Roger Hussey

An Examination of Auditor Independence Issues from the Perspectives of U.K. Finance Directors

This paper presents an analysis of the opinions of U.K. Finance Directors – also known as Chief Financial Officers (CFOs) in North America – on factors which may effect the roles and responsibilities of the external auditor to the organization. A number of proposals have been put forward over the years to enhance auditor independence and these were treated as dependent variables in this study. A questionnaire was mailed to 3 000 named Finance Directors and 776 useable replies were received. From the responses to the questionnaire, three independent variables were identified: opinions on the value of the audit in general; opinions on the impact of the audit on the organization; and the relationship between the Finance Director and the auditor. The results reveal that those Finance Directors concerned in general about the value of auditing favoured the banning of non-audit work and the rotation of auditors. In addition, those Finance Directors with good relationships with their external auditors preferred the banning of non-audit services and the rotation of external auditors. Those respondents favouring the separate regulation of auditors were also concerned about the impact of the audit on the organization. The results of this study shed some light on the sensitivity of U.K. Finance Directors to ethical issues regarding external auditor independence.

Break-even Analysis

Break-even analysis is concerned with predicting costs, volume and profit as the level of activity changes. The theory of break-even analysis is derived from the principles of marginal costing and the assumptions and definitions of fixed and variable costs and their behaviours discussed in earlier chapters are used. Break-even analysis can be conducted by constructing a chart or applying a formula. A break-even chart shows the approximate profit or loss at different levels of activity. A formula is frequently used to calculate the break-even point which is the level of activity at which the company makes neither profit nor loss, but breaks even.

The Pretence of Publishing: A Beneficial Conspiracy for Academics

Abstract Publishing activity as a measure of academic performance is a fertile research area and, frequently, leads to suggestions as to how such activity can be increased or receive greater recognition. This Commentary argues that the available evidence reveals that the majority of academics do not engage successfully and consistently in publishing. It is in the interests of policy-makers, administrators and academics, however, to maintain the illusion of its importance and prevalence. This serves both to promote the status and rewards of academics and it avoids the necessity of deciding how they should spend their time and how this should be measured and rewarded.

Cost and management accounting

Preface Acknowledgements Cost and Management Accounting in Context Cost Classification Costing for Materials Costing for Labour Integrated and Interlocking Accounts Allocation and Apportionment of Overheads Overhead Absorption Job and Batch Costing Contract Costing Continuous Operation Costing Process Costing By-Product Costing and Joint Product Costing Marginal Costing Marginal Costing and Decision-Making Break-Even Analysis Absorption Costing and Marginal Costing Compared Budgetary Control Budgets Standard Costing: Materials and Labour Standard Costing: Overhead Variances and Sales Variances Capital Investment Appraisal Developments in Management Accounting Appendix A: Present Value Tables Appendix B: Glossary Appendix C: Outline Answers to Practice Questions Index

Developments in Management Accounting

Over the last 10 years or so there have been a number of developments in management accounting. In part, these changes have been brought about by dissatisfaction with the more traditional approaches to management accounting and the information which has been generated. Other influences have been related to changes in the nature of organisations and the activities they undertake, and the increasingly complex and competitive business environment.

The Accounting System

In Part I we discussed the importance of financial information, together with the main users and uses. In order to generate financial information, a business needs to establish an accounting system. The nature of the system depends on the type of business and the size of the organisation, but there are common features since procedures must be established to allow all financial transactions to be recorded. These procedures involve raising source documents, such as invoices, purchase orders and credit notes, so that those responsible in the business are made aware that a transaction has taken place and the details of the transaction can be recorded.

Discounted Cash Flow

In Chapter 19 we looked at two techniques of investment appraisal, the payback period and the accounting rate of return. However, as we discussed, both these techniques suffer from severe limitations. Because capital investment appraisal is so crucial to decision-making, managers need to use a technique that provides valuable financial information. Discounted cash flow (DCF) does just this.

The Statement of Financial Position

non-current assets derivative financial assets 10 4,831 5,468 2,382 4,831 2,382 other financial assets 12 4,257 15,611 2,123 4,644 2,480 Intangibles 15 4,073 8,815 4,289 4,238 4,606 Investment properties 16 217,617 215,282 220,368 217,617 220,368 Property, plant and equipment 17 5,965,492 5,924,407 5,854,426 5,993,474 5,883,089 Investment in subsidiaries 37 6,509 6,509 6,509 Investment in associates 38 19,468 19,558 19,558 157,748 142,887

Specific-order Costing

You may remember from Chapter 1 that the different costing methods used for establishing actual costs can be divided in to two main groups according to the nature of production. Some businesses make products or provide services as continuous operations — such as a brewery producing cans of beer or a utility company providing electricity, gas or water — and we shall be looking at the costing methods used in these types of businesses in Chapter 17. Other businesses carry out their activities at the specific order of clients — such as a building firm that builds a house to meet the specific requirements of a client or an electrician who repairs a washing machine. In this chapter we shall be looking at the main specific-order costing methods used by these types of businesses.

Standard Costing — Overhead Variances and Sales Variances

When we examined absorption costing in Chapter 7, we saw that overheads could be charged to production in a variety of ways. The budgeted overhead for the period was divided by the appropriate units of base, a measure of time being the preferred method. One method of measuring output is in the form of standard hours of production. This is the method we will use in this chapter when considering overhead variance analysis.