Accountability, representation & control Essay Example | Topics and Well Written Essays - 1250 words

Accountability, representation & control - Essay Example Accounting is the means to measure performance and maintain control in the organization. All organizations and businesses utilize some form of accounting whether it is basic ledgers or management and cost accounting. Accounting is the means to identify elements of sales, expenditure and profit as well as budgets, inventory and forecasts. Thus it is a method of achieving accountability as it monitors and accounts for every financial transaction and thus keeps a check on fraud, embezzlement and suspicious acts within the firm. However, accounts focuses on quantitative rather than qualitative data. It does not measure qualitative performance data such as satisfaction, achievement of goals, job commitment and quality among others. Accounting does not take into account the environmental degradation, labor practices, work environment and safety rules and regulations. Thus the issue of whether accountability in an organization is best measured by accounting is a complex one. Accountability is the willingness to assume responsibility for one’s actions. In the organizational context, every employee is responsible for his actions at the workplace and thus he should be held accountable for them. In order to be effective in maintaining accountability within the organization, organizations need to be focused on setting goals that are measurable and train employees to feel accountable for their actions. Consequences of their actions should be predefined and communicated and the organization should implement the rules that it has set. (Building Organizational Accountability). Apart from internal accountability, the concept of the organization being accountable for its actions is extremely important. As organizations develop into powerful systems that affect the world and its citizens they need to be held accountable for their decisions and policies. Accountability in the financial context does control performance and finance; however it is not really effective in contr olling child labor and sweat shops. Is accounting the most effective means of achieving accountability in organizations? All organizations are involved in book keeping; they keep accounts of their costs and expenditure and their sales and revenues. This results in accountability of the actions of managers and employees. At a higher level for corporations, audits provide accountability for processes and procedures as well as transparency and accuracy of accounting records. Internal audits result in employees being accountable to the company for their actions and external audits result in the organization being accountable for its procedures and policies. The Enron case resulted in stricter guidelines for organizations regarding representation, transparency and control. The Sarbanes Oxley 302 and 404 focus on corporate governance and practices that better control the organization’s practices and prevent corruption. However, as accounting and auditing deal invariably with financ ial aspects and maximization of shareholder value, it is vital to establish the basics of accounting which is cost. The concept of cost is the fundamental of finance. However, in accounting cost is monetary cost associated with consumption of resources whereas in economics cost includes opportunity cost which is the cost of foregone alternatives. In actuality, consumption of a resource leads to many costs including the cost to society, cost to environment and other living things for example; an organization manufacturing furniture will only take into account the cost of labor, materials and processes but not the costs of deforestation and environmental degradation. Thus the concept of cost used in accounting is limited and hence every control or measure implemented by accounting methods is limited to that definition of cost that does not hold the organization for costs it imposes on others. (M. Chwastiak) This results in the