Thursday, December 5, 2019
Marketing and Management Business Products
Question: Discuss about the Marketing and Management for Business Products. Answer: AASB 1031 specifies the concept of materiality, which is applied to the GPFR of companies. As per the study of Altiero, Kang Peecher (2013), the materiality concept applies to parent entity which is subjected to reporting and disclosing their financial statements. The standard has been amended in order to accommodate changes which are predictable to affect materially in the subsequent financial years. Characteristics of Materiality According to Cameron (2014), materiality can be defined as imparting judgments to balances, transactions and errors which often arise in financial statements. Materiality ensures that the financial information becomes appropriate to the users for facilitating their decision-making needs. Dependent in the nature of business - Materiality is directly related to the volume of business and the circumstances thereon. The present part deals with the application of the concept of materiality for the general purpose of financial statements. An important tool for decision making- The preparation of financial statements involves making judgments. These judgments are facilitated by application of materiality concept. It, therefore, improves the value of the information given to users (Griffin, 2014). The notion of materiality influences the economic decisions of the users by providing relevant information to the users who serve their needs to the best interest. Ensures Complete and fair statements- Application of materiality ensures that only the information which is material is included in the financial statements. It, therefore, excludes the information which is immaterial facts. Thus, it ensures completeness of information in all material respects, thereby, presenting a true and fair vision of the companys affairs. Serves as Guidance - The concept of materiality serves as guidance to accountants on the acceptable amount of errors and omissions in financial statements. Lapses or misstatement of important information hinders users' ability to make accurate decisions thereby affecting the reliability of information. Application of concept of materiality in financial statements The concept of materiality can be applied in making various decisions with respect to the operations of the company. The nature and amount of a particular item act as a determining factor in the application of materiality (Eccles Krzus, 2014). If the adjustments occur after the estimation of balance amounts of the item then the concept of materiality is applied in accordance with the amount. The value of the item is sufficient to make a correction or adjustment. In some situations, it is essential to apply materiality on the basis of nature. As in case- when the limited resources of the company are to be allocated amongst the different stakeholders. This type of circumstance requires judgement on the nature of resources. Another case is where the management and governing authorities of the organisation need to take a decision on the operations of the business. In this case, the nature of the decision is assessed for application of materiality. For determining the applicability of materiality to an item or an aggregate of items, they are compared with the- The amount which is reflected in the balance sheet and the PL account of an organisation. The appropriate class of asset or liability to which the item belongs. Assessing Materiality of Financial Statements Guidelines for classification of material and immaterial information are given in the AASB 1031. According to the standard, An amount which is equivalent to or greater than 10% of the suitable base amount may be presumed to be material. In contrast, an amount which is equivalent to or less than 5% of the suitable base amount is presumed to be immaterial (Edgley, Jones Atkins, 2015). However, in case there is appropriate evidence exists with the company which contradict the above statements then it can be considered for the concept of materiality. Materiality concept directs the amount attributable to an item or cumulative items by specifying the edge of error which is acceptable. It also prescribes the degree of accuracy which is required for calculation of the approximate amount or an aggregate of item(s). Deciding whether or not an item is material, combined evaluation of the nature and amount of item is undertaken by the auditor. Big data represents the massive data relating to a company which is unstructured and generated through the machine and also includes data which is available outside corporate boundaries. A significant potential is observed through the transformed form of the audit; as Big data and analytics have enabled the auditor to assess financial account, audit risk, fraud and develop their approach in more appropriate manner. A variety of barriers is available which act as an obstacle to the successful integration of big data and analytics into audit (Vera-Baquero et.al., 2015). One of the issues faced by the auditor is data capture. As the companies are concerned towards the protection of their provisional data; therefore sometimes they refuse to provide data, citing security reason. Embracing Big Data means procuring sub-ledger information for the major business process. The same increases the complexity of data extraction and size of data to be processed. The potential impact of Big Data can be overwhelming for audit as these affect various facets of business procedures and functions relating to audit (Van der Aalst Damiani, 2015). As audit department needs to seek the internal risk management, particularly relating to data governance. They validate whether that the process which is available will enable them to procure valid data so that appropriate conclusions can be made. Inconsistencies and potential issues relating to business transactions might be difficult to ascertain with the assistance of conventional audit techniques. The issue majorly arises in the case when a data frame is large and the time frame is short. Thus, the same has affected the manner of auditing and concepts such as continuous monitoring of internal control and continuous audit no longer seem to be farfetched. End to End software integration The end to end functionality refers to accomplishing the audit life cycle which includes risk assessment, development of standard audit plans, development of audit report and other major functions. This increase the risk relating to reaching a conclusion as an auditor is not able to receive information relating to data in detail manner; i.e., from where it initiate and end up. The auditor should develop an integrated assurance framework which can be done through understanding, assess, review and confirm the programme that is being developed. As per the study of Patterson (2013), the auditor should efficiently assess the program that has been changed and continuously aligned to the key risk areas for resolving the relevant obstacles. The core issue that is faced by the auditor due to end to end integration of software is to ascertain the manner in which to get involved in and the manner of adding value to the complete procedure of transformation. According to Dietrich, Plachy Norton (2014), the efficient way of resolving the specified issue is to analyse end to end life cycle of the program and entrenching a risk-driven assurance approach in program delivery. The steps that can be followed by the auditor for assuring that appropriate opinion has been provided for the organisation are as follows: To get involved at prior stages and understanding the programmed proposed by risk management strategy. Analysing the existing source and level of assurance (The model three lines of the model can be developed for it). The integrated rolling plan should be developed for assurance. Acceptance of reporting framework. Development of a program for maintaining and integrating assurance plan (Inukollu, Arsi Ravuri, 2014). References Dietrich, B. L., Plachy, E. C., Norton, M. F. (2014). Analytics across the enterprise: How IBM realises business value from big data and analytics. IBM Press. Inukollu, V. N., Arsi, S., Ravuri, S. R. (2014). Security issues associated with big data in cloud computing. International Journal of Network Security Its Applications. 6(3), 45. Patterson, T. (2013). Information integrity in the age of big data and complex information analytics systems. EDPACS. 48(6). 1-10. Van der Aalst, W. Damiani, E. (2015). Processes meet big data: Connecting data science with process science. IEEE Transactions on Services Computing. 8(6). 810-819. Altiero, E., Kang, Y. J., Peecher, M. E. (2013). The investor perspective and its influence on auditor materiality judgments. Inthe 19th annual International Symposium on Audit Research (ISAR 2013).(Vol. 27). Cameron, R. A. (2014). Applying the Materiality Concept: The Case of Abnormal Items. Eccles, R. G. Krzus, M. P. (2014).The integrated reporting movement: Meaning, momentum, motives, and materiality. John Wiley Sons. Edgley, C., Jones, M. J. Atkins, J. (2015). The adoption of the materiality concept in social and environmental reporting assurance: A field study approach.The British Accounting Review.47(1). 1-18. Griffin, J. B. (2014). The effects of uncertainty and disclosure on auditors' fair value materiality decisions.Journal of Accounting Research.52(5). 1165-1193. Vera-Baquero, A. et.al. (2015). Leveraging big data for business process analytics. The Learning Organization, 22(4) 215-228.