Factors that combine to determine media richness

Media richness is defined as the media's capacities for carrying multiple cues and providing rapid feedback. 

 

The richness of each medium involves a blend of several factors: 

 

One factor is the speed of personalized feedback provided through the medium. 

 

A second factor is the variety of cues and language provided through the medium. A cue is a stimulus, either consciously or unconsciously perceived, that results in a response by the receiver. Different media are combined with these two factors to determine media richness. Because these factors are on a continuum, a medium may vary somewhat in richness, depending on its use by the sender and receiver. Messages that require a long time to digest or that can't overcome biases are low in richness. 

 

The text ranks face-to-face communication, voice mail and e-mails in descending order of media richness, but students raised on e-mail may have a different perspective.

Plantwide versus Departmental Overhead Application Rates

National Polymers Ltd. is used to illustrate the calculation of a single, plantwide overhead application rate. This division contains two departments (Cutting and Mounting, and Packing). At the end of 2000, division management budgets its 2001 activity level at 75,000 machine hours and manufacturing overhead costs at $399,750. If a plantwide predetermined overhead application rate is calculated on per machine hour: 

 

Plantwide OH Rate = (Total Budgeted OH Cost at a Specific Activity Level/Volume of Specified Activity Level)

                          = $399,750/ 75,000 MH

                           = $5.33

Although a single plantwide overhead rate can be computed, such a process is frequently not adequate. In most companies, work is performed differently in different departments or organizational units. For example, although machine hours may be an appropriate activity base in a highly automated department, direct labor hours (DLHs) may be better for assigning overhead in a labor-intensive department.

In the quality control area, number of defects may provide the best allocation base. Thus, because homogeneity is more likely within a department than among departments, separate departmental rates are generally thought to provide managers more useful information than plant-wide rates.

The Cutting and Mounting Department is highly automated and, therefore, uses machine hours as its overhead cost driver. In contrast, the Packing Department is more labor intensive and uses DLHs.

5 General principles of Corporate Governance

The five principles set out below were developed by the Organisation for Economic Co-operation and Development (OECD). They are intended to provide a general model of a good corporate governance system to achieve the following objectives.


(1) Protect shareholders’ rights, such as voting rights and the right to transfer ownership in shares.

(2) Ensure the equitable treatment of all shareholders, including minority and foreign shareholders. All shareholders should have the opportunity to obtain effective remedy for any violation of their rights.

(3) Recognize the rights of stakeholders as established by law and encourage active co-operation between corporations and stakeholders in creating assets, jobs, and the sustainability of financially secure enterprises.

(4) Ensure that timely and truthful disclosure is made on all material matters concerning the corporation, including the financial position, performance, ownership, and governance of the company.

(5) Ensure the strategic direction of the company, the effective monitoring of management by the board, and the board’s accountability to the company and the shareholders.

Management Representations in auditing

The auditor should obtain written representations from management that: 

(a) it acknowledges its responsibility for the implementation and operation of accounting and internal control systems that are designed to prevent and detect fraud and error;
(b) it believes the effects of those uncorrected financial statement misstatements aggregated by the auditor during the audit are immaterial, both individually and in the aggregate, to the financial statements taken as a whole. A summary of such items should be included in or attached to the written representation;
(c) it has disclosed to the auditor all significant facts relating to any frauds or suspected frauds known to management that may have affected the entity; and 

(d) it has disclosed to the auditor the results of its assessment of the risk that the financial
statements may be materially misstated as a result of fraud.
 

“Representations by Management” provides guidance on obtaining appropriate representations from management in the audit. In addition to acknowledging its responsibility for the financial statements, it is important that management acknowledges its responsibility for the accounting and internal control systems designed to prevent and detect fraud and error.
 

Because management is responsible for adjusting the financial statements to correct material misstatements, it is important that the auditor obtains written representation from management that any uncorrected misstatements resulting from either fraud or error are, in management’s opinion, immaterial, both individually and in the aggregate. Such representations are not a substitute for obtaining sufficient appropriate audit evidence. In some circumstances, management may not believe that certain of the uncorrected financial statement misstatements aggregated by the auditor during the audit are misstatements.

Scope of Audit

The scope of an audit of financial statements will be determined by the auditor having regard to the terms of the engagement, the requirements of relevant legislation and the pronouncements of the Institute. The terms of engagement cannot, however, restrict the scope of an audit in relation to matters which are prescribed by legislation or by the pronouncements of the Institute.

The audit should be organized to cover adequately all aspects of the enterprise as far as they are relevant to the financial statements being audited. To form an opinion on the financial statements, the auditor should be reasonably satisfied as to whether the information contained in the underlying accounting records and other source data is reliable and sufficient as the basis for the preparation of the financial statements. In forming his opinion, the auditor should also decide whether the relevant information is properly disclosed in the financial statements subject to statutory requirements, where applicable.

The auditor assesses the reliability and sufficiency of the information contained in the underlying accounting records and other source data by:
(a) making a study and evaluation of accounting systems and internal controls on which he wishes to rely and testing those internal controls to determine the nature, extent and timing of other auditing procedures; and
(b) carrying out such other tests, inquiries and other verification procedures of accounting transactions and account balances as he considers appropriate in the particular circumstances.
The auditor determines whether the relevant information is properly disclosed in the financial statements by:
(a) comparing the financial statements with the underlying accounting records and other source data to see whether they properly summarize the transactions and events recorded therein; and

(b) considering the judgements that management has made in preparing the financial statements; accordingly, the auditor assesses the selection and consistent application of accounting policies, the manner in which the information has been classified, and the adequacy of disclosure.

The auditor’s work involves exercise of judgement, for example, in deciding the extent of audit procedures and in assessing the reasonableness of the judgements and estimates made by management in preparing the financial statements. Furthermore, much of the evidence available to the auditor can enable him to draw only reasonable conclusions therefrom. Because of these factors, absolute certainty in auditing is rarely attainable.

In forming his opinion on the financial statements, the auditor follows procedures designed to satisfy himself that the financial statements reflect a true and fair view of the financial position and operating results of the enterprise. The auditor recognizes that because of the test nature and other inherent limitations of an audit, together with the inherent limitations of any system of internal control, there is an unavoidable risk that some material misstatement may remain undiscovered. While in many situations the discovery of a material misstatement by management may often arise during the conduct of the audit, such discovery is not the main objective of audit nor is the auditor’s programme of work specifically designed for such discovery. The audit cannot, therefore, be relied upon to ensure the discovery of all frauds or errors but where the auditor has any indication that some fraud or error may have occurred which could result in material misstatement, the auditor should extend his procedures to confirm or dispel his suspicions.

The auditor is primarily concerned with items which either individually or as a group are material in relation to the affairs of an enterprise. However, it is difficult to lay down any definite standard by which materiality can be judged. The auditor is not expected to perform duties which fall outside the scope of his competence. For example, the professional skill required of an auditor does not include that of a technical expert for determining physical condition of certain assets.

Constraints on the scope of the audit of financial statements that impair the auditor’s ability to express an unqualified opinion on such financial statements should be set out in his report, and a qualified opinion or disclaimer of opinion should be expressed, as appropriate.