they provide a successful tool with which to create motivation of the workforce and thus ensure the desired performance. Developing these skills and goal interdependence may be an important way that managers can prepare their organisations to grapple with change, adjust and make their budget and other systems work, and distribute and use scarce resources effectively. ...read more.

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