Question:
Write an essay on financial information.
Accounting ethics is mainly making, disclosure, as well as presentation of the financial information ethically and morally so that users of the financial reports can obtain accurate data. The undertaken case study is on a construction company named Strong Built Construction Company, which has been slumped because of strict measures applied by the Government. The Chief Executive Officer (CEO) of the company is Bill Strong, who has significant contribution in the success of the company (Becker, 2006). The last 2 years the company performs equally and manages equal level of income. The board of member of the company has arisen question about the current approach to the executive remuneration and the reward of company share as compensation. Bill Strong has given the example of company agency theory approach in order to argue with the executive that with the compensation plan the employees of the company will get maximum advantages from the company that help to motivate the employees to give their best to the company(Foss and Stea, 2014). He clarified that the fundamental consideration requires applying within the accounting system for deciding the compensation of the executive.
Constituents of the remuneration package
The remuneration package of the company is as follows:
Basic Salary
The basic salary of the employees is mainly a fixed salary, which the company decide as per the qualification, skill, and talent of the employees(Gold, Gronewold and Pott, n.d.). It usually cash payment and a well structured basic salary plan help in supporting as well as retaining the executive talent.
Annual Bonus
In order to encourage the employees for giving additional effort in their job the company can give additional reward for their achievement and accomplishment of the determined objectives. This helps the employees to be motivated and to achieve the predefined objectives.
Long term incentives
The long term incentives are basically changeable compensation that use to be given to the employees for motivating them for their long term performance of the employees and the company(Hermanson et al., 2011). The incentives are usually provided by common stock of the company.
Other benefits
The employers usually provide the benefits to the employees like insurance plan and pension plan from the company along with different types of savings plan.
The motivation is a factor that use to stimulate the desire as well as the energy to act or behave in a particular manner. The motivational factors can be internal as well as external which help in stimulating the wish to improve the tasks or job assigned to the individual as well as in achieving the desired goal . The motivation uses to come from the both conscious as well as unconscious aspects such as intensity of wish or requirement, incentive or else the value of reward for accomplishment of the goal and lastly the expectation of the individuals. These are factors or reason of the behavior of the individuals in a certain way. The employees are motivated by the both external as well as internal factors as well as it is vital to understand and recognize the factors in order to bring out the best performance from the employees(Ims, Pedersen and Zsolnai, 2013). The difference between the extrinsic factor as well as the intrinsic factors and their effect should be recognized so that employers or the management of the company can use them as per requirements. The extrinsic factors are mainly the external influences, which use to motivate the employees such as reward, commission, bonus like monetary benefits or else vacation, gift voucher, or any gift these are the rewards for the achievement of the employees help in improving the motivation of the employees (Jeffrey, 2007). The intrinsic motivation use to come from the inner soul of an individual. While a person intrinsically motivated he/she use to enjoy the work assigned to him/her, love to do the job, thus the urge of improving comes from internally. Besides this, the company provide different types learning and training sessions in order to improve the skill and talent of the employees, which help in stimulating the desires of improving personally as well as professionally, which improve the performance of the company.
There are significant relationships between extrinsic as well as intrinsic motivation. The studies of the intrinsic as well as extrinsic motivation rely on the one dimensional model. There are negative relationships between the intrinsic as well as extrinsic motivation. The intrinsic motivation comes from internally and when the external motivation added the motivation use to increase(Pepper and Gore, 2014).
Risk seeking employees normally defines the term which assists in the increment of the more volatility and the uncertainty in the increment. Therefore it also enacts the increment of the exchange which assists in the creation of the anticipated higher return and therefore pursuing of the investment and the estimation of the investments are carried out for the appropriate accessing of the systems which are necessary for the enhancement of the investments and therefore created the conduct even more because of intelligence and therefore the risks are taken into consideration for the investment (Kimmel, Weygandt and Kieso, 2007). Therefore it also helps in the increment of the implied risks that are necessary for the growth of the interest which are helpful for the proper mitigation of the risk in the organization.
Risk adverse employees are symbolic for the appropriate enhancement of the performance of the employees which assists in providing proper judgment to the employees. It also helps in creating the increment that assists in the improvement of the workforce in the public sectors and therefore it also provides assistance in the participation of the employees who are facing risks. This is responsible for the creation of altruistic motivation.
The core focuses of conventional agency theory in on the motivational influence of the compensation on performance of the employees. The agency theory has brought the economic perspectives in order to decide the executive compensation and which the firm must apply. The agency theory interlinked with the compensation of the executive and the performance of the firm, ROI or return on the investment along with the stockholder interest. The influence of the compensation plan on the behavior of the managerial staffs as well as the performance of the company is elucidated in the agency theory, which illustrated that the employees are motivated for attaining their objectives (McMillan, 2010). Thus, it can be state that there is a link between the compensation plan and the performance of the employees as well as the performance of the firm.
The financial benefits are provided by the companies to their employees in order to motivate them to achieve their task objectives. The financial benefits that are given to the employees such as fringe benefits, paid vacations, and bonus that helps to motivate the employees (Audit and assurance (United Kingdom), 2007). The organization commonly gives financial benefits to the employees who are having one year of experience and it is the extra benefits that are provided to them.
The fairness consideration is very much important while determining the compensation plans. The compensation committee should include fair plans for compensation and determining the appropriate compensation strategies (Benefit from financial advice, 2010). Justice and equity are related concepts that have been connected with the perception of fairness. Reward fairness and equity pay is related to the attitudes of the employees that help in the development of the company and also enhancing pay satisfaction (Pickett, 2005). Therefore, it can be concluded that the perception of the employees towards fairness compensation plans is closely related to the behavior, attitudes and performance of the employees. Fairness or equity arises in different context in the compensation plan. Some of the major areas are as follows:
The perception of fairness can influence the ability of a company to attract, motivate and retain its employees (Braiotta, 2004). The fairness or equity is achieved when return on equity is equal to the investment. Therefore, fairness or equity achieved when the pay is equal to the value of work performed.
The executive compensation committee provides benefits in determining the compensation in order to encourage and motivate employees towards their objectives. The committee is mainly responsible to oversee the design, planning and implementation of the compensation plans and benefit strategies of the organization which includes base salary, retirement plans, incentive and equity compensation plans and the director compensation (Saxena et al., 2010). The benefits are provided to encourage employees and achieving the goals of the company. The main purpose of the compensation committee is to provide benefits to the employees through benefits plans. The compensation plan will help to support the key objectives of the company and it is also considered as pay for the performance.
There are both practical and legal reasons for the board of directors to establish the compensation committee. The listed organizations are required to have the compensation committees that include independent directors (Catuogno, Arena and Viganò, 2016). The compensation committee helps to deal with difficult situations and operating all the activities of the organization. It is significant for compensation committees to have autonomy in respect to the incentive compensation plans to ensure that awards under the plans qualify for exemptions. The size of the committee should be composed of from 3 to 5 members. The members of the committee were commonly appointed by the board of directors. The corporate governance assigned task of the appointing committee members which includes members of compensation committee. Therefore, the corporate governance is responsible to focus on establishing qualifications for the board membership. It is significant that the compensation committee should be experts in the compensation but they should understand the costs, risks, mechanics and other ramifications of the compensation decisions (Credit unions, 2006).
Conclusion
The compensation for the executives along with the employees would get financial benefits which will help to motivate them to achieve their goals. The benefits of the employees that should be implemented by the company are retirement plan, life insurance, stock ownership plan, paid vacation and disability insurance (Executive compensation, 2006). The compensation to the employees is the authority of the executives and the benefits that are provided by to the employees in the form of financial matters help to motivate the employees in achieving the goals of the organization.
The aim of this research provides the auditor to create the statement ISA 700 for the purpose of reduction of the audit expectation gap. The auditor believes that the financial statement helps in the providing the fair and the proper statement for creation of the accurate report for the creation of the true and the value presented which helps in the creation of the framework for the financial reports (Gold, A, 2012). Thus for the purpose of this the financial reporting framework is created with the creation of the financial accounting framework and thus it also helps in the enhancement of the framework. Therefore the objective that lies in the paper is that the investigation of the users statements that are helpful for the creation of the comparison of the two process that are included for the creation of the comparison between the management and the experienced auditors assignment is made for the enhancement of the responsibility and thus it also helps in the development of the strategies that are required for the creation statement for the purpose of experiencing and thus the responsibilities comes under the code of the ISA 700 (Spiceland, 2009). The audit report creates the significance of the nature and the scope of the financial reports that are helpful for the enhancement of the responsibilities of the expectation. For this purpose the auditor’s reports are created for appropriate opinions that helps in carrying out the responsibilities and thus it also provision the proper facilities for the detection of the frauds and also helps in the provision of the proper structure for the company.
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Group no. |
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1. |
Persistence of Audit Expectation Gap |
The implementation of the ISA 700 entirely can be done by the help of the expectation gap. It also helps in carrying out the changes that helps in the creation of the report for the auditor and thus it also helps in the reduction of the expectation gap for the purpose of the enhancement of the perceptions. It also helps in predicting the patterns that are for matching purpose of the user and the responsibilities of the user for the carrying out successfully |
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2. |
Audit Expectation Gap |
The expectation gap made by the audit helps in the creation of difference between the users and the financials and thus t is also seen that the audit expectation gap concerns about the financial expectation gap and thus it also helps in the auditing the financial statements. The creation of the differences also helps in the development of the true value presented by the auditor. |
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4. |
Responsibility of the auditor |
The vital responsibility that an auditor carries out is the preparation of the fair value and the true value of the financial statements. it also helps in the determination of the fraudulency and the omission of the financial statements are detected. |
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5. |
Effectiveness of Auditor’s report to reduce audit expectation gap |
With the proper evaluation of the reports it can be concluded that the expansion of the report created impact on the auditors. Thus the changes are made for the creation of the perception of the auditor which is required for the changes. |
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6. |
Effect of the financial statement on audit expectation gap |
It is evaluated that the acknowledgement must be made for the creation of the comparison for the uneducated students and thus it also helps in the evaluation of the effects that are required for the enhancement of the auditors for the creation of the report. Thus it also helps in the creation of the differentiation between the students and the auditors. |
The foremost important objective is the checking manipulation which helps in the realization for the existence of the manipulation and thus it also helps in providing the report to the auditor. For the purpose of checking the manipulation scenario, the competitors asked the questions that are helpful for concerning the values that are required for the enhancement of the survey for the purpose of the investigation (Executive compensation, 2011). The total mean answers were seemed to be 4.81 for the purpose of the entire treatment of the report and thus around 2.20 of the treatments were merely done. Thus on the other hand the accepting of the statement is done for the proper creation of the judgment that helps in the enhancement of the rating and thus it also helps in providing the distinctive means of the enhancement techniques that helps in carrying out the process of manipulation judgment and the behavior of each group (Ezra, 2015).The audit expectation gap helps in the creation of the variation of the public expectations and hence the growth of the expectations is made for the auditors. It provides the proper framing of the knowledge and thus it also helps in focusing on the significant issues. The researcher also focuses on the evaluation of the audit expectation gaps that are created during the audit expectation gap of Ghana (Agyei, A, 2013). Thus the profession is essentially required for the creation of the reasonable expectations that must be used by the different users.
The Audit process is done for the creation of the enhancement of the audit types and thus it also helps in the creation of the increment of the expectations which seems to be useful for the proper creation of the accounts of the company (Johnston, 2010). Thus it also helps in providing the priority to the company for the creation of the expectation gaps and thus the presentation of the audit is created for the variance of the expectations with the creation of the originality report by the auditor. For this purpose the rigorous form helps in the origination of the report that are expected to be presented by the external auditor.
For the primary object of this participant’s selection of this research, researches apply the question set to ask the question. These techniques are commonly used by the researchers and also to seem to be purposive and convenient. The purposive sampling procedures are mostly utilized for the purpose of the formation of the attempt in accordance to reflect the collection of respondents by the knowledge. The convenient sampling methods are used for the object to the progress of these systems (Kuo and Yu, 2014). Moreover, it assists to enhance of questionnaires which are strictly responsible for creating this rigorous approach.
The research of the questionnaires mostly consists of the only number of 50 questions which are incorporated for the object of continuation of this favorable response. It also seen when the 30 questions are mostly returned from auditors and rest of the 35 questions is also returned by the stockbrokers. Conversely, from these answered 20 questions are commonly seemed to be functional for each group.
The study also assists in the attending and the collection of the primary data that is necessary for the appropriate participation process. It is collected with the assistance of the given data and the answers are received from the participants. The near ending of the questions occur and therefore it also provides assistance in the improvement of the score which appeared to increase from 1 to 5. Therefore this helps with the transition of strong disagreement to strong agreement and there after the anonymity was followed by the continuation and the conducting of the study.
The fraud detection is used for the creation of the continuation of the primary objectives that are helps in the continuation of the primary objectives for the study of the process. the vital objective is that the auditing structure helps in the creation of the modification for the development of the objectives that creates the proper reporting statement. Thus it also helps in the continuation of the business scenario. As per the people and the process of the organization, the dissatisfaction of the objectives are seemed to b taking place with the help of the proper acquisition of the band gaps between the expectation gaps. For this reason the two flaws are detected for the purpose of discussing the expectations and henceforth the annual report of the audit is presented.
References
Agyei, A, Aye, BK &Owusu-Yeboah, E 2013, ‘An assessment of audit expectation gap in Ghana’, Int. J. Acad. Res. Account.,Financ. Manage. Sci, vol. 3, no. 4, pp. 112-8.
Audit and assurance (United Kingdom). (2007). London: BPP Learning Media.
Becker, C. (2006). The effects of type of accounting standard and outcome knowledge on juror evaluations of auditor responsibility.
Benefit from financial advice. (2010). BDJ, 208(8), pp.369-369.
Braiotta, L. (2004). The audit committee handbook. New York: Wiley.
Catuogno, S., Arena, C. and Viganò, R. (2016). Compensation Committee Quality and Effective Executive Remuneration. IJBM, 11(6), p.118.
Credit unions. (2006). [Washington, D.C.]: U.S. Government Accountability Office.
Executive compensation. (2006). Washington: U.S. G.P.O.
Executive compensation. (2011). Washington, D.C.: American Bar Association, Joint Committee on Employee Benefits.
Ezra, D. (2015). Defined-Benefit and Defined-Contribution Plans of the Future. Financial Analysts Journal, 71(1), pp.56-60.
Foss, N. and Stea, D. (2014). Putting a Realistic Theory of Mind into Agency Theory: Implications for Reward Design and Management in Principal-Agent Relations. European Management Review, 11(1), pp.101-116.
Gold, A, Gronewold, U &Pott, C 2012, ‘The ISA 700 auditor’s report and the audit expectation gap– Do explanations matter?’,International Journal of Auditing, vol. 16, no. 3, pp. 286-307.
Gold, A., Gronewold, U. and Pott, C. (n.d.). The ISA 700 Auditor’s Report and the Audit Expectation Gap – Do Explanations Matter?. SSRN Electronic Journal.
Hermanson, D., Tompkins, J., Veliyath, R. and Ye, Z. (2011). The Compensation Committee Process*.Contemporary Accounting Research, 29(3), pp.666-709.
Ims, K., Pedersen, L. and Zsolnai, L. (2013). How Economic Incentives May Destroy Social, Ecological and Existential Values: The Case of Executive Compensation. J Bus Ethics, 123(2), pp.353-360.
Jeffrey, C. (2007). Research on professional responsibility and ethics in accounting. Amsterdam: Elsevier JAI.
Johnston, (2010). Recycling the surgical audit. CA, p.89.
Kimmel, P., Weygandt, J. and Kieso, D. (2007). Financial accounting. Hoboken, NJ: John Wiley.
Kuo, C. and Yu, S. (2014). Remuneration Committee, Board Independence and Top Executive Compensation. Journal of Risk and Financial Management, 7(2), pp.28-44.
McMillan, E. (2010). Not-for-profit accounting, tax, and reporting requirements. Hoboken, N.J.: Wiley.
Pepper, A. and Gore, J. (2014). The economic psychology of incentives: An international study of top managers. Journal of World Business, 49(3), pp.350-361.
Pickett, K. (2005). Auditing the risk management process. Hoboken, N.J.: Wiley.
Saxena, R., Srinivas, K., Rai, U. and Rai, S. (2010). Auditing. Mumbai [India]: Himalaya Pub. House.
Spiceland, J. (2009). Intermediate accounting. Boston: McGraw-Hill/Irwin.
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