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Essay: Business environments require

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  • Subject area(s): Accounting essays
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  • Published: 21 June 2012*
  • File format: Text
  • Words: 918 (approx)
  • Number of pages: 4 (approx)

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Business environments require

Introduction

Challenges in business environments require businesses to adapt and change their strategies to tackle these challenges. Firms in the accountancy service sector have adopted new strategies and technology which makes accounting work easier and less costly for them. These strategies involve employing non-CPA staff and the use of accounting software such as Quickbooks which computes all financial statements from raw data fed to it. Although my tax advisory firm is small in size, it handles wealthy clients who have substantial returns. In order to increase competitiveness and lower costs, we have adopted the use of accounting software and employment of non-CPAs to perform our basic tax work. This move will have certain ethical and economic issues relating to the organization’s operations. This paper will analyze these issues and recommend on how to effectively deal with them. A conclusion will be given on the discussed issues.

Economic issues relating to pricing

There are various economic issues which affect pricing and some of them are discussed below;

Competition

In order to attract clients, competitive prices should be charged to services and products offered by our company. These prices should be competitive and should match the quality of work done. However, when competitors use a predatory pricing strategy and offer products at lower prices, then this may lead to losses by our firm. In order to deal with such a situation, services and products offered by our firm should be of very high quality such that clients are attracted by quality of work rather than prices.

Global crunch

The global economic crisis has lead to bankruptcy and reduction of profitability by firms. Due to decrease in profitability, many firms reduce costs as a strategy to mitigate against the crisis. This means that firms are less willing to spend funds on various costs, including tax fees (Eisen, 2007). In order to retain clients, prices for tax services offered should be decreased and made affordable to firms. However, adjusting prices downwards may reduce profits made by our organization and we may incur losses. This is the reason that the global crunch affects pricing and introduces a threat to our organization.

Ethical issues arising

Various ethical issues arise when we employ non-CPAs to work alongside CPAs in our tax firm. Some of these issues will be evaluated below;

Qualifications and conflict

Non-CPAs hold a lower qualification than CPAs in the accounting field. CPAs have more experience and knowledge than non-CPAs in this field. As a result, CPAs may intimidate or be hostile to non-CPA employees who they may perceive as “unqualified” and “inexperienced” (Duska & Duska, 2003). This may result in conflict within the organization and will negatively impact employee performance and morale. This in turn will lower organizational performance. In order to prevent this situation arising, all employees should be taught the value each adds to the organization. They should all know their efforts complement each other and that organizational goals cannot be met in the absence of either non-CPAs or CPAs.

Remuneration

As discussed, non-CPAs hold a lower qualification than CPAs in the accounting field. Therefore, CPAs expect better and higher remuneration than non-CPAs. However, remuneration is usually given after assessment of added value by employees to organizations. Non-CPAs may sometimes add more value than CPAs depending on roles undertaken, and in such instances, they deserve better remuneration (Ketz, 2006). In this case, conflict between non-CPAs and CPAs may occur on basis of remuneration. The employer should explain the unique role played by non-CPAs to CPAs, which facilitates the high remuneration given.

Loss of jobs

The introduction of accounting software which computes and develops financial statements will increase efficiency. It will also increase accuracy through reduction of errors. However, since the software will compute financial statements from raw data, then various employees may lose their jobs since these will be performed by the software. For instance, the number of people handling development of financial statements may be reduced since only one person who feeds data to the system will be needed. Loss of jobs may reduce employee morale due to uncertainty on job security. The employer should explain to employees, actions which necessitated the reduction of employees and how it is consistent with organizational goals of creating wealth.

Standards applying to non-CPAs and CPAs

In the US, CPAs are regulated by the Institute of CPAs in America while non-CPAs are regulated by individual organization’s ethical codes and professional ethical codes (Racine, 2008). CPAs are guided by GAAP accounting principles and these include integrity, full disclosure, prudence, materiality, objectivity and others. Failure to follow them is punishable by their professional body. However, non-CPAs are not strictly punishable by professional bodies, with their employer being the main overseer and regulator of their activities. This means that operations by non-CPAs may be below international standards and may compromise the organizational accounting system and procedures. They should be therefore monitored to ensure they comply with accounting standards and ethical codes.

Conclusion

As has been discussed, the decision to use non-CPAs and introduce accounting software to our organization has various impacts. Economic impacts relating to pricing include competition and the global economic crunch. Ethical issues arising from this decision include loss of jobs, and conflict arising from remuneration and qualification differences between non-CPAs and CPAs. In order to solve these problems, dialog with employees will enable them to understand the role both non-CPAs and CPAs play in achieving the organizational goals (Goree, 2006). This will prevent conflict from arising and will aid in achievement of organizational goals.

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