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Corporate Reporting

Corporate Reporting is the key subject the exhibit the practical understanding and practices of the Professional Chartered Accountants in the 21st Century.

Becoming a Business Leader and a Professional Accountant in the 21st Century has become a key field of study which requires people not only with the Certification but also with pragmatic experiences to stay within the Corporate World and become the best in such a Competitive industry.

However, Becoming a Professional Accountant is not something that one rises up and do overnight. It requires Commitment, Discipline and most importantly Time management over a long period of time which significantly becomes a lifestyle.

With a lot of business books written in this field of study, only a few really addresses the subject matter and give guidelines to students and practitioners. This has resulted into a lot of students failing the subject over several sittings and also not equipping them enough to practice what they study in the Corporate World.

Advanced Audit and AssuranceAudit and AssuranceBusiness Management and Information SystemsCorporate FinanceCorporate ReportingManagement AccountingPublic Sector Accounting and FinanceStrategic ManagementTaxation and Fiscal Policy


mock exam

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Join our revision session for ICAG May 2018 Examination.

Thank you for visiting our website today. Our team of Expert Professional Educators has put together the following documents, analysis and revision time table for the May 2018 examination.

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The role of business ethics cannot be over – emphasized. This is because, business ethics an important topic to the success of a business and gaining competitive advantage.

You can relate very well to this because of the continuous news release of businesses engaging in several non – ethical behavior as well as the impacts of this on the businesses.

In today’s post, we will spend time to discuss in details the role of business ethics.


So what is Business ethics?

Business ethics (corporate ethics) is a form of applied ethics or professional ethics that examines ethical principles and moral or ethical problems that arise in a business environment. It applies to all aspects of business conduct and is relevant to conduct of individuals and entire organizations.


Business ethics are govern by certain rules. Rules are a collective idea of what is right and wrong for the good of a group of people the breach of which results into punishment.

Ethics are a set of moral principles to guide human behavior.

Sources of Rules

  • The law: This is the highest source of rule from which all other rules must originate or conform. Any rule that is not conform to the law, which is the constitution of a country, then it, means such rules are illegal and cannot be enforced on any individual.


  • Non- legal rules and regulation: These are rules issued by some specific bodies to regulate the behavior of its members. These may not necessarily be conforming to the laws of a certain jurisdiction due to how complex and global some of them are. These may include; International Financial Reporting Standards (IFRSs), International Accounting Standards (IASs), International Standards on Auditing (ISAs), Ghana Stock Exchange regulations, among others.
  • Ethics: Ethical behavior is seen as the highest level of behavior that society expects.

Business Ethics – Corporate Governance Concepts

  • Fairness: This means directors must have systems and values that take into account everyone who has a legitimate interest in the company, and respecting their rights and views. An example of directors’ fairness can be how they relate to ordinary and preference shareholders and how they treat other stakeholders.
  • Openness or transparency: This means open and clear disclosure of relevant information to all stakeholders and not concealing information when it may affect decisions.  Disclosures include; financial statements, narrative notes (directors’ report, the operating and financial review).

 Main Reasons / Importance of Openness

  • To solve the agency problem
  • To confirm the level or strength of internal controls for reliability
  • Market prices of shares

 Circumstances for Concealment

  • The future strategy of the company
  • Confidential issues relating to individuals.

NOTE: To ensure this, there has to be independent non-executive directors.


  • Probity /honesty: This means telling the truth and not misleading shareholders and other stakeholders. Management must be honest with preparing and preparation of financial statement and other operations of the organization.
  • Responsibility: This means management accepting the credit or blame for governance decisions.


The South Africa King Report stressed that; there must be a system that allows for corrective action and prevailing mismanagement to ensure to ensure responsibility.


NOTE: There is always a battle or contention as to the responsibility of manager’s towards each stakeholder.


  • Accountability: This refers to whether organizations (and its directors) are answerable in some way for the consequences of their actions.

NOTE: The UK Cudbury report stressed that making the accountability work is the responsibility of both parties (directors and stakeholders).


  • Reputation: This means how an organization fulfills other principles of corporate governance. It is often a very valuable asset of the organization.


  • Judgement: This means that the board making decisions that enhances the prosperity of the organization. This is ensured by directors having multiple conceptual skills to management that aim to maximize long-term returns.


  • Integrity: This means management being straightforward in dealing and completeness. It means, adhering to principles of professionalism and probity. The Cudbury report stressed on the need for personal honesty and integrity of preparers of accounts. This is one of International Federation of Accountants (IFAC) codes of ethic.


Fiduciary responsibility: This means managers have a duty of faithful service in respect of stakeholders and their behavior must always reflect it.

The boundaries of management Discretion:

The stakeholder view of company objectives:

 Each stakeholder has an objective and managers must ensure to balance off all these through their actions and discretion.

The consensus theory of Company objectives

This theory was developed by Cyert and March. They simply argued that, objectives are always not selected or controlled by management but differing views of stakeholders. It means management takes into consideration the objectives of stakeholders.


Ethics and morality are about rights and wrong behavior. Western thought about ethics is based on two ideas; Duty & Consequences. Ethics is also influenced by the concepts of virtue and rights.

Organizations always have complexity in dealing with the political and social environment.

Whiles the political environment consists of laws, regulations and government agencies, the social environment consists of the customs, attitudes, beliefs and level of education of citizens.


This approach judges actions by reference to their outcomes or consequences.

Utilitarianism :

This refers to choosing the action that is likely to result in the greatest good for the greatest number of people. It was propounded by Jeremy Bentham.


It states that an act is ethically justified if decision makers freely decide to pursue their own short-term desires or their long-term interest.


It is mostly by shorter-mists. That’s long-term goals are sacrifice for short-term goals.


This concept states that ‘different views may exist on morality. It means there are considerations of different range of perspectives or viewpoint in order to establish a course of action.



This refers to the view that a wide variety of acceptable ethical beliefs and practices exists. The ethics that are most appropriate in a given situation will depend on the conditions at that time.



  • It highlights our cognitive bias in observing with our senses(we see only what we know and understand)
  • It highlights differences in cultural belief.
  • It resolves moral conflicts between different cultures. The philosopher Bernard Crick states that, each culture has an absolute.
  • More flexibility and greater success for multinational companies.



  • There is always a fundamental contradiction between different cultures.
  • It leads to a philosophy of ‘anything goes by religious leaders.
  • It contradicts with natural laws; this view was by the atheist scientist Richard Dawkins.


This is the view that, there is an unchanging set of ethical principles that will apply in all situations, at all times and in all societies. 


  • Absolutists: believe that certain actions are always wrong – no ‘ifs’ or ‘buts’.
  • Relativists/pluralists: believe that that nothing is objectively right or wrong and that ‘right’ or ‘wrong’ depend on the prevailing view of a particular individual, culture, or historical period.
  • Consequentialism: whether something is right or wrong depends on the consequences, or outcome, of the act.
  • Utilitarianism: this is a branch of consequentialism that states that the ethically right choice in a given situation is the one that produces the most happiness and the least unhappiness for the largest number of people.
  • De-ontological: this is a duty-based approach to ethics and is concerned with what people do, not with the consequences of their actions. People have a duty to do the right thing because it is the right thing to do.


Managers have a duty (in most enterprises) to aim for profit. At the same time, modern ethical standards impose a duty to guard, preserve and enhance the value of the enterprise for the good of all touched by it, including the general public.

There are basically two issues; conflict of interest among stakeholders and the payments made by the companies to government or municipal officials.


In his book ‘The Ethics of Corporate Conduct’, Clarence Walton refers to the fine distinctions which exist in the area of payments organizations have to make;

  • Extortion: Some officials may threaten to seize or bring closure of a company’s business if some amount of money is paid.
  • Bribery: This refers to payments for services to which a company is not legally entitled.
  • Grease money: These are payments made to right people in a country to oil the machinery of bureaucracy. This may happen due to the inability of the company enjoying the services for which it is legally entitled to have.
  • Gifts: In some cultures such as Japan, gifts are regarded as essential part of civilized negotiation and companies may adopt this in such cultures even though it may appear dubious by other cultures.



Lynne Paine of Harvard Business Review suggests that there are two approaches to the management of ethics in organizations:

Compliance-based approach:

This is primarily designed to ensure that company acts within the letter of the law, and that violations are prevented, detected, and punished. Organizations may take the following step:

  • Compliance procedures to detect misconduct
  • Audit of contracts
  • Systems for employees to report criminal misconduct without fear of retribution
  • Disciplinary procedures to deal with transgressions.

Integrity – based approach:

This approach combines a concern for the law with an emphasis of managerial responsibility for ethical behavior.


As a Professional Accountant, your values and attitudes flow through everything you do professionally. They contribute to the trust the wider community puts in the profession and the perception it has of it.

A code of ethics for accountants

Fundamental principles of the IFAC Code of Ethics and Conduct (ICAG):

  • Integrity: be straightforward and honest in all professional work. Stand up for what you believe to be right. Do not ‘turn a blind eye’.
  • Objectivity: do not allow bias, self-interest or conflicts of interest to influence professional judgements and conclusions.
  • Professional competence and due care: carry out work to proper standards; don’t skimp; keep up to date with changes in legislation, methodology and regulations.
  • Confidentiality: do not disclose information received through professional work without permission or if there is a legal duty or right to disclose it.
  • Professional behavior: comply with laws and regulations and do not act in a way that brings ICAG or the wider accountancy profession into disrepute.



Personal quality Details
Reliability When taking on work, you must ensure it gets done and meet professional standards
Responsibility In the workplace you should take ‘ownership’ of you work
timeliness Clients and work colleagues rely on you to be on time and produce work within a specific time frame
Courtesy You should conduct yourself with courtesy and consideration towards clients and colleagues
Respect As an accountant, you should respect others by developing constructive relationships and recognizing the values and rights of others.





Professional quality Details
Independence You must be able to complete your work without bias or prejudice and you must also be seen to be independent
Skepticism You should question information given to you so that you form your own opinion regarding its quality and reliability
Accountability You should recognize that you are accountable for you own judgements and decisions
Social responsibility Accountants have a public duty as well as a duty to their employer or client. Audit work, accountancy work and investment decisions may all affect the public in some way.



Threats to professional ethics arise from

  • Self-interest
  • Self-review
  • Advocacy
  • Familiarity

Self-interest threats

 Self-interest threats are the following:

  • Financial: For example if an auditor own shares in the client, the auditor could be accused of wanting the client’s profits to look good, so that the share price rises thereby enriching the auditor.
  • Close business relationships are also threats. For example, if a partner retired from an audit partnership and then immediately went to work for a client, they could be accused for having lined themselves up for a job and to do that they perhaps did not do their audit rigorously. A period of at least two years should pass before an ex-partner takes up an appointment with a client. Having a partner on the client board is also unacceptable.
  • Close family and personal relationships between the auditor and owners or directors of the company they are auditing lay the auditor open to suggestions that the audit has been neither objective nor independent, and that the auditor did not show the proper degree of integrity.
  • Loans and guarantees from the client to the auditor should be looked at carefully. If the audit client is a bank and it makes a loan on a normal business terms to a member of the audit staff, for example a mortgage, this would normally be regarded as acceptable. If however the bank (the audit client) makes a large loan into the partnership then this again could leave the audit firm open to accusations of having being treated faithfully by the bank. Certainly no loans or financial relationships should exist between a client and an auditor if it is not normal business for the client to make loans.                                                                                       
  • Overdue fees put the auditor at some risk as there is a possibility that client will never pay those fees. This could lead to accusations that the auditor has not qualified the audit report to reduce the likelihood that a worried creditor triggers the company’s liquidation. If there are overdue fees the auditor should not make the situation worse.

Self-review threats

Self-review threats arise when an auditor does work for a client and that work may then be subject to self-checking during the subsequent audit. For example, if the auditor prepares the financial statements, and then has to audit them or the auditor performs internal audit services and then has to check that the system of internal control is operating properly.

Auditors could obviously be reluctant to criticize the work which their own firms have earlier undertaken, and this could interfere with independence and objectivity.

Advocacy threats

Advocacy is where the assurance or audit firm promotes a point of view or opinion to the extent the subsequent objectivity is compromised. An example would be where the audit firm promotes the shares in a listed company or supports the company in some sort of dispute. Advocacy can interfere with professional skepticism.

Familiarity threats

Familiarity threats arise because of the close relationship between members of the assurance or audit firm and the client. The close relationship can arise by friendship, family or through business connections. There is no general definition of what’s meant by close relationships, but if you were an auditor and your brother was the Finance Director of a client firm then there probably is a close relationship! If however the finance director was a remote cousin of yours, there might not be a close relationship.


The final groups of threats are intimidation threats. These can deter the assurance team from acting properly.

Examples could be threatened litigation, blackmail, or there might even be physical intimidation, though it is to be hoped that that is rare. Blackmail could be more subtly applied and might relate back, for example, to a period where the auditor was not acting in accordance with the required ethical standards.


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Principles of Corporate Governce


I believe you will agree with me when I say Corporate governance principles play a major role in an organisation’s ability to gain competitive advantage in the industry and become successful.

Well this statement is not just a myth but true in reality and you can relate to this as an individual.

And in today’s post, I am going to explain exactly these Corporate governance principles and how they help an organisation to gain competitive advantage.

So you will ask: “what are the principles of Corporate Governance?”

CORPORATE GOVERNANCE is the system of rules, practices and processes by which a company is directed and controlled. Corporate governance principles essentially involve balancing the interests of a company’s many stakeholders, such as shareholders, management, customers, suppliers, financiers, government and the community.



 Read also, Governance Pro

  • Risk management: A need for a new look

Boards of directors are increasingly willing to take firm managerial action to mitigate the downside risks of strategic change. In February of 2005, for example, the directors of Hewlett Packard suddenly removed Carly Fiorina as CEO because of her management of the risks and slow progress of the complex HP-Compaq merger.


  • Effectiveness and Efficiency
    Good governance means that the processes implemented by the organization to produce favourable results meet the needs of its stakeholders, while making the best use of resources – human, technological, financial, natural and environmental – at its disposal.


  • Accountability
    Accountability is a key tenet of good governance. Who is accountable for what should be documented in policy statements. In general, an organization is accountable to those who will be affected by its decisions or actions as well as the applicable rules of law.
  • Equity and Inclusiveness
    The organization that provides the opportunity for its stakeholders to maintain, enhance, or generally improve their well-being provides the most compelling message regarding its reason for existence and value to society.


  • Rule of Law
    Good governance requires fair legal frameworks that are enforced by an impartial regulatory body, for the full protection of stakeholders.


  • Transparency
    Transparency means that information should be provided in easily understandable forms and media; that it should be freely available and directly accessible to those who will be affected by governance policies and practices, as well as the outcomes resulting therefrom; and that any decisions taken and their enforcement are in compliance with established rules and regulations.


  • Responsiveness
    Good governance requires that organizations and their processes are designed to serve the best interests of stakeholders within a reasonable time frame.




1.1. Domination by a single individual

A feature of many corporate governance scandals has been boards dominated by a single senior executive with other board members merely act as a rubber stamp.  Sometimes the single individual may by pass the board to action his own interests. This can result in management and directors awarding themselves remuneration and company perks that do not align with company performance or shareholder interests. This is an inherent problem in agency theory.

1.2. Lack of involvement of board


Boards that meet irregularly or fail to consider systematically the organization’s activities and risks are clearly weak. Sometimes the failure to carry out proper oversight is due to lack of information being provided.

1.3. Lack of adequate control function

Another potential weakness is a lack of adequate technical knowledge in key roles, for example in the audit committee or in senior compliance positions. A rapid turnover of staff involved in accounting or control may suggest inadequate resources, and will make control more difficult because of lack of continuity.

1.4. Lack of supervision

Employees who are not properly supervised can create large losses for the organization through their own incompetence, negligence or fraudulent activity. The behaviour of Nick Leeson, the employee who caused the collapses of Barings bank was not challenged because he appeared to be successful, whereas he was using unauthorized accounts to cover up his large trading losses. Leeson was able to do this because he was in charge of dealing and settlement, a systems weakness of lack of segregation of key roles that featured in other financial frauds.

1.5. Lack of independent scrutiny

External auditors may not carry out the necessary questioning of senior management because of fears of losing the audit, and internal audit do not ask awkward questions because the Chief Financial Officer determines their employment prospects. Often corporate collapses are followed by criticisms of external auditors, such as the Barlow Clowes affair were poorly planned and focused audit work failed to identify illegal use of client monies.

1.6. Lack of contact with shareholders

Often, board members grow up with the company and lose touch with the interests and views of shareholders. One possible symptom of this is the payment of remuneration packages that do not appear to be warranted by results.

1.7. Emphasis on short-term profitability

Emphasis on success or getting results can lead to the concealment of problems or errors, or manipulation of accounts to achieve desired results.

1.8. Misleading accounts and information

Misleading figures are often symptomatic of other problems (or are designed to conceal other problems) but clearly poor quality accounting information is a major problem if markets are trying to make a fair assessment of the company’s value. Giving out misleading information was a major issue in the Enron scandal as discussed previously.




The debates about the place of governance are founded on four differing views associated with ownership and management of organisations. These theories include:

1.1. Stewardship theory

This theory means that, management is the steward of the assets of the organization and good governance requires active participation from all members. Management will act primarily as stewards of the organization.

1.2. Stakeholder theory

This means that, management has a duty of care to the organization, its owners, and to its wider stakeholders.

1.3. Agency theory

This means that, management will act in an agency capacity, seeking to service their own self-interest and looking after the performance of the company only where its goals are co-incident with their own. Agency theory aims to ensure that managers pursue effectively shareholders’ best interest.

1.4. Transaction cost theory

This theory means the way the company is organized or governed determines its control over transactions. Management will be opportunistic. Like agency theory, transaction cost theory aims to ensure that management effectively pursue shareholders’ best interest.


Stakeholders can be defined as anyone affected by the organisation. It’s important to know who your stakeholders are and what they want, because if the stakeholders are unwilling to cooperate you may find it difficult to put a strategy into action.


 Stakeholders include:


  • Shareholders
  • Employees
  • Managers/directors
  • Suppliers
  • Customers
  • Competitors
  • The government
  • The local community


Stakeholders can be classified as:


  • Internal Directors: managers and employees
  • Connected Shareholders: lenders, suppliers, customers
  • External: Government, local populace, pressure groups, trade unions, non-governmental organisations, regulatory agencies.




Corporate governance is about ensuring that companies are run well in the interests of their shareholders and the wider community. The following points explains gives us an idea


  • The need to improve corporate governance came to prominence in the

UK in the 1980s, following the high profile collapses of a number of large companies (Maxwell, Polly Peck, BCCI, etc.).


  • Poor standards of corporate governance had led to insufficient controls being in place to prevent wrongdoing in the US in the 1990s, as demonstrated by the collapses at Enron and WorldCom.


  • The authorities internationally have now been working for a number of years to tighten up standards of corporate governance.


  • Good corporate governance is particularly important for publicly traded companies because large amounts of money are invested in them, either by ‘small’ shareholders, or from pension schemes and other financial institutions.


  • The well-publicised scandals mentioned above are examples of abuse of the trust placed in the management of publicly traded companies by investors. This abuse of trust usually takes one of two forms (although both can happen at the same time in the same company):

– The direct extraction from the company of excessive benefits by management, e.g. large salaries, pension entitlements, share options, use of company assets (jets, apartments etc.)

– manipulation of the share price by misrepresenting the company’s profitability, usually so that shares in the company can be sold or options ‘cashed in’.



The need for regulation of how companies are run in a Good Corporate Governance manner came to implementation in the year 1991 in the UK.

During the 1990’s in the UK, there were three separate committees set up to consider aspects of corporate governance which each produced a report.


These were:


The Cadbury Report in 1992, which focused on the control functions of boards and on the role of auditors


The Greenbury Report in 1995, which focused on the setting and disclosure of directors’ remuneration


The Hampel Report in 1998, which brought together the previous recommendations and submitted a proposed code to the Stock Exchange which listed companies, should comply with.

The Stock Exchange published the final version of its ‘Principles of good governance and code of best practice’ (known as the Combined Code) in June 1998. Listed companies now have to disclose how they have applied the principles and complied with the Code’s provisions in their annual report and accounts. The auditors have to express an opinion on this statement.


Then the Financial Reporting Council in June 2010 revised and renamed the code as The U.K. Corporate Governance Code. Which applies to all quoted entities and every entity must report on:

  • How it has apply the code
  • Whether or not; if not why?




There are 45 ‘code provisions’ which include the following:

Board members

  • The roles of Chair of the Board and Chief Executive should be separated unless the company publicly justifies reasons for not doing so
  • The identification of a senior independent director
  • Not less than one-third of the board comprises non-executive directors
  • The majority of non-executive directors should be independent

Board structure and function

  • There should be a nominations committee (unless the board is small)
  • The formalisation of the role of Chairman in ensuring that all directors are properly briefed on issues arising at board meetings
  • The audit and remuneration committees must only be of non-executive directors
  • Directors should, at least annually, conduct a review of the effectiveness of the group’s system of internal controls and should report to shareholders that they have done so.

Remuneration of directors


  • Performance related elements should form a significant proportion of the total remuneration package

Conduct of AGMs

  • Announcement of proxy votes at AGMs
  • Unbundling of resolutions
  • sending out the notice of the AGM and the related voting papers at least 20 working days before the meeting

There is also a requirement that companies consider:

  • A reduction of the notice period of directors to one year or less
  • Early termination arrangements
  • The extent to which the principal shareholders should be contacted about directors’ remuneration
  • Whether the remuneration report should be voted on at the AGM



Most corporate governance codes are based on a set of principles founded upon ideas of what corporate governance is meant to achieve. This is based on a number of reports.


1) To ensure adherence to and satisfaction of the strategic objectives of the organisation, thus aiding effective management.

2) To minimize risk, especially financial, legal and reputational risks, by ensuring appropriate systems of financial control are in place, systems for monitoring risk, financial control and compliance with the law.


3) To promote integrity, that is straightforward dealing and completeness.


4) To fulfil responsibilities to all stakeholders and to minimize potential conflicts of interest between the owners, managers and wider stakeholder community.


5) To establish clear accountability at senior levels within an organisation. However, one danger may be that boards become too closely involved with day-to-day issues and do not delegate responsibility to management.


6) To maintain the independence of those who scrutinize the behaviour of the organisation and its senior executive managers.

Independence is particularly important for non-executive directors, and internal and external auditors.


7) To provide accurate and timely reporting of trustworthy/independent financial and operational data to both the management and owners/members of the organisation to give them a true and balanced picture of what is happening in the organisation.


8) To encourage more proactive involvement of owners/members in the effective management of the organization through recognizing their responsibilities of oversight and input to decision making processes via voting or other mechanisms.



  1. The right to shareholders:

Shareholders should have the right to participate and vote in general meetings of the company elect and remove members of the board and obtain relevant and material information on a timely basis. Capital markets for corporate control should function in an efficient and timely manner.

2) The equitable treatment of shareholders:

All shareholders of the same class of shares should be treated equally, including minority shareholders and overseas shareholders impediments to cross-border shareholding should be eliminated.

3) The role of stakeholders:

Rights of stakeholders should be protected. All stakeholders should have access to relevant information on regular and timely basis. Performance-enhancing mechanisms for employee participation should be permitted to develop. Stakeholders, including employees, should be able to freely communicate their concerns about illegal or unethical relationships to the board.

4) Disclosure and transparency:

Timely and accurate disclosure must be made of all material matter regarding the company, including the financial situation, foreseeable risk factors, issues regarding employees and other stakeholders and governance structure and policies. The company approach to disclosure should promote the provision of analysis or advice that is relevant to decisions by investors.


5) The responsibilities of the board:

The board is responsible for the strategic guidance of the company and for the effective monitoring of management. Board members should act on a fully informed basis, in good faith, with due diligence and care and in the best interest of the company and its shareholders. They should treat all shareholders fairly. The board should be able to exercise independent judgement; this includes assigning independent non-executive directors to appropriate tasks.


The OECD Principles of Corporate Governance are intended to:


  • assist Member and non-Member governments in their efforts to evaluate and improve the legal, institutional and regulatory framework for corporate governance in their countries


  • to provide guidance and suggestions for stock exchanges, investors, corporations, and other parties that have a role in the process of developing good corporate governance.


I trust you now understand corporate governance

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Good Information refers to data that has been processed in such a way as to be meaningful to the person using it.


The accountant’s work is involved with collection of data and processing it into information to be used by various stakeholders.

Data refers to the raw material for data processing. That is, the raw facts, events or transactions that are processed into information.


Information refers to data that has been processed in such a way as to be meaningful to the person using it.

Information may be classified as financial or non-financial. It can also be classified as quantitative or qualitative.


Qualities of Good Information


Good management information must have the following qualities so as to make it useful:

  1. Relevance: Information that is relevant meets the needs and aspirations of management. Irrelevant information does not serve management needs.
  2. Accuracy: Good information should be free of material errors. However there is no need to go into unnecessary detail for pointless accuracy.
  3. Clarity (Understandability): Information must be clear to understand by the user.
  4. Completeness: Information users should have all the facts needed to make a particular decision.
  5. Confidence: Good information must inspire confidence so as to be trusted by users. Where there is uncertainty, the assumptions underlying the information should be stated.
  6. Volume: Good information must be brief and concise. Where possible, the exception principle must be used.
  7. Timeliness (Speed): Information must be prompt for any decision. That is, information which is too late is as bad as too early.
  8. Communication: Information is classified as good when communicated to the right person.
  9. Cost (Economy): The benefit derived from any good information should be greater than the cost of acquiring it.
  10. Channel of communication: Good information must be communicated using the right channel or medium. For example using memos, professional magazines, journals, electronic mail, word-of-mouth, etc

Planning, Controlling and Decision Making

The three main functions of management are planning, decision making and control.

  1. Planning refers to the establishment of business objectives and devising strategies or means to achieve those objectives. The three levels of planning are


Strategic planning (long term planning)

Tactical planning (management control)

Operational planning (operational control or short term planning)

2. Decision making refers to making a choice between alternative courses of action. The three levels of decision making are

  1. Strategic decision
  2. Tactical decision (management decision)
  • Operational decision


  1. Control refers to the setting of standards, measurement of actual results and comparison with the standard set so as to take corrective action where there are deviations or variances.


It must be noted that the three management activities above are interdependent. That is, all three are inseparable in practice. For example, there cannot be effective control without planning and planning without control is practically impossible.


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Cost Accounting can be defined as the application of accounting and costing principles, methods and techniques in the ascertainment of cost and the analysis of saving and/or excess as compared with previous experience or with standard.


Financial Accounting concerns itself with the recording of transactions between a business and its stakeholders such as customers, suppliers, employees, owners, etc and the preparation of income statement, statement of financial position and statement of cash flow, at least, once every year for the stakeholders.


Financial Accounting, therefore, ensures that the assets and liabilities of a business are properly accounted for, and provides information about profit and so on to stakeholders.


Management Accounting is an integral part of management concerned with identifying, presenting and interpreting cost and financial accounting information used for planning ,decision making and controlling as well as the optimum use of resources. The source of information is the financial and cost accounts.

Differences between Financial, Cost and Management Accounting

Financial Accounting Cost Accounting Management Accounting
1.      It shows the financial performance and position of a business. 1.      It is used to establish the cost of a product, an activity or a department. 1.      It aids management to plan, control and make decisions for a business.

2.      It is required by law especially for limited companies.


2.      There is no legal requirement to prepare cost accounts.



2.      There is no legal requirement to prepare management accounts.


3.      Format for presentation of information is determined by law or accounting standards. 3.      Format of cost accounts is at management discretion. 3.      Format of management accounts is at management discretion.
4.      It covers the business as a whole.


4.      May focus on specific areas of a business. 4.      May focus on specific areas of a business.
5.      It is for external use.


5.       It is for internal use. 5.      It is for internal use.
6.      It prepares statements in summaries or aggregates.



6.      Statements prepared may be aggregate or detail.


6.      Statements prepared may be aggregated or detailed.

7.      It is of monetary in nature.




7.      Information is both monetary and non monetary. 7.      Information is both monetary and non monetary.
8.      It is historical.



8.      It is both historical and forward-looking. 8.      It is both historical and forward-looking.

9.      Statements are normally prepared annually.

9.      Statements prepared cover shorter periods i.e. daily etc. 9.      Statements prepared covers shorter periods such as monthly management accounts, etc.


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Corporate FinanceCorporate ReportingStrategic Management




The Balanced Scorecard is a strategic planning and management system that is extensively used by entities to align business activities to the vision and strategy of the organization, improve internal and external communication, monitor organization performance against strategic goals. It was originated by Dr. Robert Kaplan (Harvard Business School) and David Norton as PERFORMANCE MEASUREMENT framework that added strategic metrics to give managers and executives a more “balanced” view of organizational performance.

There are four indicators of measuring the performance of management from the view point of Kaplan & Norton.

These are:

  • THE FINANCIAL PERSPECTIVE: This measures the financial performance of the entity. It is the traditional evaluation of the entire business base on the financial statements. Examples include financial ratios such as return on assets, return on equity, liquidity ratios, and return on investment. This answers the question: “HOW DO WE LOOK TO SHAREHOLDERS”.
  • THE CUSTOMER PERSPECTIVE: Customer measures of performance relate to customer attraction, satisfaction, and retention. These measures provide insight to the key question “How do customers see us” Examples might include the number of new customers and the percentage of repeat customers. Recent management philosophy has shown an increasing realization of the importance of customer focus & customer satisfaction in any business.


  • INTERNAL BUSINESS PROCESS: Internal business process measures of performance relate to organizational efficiency. These measures help to answer the key question “What must we excel at”. Examples include the time it takes to manufacture the organization’s good or deliver a service. The time it takes to create a new produce and bring it to the market is another example of this type of measure. This allows management to know how well their business is running, and whether its products and services conform to customers’ requirement (the mission) in terms of cost, quality, reliability, etc.


  • ORGANISATIONAL CAPACITY/ LEARNING & GROWTH: This relates to the future. Such measures provide insight to tell the organization, “Can we continue to improve and create value”.

This includes:

  • Employee training and corporate cultural attitude related to both individual and corporate self-improvement
  • Ability to adapt and utilize advancements/changes in technological tools.



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