Management Accounting Steel Pty Ltd.

Question: Discuss about the Management Accounting for Steel Pty Ltd. Answer: Introduction: The current scenario mainly depicts the situation in which the fundamental laws of acquisition are being discarded to achieve sustainable growth and profitability. In addition, the evaluation of cash flow statement is essential to determine the overall liquidity and viability of the financial statements presented by Steel Pty Ltd. In addition, the two threats, which could arise if the fundamental principles are ignored, are as follows. Self interest Threat: The overall self-interest threat mainly indicates that the auditor has been compromising and using unethical measures to evaluate the financial report. In addition, scenario 1 mainly portrays the unethical measures, which is suggested by CFO. In this context, Zeff (2016) stated that audit association board and IFRS effectively monitors the auditors, which helps in reducing the unethical practises conducted in organisations. On the other hand, Power and Gendron (2015) criticises that some auditors to increase their personal gain help companies to identify the loopholes in accounting standard, which might support their future endeavours. This threat is only conducted if the auditor is forced or willing to compromise with the CFO of the company. Advocacy Threat: When an auditor uses unethical measure and changes the fundamental accounting rules for supporting the suggestion of the company head, then it is mainly knows as advocacy threat to the fundamental principles. Moreover, the auditor to comply with the request of the CFO of Bolts Ltd mainly neglected the cash flow statement of Steel Pty Ltd and only depicted his analysis on the profit and balance sheet statement. Bateman et al. (2014) cited that auditors to increase their personal income mainly compromise with the statutory rules laid out by the IFRS. On the other hand, Mironeasa and Codina (2013) criticises that due the monitoring and punishment process, auditors are keen on not supporting the unethical endeavours of the organisation. Identifying the fundamental principles that could be breached: After evaluating scenario 1 major fundamental principles, which are at risk is as follows. Professional behaviour: The above fundamental principle mainly states that an auditor should comply with the laid out rules and laws, which are depicted by Associate Chartered Accounts (ACA). In addition, in scenario 1 the auditor mainly presents a risk to the fundamental principle of ACA and might portrays the report without adding the evaluation of cash flow statement. Griffith et al. (2015) mentioned that with the help of lucrative offers auditors inflate the financial statement of the company, which in turn help in attracting potential investors and increase liquidity of the organisation. Objectivity: The Second fundamental principle that is at risk is objectivity, which mainly depicts that an auditor should not allow any bias, conflict or under influence statement to support their personal endeavours. However, the auditor in scenario 1 mainly helps the CFA of Bolts Ltd and is bias in evaluating the financial performance of Steel Pty Ltd. Serbanica et al. (2015) stated that fundamental objective mainly help in reducing the unethical measures conducted by auditors. Scenario Second: Evaluating the scenario with the help of American Accounting Association decision-making model and recommending the action taken by Luke: Figure 1: Showing the steps in American Accounting Association decision-making model (Source: Mintz 2016) Step 1: Establishing facts of the case Luke effectively knows that there is a personality conflict between the Zane and the client, which mainly resulted in the registration of a formal complaint. However, the complaint also pointed out that Zane was late and missed certain issues within the audit. However, after the evaluation of the books, Luke found out that Zane had conducted an effective audit. Step 2: Identifying ethical issues The ethical issue is late appearance of Zane in the work place and personality conflict with the client. Step 3: Identifying norms and principles related to the case Customer satisfaction Punctuality in work place Step 4: Identifying alternative course Zane and Luke both could be assigned to the client so that audit and client satisfaction both are met. Luke could adopt methods of Zane to continue identifying issues in the audit report. Zane could apologize to the client and continue his work in the auditing firm Step 5: Identified norms are overlaid in alternative options Adoption of Zanes methods could help Luke in increasing its service quality and ensuring high end customer service. Zanes apology to the client could increase customer satisfaction and punctuality at work place, which will be beneficial to the audit firm. Step 6: Considering the consequence of the action Consequence 1: Zane will leave the job on Ego basis and audit firm will lose an effective auditor. However, the audit firm will again trust of the client, which might help in advancing future business. Consequence 2: Zane will not teach Luke his methods of audit and instead leave the auditing firm. Step 7: Decision is made Zane will apologize to the client and continue to work for the audit company. Table 1: Showing the decision in the terms of American Accounting Association decision-making model (Source: As created by the author) Evaluating and recommending the scenario with the help of Mary Guy decision-making model: Figure 2: Showing the steps in Mary Guy decision-making model (Source: Craft 2013) Step 1: Defining the problem Late appearance of Zane in the work place and personality conflict with the client Step 2: Identifying the goals to be achieved To increase customer satisfaction by reducing complaint of the client To increase punctuality in work place Step 3: Listing all possible solutions to the problem Taking a apology letter from Zane and providing it to the client Terminating Zane on the basis of irregular punctuality Providing evidence of good work conducted by Zane to the client Training Luke with Zane to increase efficiency of the workforce Step 4: Evaluating each alternative to determine the requirement best suited for the situation Providing evidence of good work conducted by Zane to the client Taking a apology letter from Zane and providing it to the client Step 5: Identifying the action that is most likely to produce the desired consequence of the situation Producing an apology letter to the client from Zane and depicting the significant issues that had been identified by him. Step 6: Make a commitment to the choice and implement it Encouraging Zane to maintain punctuality in work place and increase customer satisfaction level. Table 2: Showing the decision in the terms of Mary Guy decision-making model (Source: As created by the author) Scenario Three: Listing the key assertions at risk in relation to accounts payable: After evaluating scenario 3 the Transaction-Level Assertions and Account balance Assertions are at risk. In addition, the identification of key assertion mainly helps in evaluating the efficiency of the audit report. Mock and Fukukawa (2015) mentioned that identification of adequate assertion mainly helps the auditors to evaluate the accounts payable statement of the company. Effectively depicting the justification for each assertion: Transaction-Level Assertions: The wrong depiction of transitional data might mainly reduce the efficiency of the overall financial statement and portray inaccurate profitability of the company. Moreover, the assertion mainly helps in evaluating the slow flow of information within the accounts department of Peak Sawmill Limited. Johnstone et al. (2013) cited that owners use changing prices of commodity to reduce their profitability and retain unethical personal income from the business. Account balance Assertions The unprocessed invoices, timing difference and credit request mainly change the overall account balance of the company. In addition, the identified account balance assertion mainly depicts the low responses of the management to the accounts department regarding revised prices of the logs. In this context, Mueller et al. (2013) stated that due to the positive impact of rules and norms government are able to reduce unethical measures conducted by companies Depicting a substantive test for each assertion, this could help in obtaining appropriate audit evidence: Inquiries, observations and inspections: The Transaction-Level Assertions could be effectively controlled with the help of inquires, observations and inspection test conducted on Peak Sawmill Limited. These tests could mainly help in evaluating the right transactional prices quoted by the log suppliers. In additional, this test could mainly help the auditor to record right transactional data in accounts book. Abdel (2013) mentioned that continuous inquires and inspections mainly help in maintaining the ethical practices conducted in an organisation. In addition, the evaluation of the transactional level assertion could mainly help auditors to depict the adequate transaction and determine accurate financial position of the company. Evaluating and reperforming clients activities: The Account balance Assertions could be effectively evaluated with the help of evaluation and reperforming of clients activities. In addition, reperforming clients activities could eventually help the auditor to effectively evaluate the actual prices of the logs as per the transactions. Moreover, this test evaluation mainly helps in providing accurate transaction data with correct price structure depicted from the suppliers. On the other hand, Stanley and Marsden (2013) criticises that some auditors mainly uses unethical practises to inflate balance sheet and depicts wrong financial statement of the company. Reference: Abdel-Khalik, A.R., 2013.Accounting for Risk, Hedging and Complex Contracts. Routledge. Bateman, N., Hines, P. and Davidson, P., 2014. 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