Research In Accounting For Strong Built Construction Company Essay.

Discuss about the Research in Accounting for Strong Built Construction Company. 

Most of the organizations mainly put importance to the components like base pay, bonuses, equity, benefits and perks of a typical compensation structure (Horngren, Harrison and Oliver 2012).   Organization provides compensation to its employees so that they can able to fulfill their needs. In this study, Strong Built Construction Company has able to maintain its position even when the industry is facing trouble.  

A typical compensation package is composed of nine elements. These are – base salary; annual or quarterly bonus; other bonus like boss, peer, outstanding non-normal accomplishments; stock options; stock units; health and  wellness that consists of dental, medical, vision, employee assistance program; life and accident insurance that is composed of basic life, survivor income benefit, long term disability, accidental death and dismemberment; other insurance like travel, legal and perks like – internet services, food,  gym memberships, company bus, plane or train fare, cell phone and service, company discounts, university or ongoing funding for education, electric car chargers and many more (Warren, Reeve and Duchac 2012). However, the structure of a compensation package depends on size of the organization, nature of industry and even on the geographic location of the organization. The compensation package of an individual of the higher designation might vary as more elements might be incorporated within the structure of compensation. The compensation package varies from one company to another. Thus the proportion of the components of a typical compensation package should vary from one organization to another

Agency theory is one of the major components of financial economics. It indicates the conflicts of the interest between individuals with diverse interest in the same assets. By analyzing the agency theory, it can be assessed that the particular theory indicates the conflicts between shareholders and managers of the organizations and shareholders and bondholders. As per the theory, the relationship between the principals and agents can be described in an effective manner. The traditional agency relationship arises when individuals called principals or hire one or more individuals for conducting a particular process (Ballwieser et al. 2012). The primary agency relation lies between the stockholders and managers of the organization. In this context, Bill Strong, the founding director of Strong Built Construction Company have discussed about the profitability of the business in recent board meeting. Hence, the organization has been trying to improve the agency relationship with stakeholders. In the recent survey, it has been identified that the motivation level of employees have fallen and it has affected the business (Van Puyvelde et al. 2012). Consequently, the business is unable to move forward in the global market. The traditional agency theory facilitates the organization to diminish the conflicts of interest between agents and principals. It is a strong indication of corporate governance and business ethics. With the involvement of the traditional agency theory, the director of Strong Built Construction Company would be able to resolve issues regarding compensations. In this scenario, the profit before tax has fallen and it affects the business in many ways. For example, the employees become de-motivated and less performer. Through the engagement of the traditional agency theory, the Strong Build Company has been upholding the relation with staffs, shareholders, suppliers and customers. Moreover, the organization has been planning to enhance the relation with their employees by providing the adequate compensation to them. In recent years, Strong Built Construction Company has been approaching the conventional agency theory for executing the compensation to employees (Pepper & Gore 2015).

Comparison Between Extrinsic and Intrinsic Motivation

With the involvement of the conventional agency theory, employees obtain the monetary benefits from the company. Bill Strong, the director of Strong Built Construction Company, has argued that monetary compensation would be beneficial for the employees and it would facilitate to motivate employees for providing enhanced performance in the business. On the other hand, the executive compensation would be considered during the compensation planning. Hence, it can be assessed that the traditional agency theory influences the organization approaching compensation for employees in the business (Pepper & Gore 2014).

Extrinsic Motivation

Intrinsic Motivation

The extrinsic motivation means outside or external motivation. This type of motivation is commonly found everywhere and is used frequently within the present society. As per the extrinsic motivation, an individual is motivated to behave, learn and achieve based on the highly observed result (Hoggett 2012). Rather it can also be said that this motivation is used for the purpose of fun, learning or development that is served within an experience.

Intrinsic motivation provides fun and mainly aim for competency and skill development and for excitement and accomplishment. In case of intrinsic motivation, an individual perform some activities in order get himself stress free, relieved and to get fun. Implementation of this method makes an individual feel better. Excitement makes people to think in a different way, thus this type of motivation is also counted as intrinsic motivation (Bragg 2013). In terms of intrinsic motivation, an individual work internally to develop his skills, rather it can be said that people are motivated by the implementation of the intrinsic measures.

Though there are many differences between intrinsic and extrinsic motivation, there is one relationship between the two types of motivation and that is both the types help people to get motivate and to achieve their goals.  

The compensation of the members is based on the employees who are willing to take the risk and willing to avoid the risk. In case Strong built Construction Company aligns the present incentives in the compensation scheme with the risk attitude of the employees then the employees will be able to reward themselves with higher amount of compensation. The higher is the risk taking attitude of the employee, the higher amount of compensation should be awarded to the employee. On the other hand the risk avoiding employee tends to avoid risk and this should directly reflect in their compensation (Ims et al. 2014).

According to Foss, N & Stea, D (2014), the compensation committee led by U.S. takes in consideration “fairness” and “balance” in the compensation. According to this principle the employees having more responsibility towards the organization fundamentally have greater pay for performance, proper alignment of incentives and a shareholder friendly compensation package. The willing among the employees for greater productivity is has a direct influence on the external rewards and it follows logical sequence of payment system followed by the performance of the employees. The risk avoiding employees are further motivated by the several factors such as, meeting the goals of the organization, making and implementation of the various decisions and the willingness to take part planning, organizing and controlling the effects of the other employees.  This has a direct impact on the compensation of the employees (Hermanson 2012).

 According to Graham et al. (2013) the best time for the employees to receive financial benefit is during the time when the share prices of the company are high and the tax level is low. The best time is driven by the various market forces, due to this reason the company need to identify the best time according to the present tax and future forecast of the tax structures. In this way even if the revenue of the company falls, the employees will be able to draw higher amount of compensation. The various intrinsic factors like giving a challenging task or getting the employees involved in the decision making process will ensure that the employees always stay motivated and improve the working attitude among the employees.  The time when the company decides to dissolves its held shares for the past three years is also a good time to provide the compensation. The company needs to bring liquid flow of money in its account so that it is able to settle the salaries of the employees with ease. (Gursoy 2013).

Compensation is a substitute term for salaries and wages. Studies have identified that compensation is one of the prime factor that helps employees to work to their full potential. Hence, fairness consideration will have to be implemented by the company so that no employees of the organization feel that they are not a valuable asset of the company (Osibanjo, Pavithra and Adeniji 2014). However, survey has identified the fact that level of motivation of the employees have fallen to a great extent. As a result, the management tries to implement conventional agency theory approach so that it can provide high level of monetary benefits to its employees so that their motivational level can remain in good order.

Fairness consideration in determining compensation is a kind of thing that had to mention by the organization (Chen et al. 2015). Otherwise, the prime objective that is to improve the present level of motivation of the Strong Built Construction Company might not be fulfilled. In addition, the company is looking to initiate company share to the employees. Therefore, the company has to ensure that the share of the company is distributed in such a way so that every individual within the company can actually feel satisfied with this approach (Su 2014). Otherwise, it might even increase the negative impact on the mind of the employee.

Executive compensation is one of the most highly important factors that Strong Built Construction Company has to consider at the time of providing compensation to the executives. Since, executive are often considered that they might not show their incentive to perform to their full potential, which might affect the company’s overall performance. Therefore, executive committee has to be developed in such way, which can evaluate the performances of the employees (Goel 2012). The performance measurement is extremely crucial at the time of providing compensation. Since, if the an employee who is giving his best at the workplace, does not compensated properly as compared to another employee who is not probably giving too much effort in the job, it actually can increase the dissatisfaction or frustration level of the employees even more higher. Hence, formation of the committee can minimize this kind of possibilities, which will help the Strong Built Construction Company to increase the present level of the motivation for the employees.

According to Hermanson et al. (2012), compensation  committee   is  need  to  be  established  because   of  practical  and  legal  reasons. The key determinations of the compensations need to be established. There  are  complex  compensation  issues  which  are  need  to  be  addressed  and  the  board  does  not  have  adequate  time  to  solve  the  complex  compensation  issues  and  this  resulted  in  the  formation  of  compensation  committee  which  ensures  that  the  issues  are  addressed  and  receiving  the  deliberate  attention. The committee formed should have relevant degree of independence.  The  compensation  program  needs  to  be  designed  by  the  compensation  committee  should  focus  on  the  incentives  promoted  by  the  program. The  committee  should  consist  of  independent  directors  and  the  evaluation  of  the  committee  should  be  done  annually. The  compensation  of  compensation   committee  should  be  determined  by  the  board  itself. The  chair  of  the  compensation  committee  would  be  elected  by  the  board  unless  elected  by  the  board. With  or  without  case , the  board  is  entitled  to  remove  the  member  of  compensation  committee (Guthrie et al. 2012).  The  members  of   committee  needs  to  address  the  dissatisfaction  of  employees  and  the  idea  of  new  chief  officer  to  provide  intrinsic  compensation  to  employees  which  means  motivation  is  given  to  the  employees  by  rewarding  them  in  terms  of  intangible  factors  such  as  appreciating  them  at  the  accomplishment  of  the  tasks  to  boost  their  morale,  treating  with  consideration  and  making  them  feel  satisfied. This  would  enable  to  boost  the  outcome  as  the  current  level  of  executing  compensation  is  not  optimum (O'Reilly 2014). 

Conclusion

According to various dimensions of the research study it can be observed that the traditional theory related to the agency theory shows the importance of principal and agents. The agency theory helps to address the issues associated with desire of principal and the attitude of the principal for the compensation of degree of risk. In practical application of the problem is mainly observed among the stock holders. The extrinsic and intrinsic factor of motivation further illustrates how the internal agents vary from the external agents in defining of the attitude towards work. The appropriate time to pay of compensation is based on the availability of the liquid cash flows and several Governmental policies which are in favor of the construction companies. The overall aim of the study is to put an augmented emphasis on the fairness related to the structuring of the compensation package of the employees.                                    

Due  to  the  stringent  policy  by  the  government ,  the  construction  company  is  in  downturn  but  the  Strong  built  construction  company  has  been  able  to  maintain  its  profile    and  though  the  company  was  able  to  maintain  its  stability  in terms  of  revenue  there was  falling  motivation  among  the  employees. The  proposal  by  the  new  chief  financial  officer, Susan Bold  to  compensate  the  employees  in  terms  of  intrinsic  motivation  is  sounding  good  and  it  would  enhance  their  performance.  The  monetary  compensation  would  be  determined  by  the  time  frame  of  the  business when  it  is  exploring.  And  so  the  intrinsic  benefits  such  as  making  them  feel  satisfied, participating  in  decision  making  process would  change  the  attitude  of  the  employees  toward  their  work  and  would  keep  them  motivated. In  order  to  settle  the  salaries  of  the  employees  with  ease,  the  company  needs  to  maintain  the  liquid  flow  of  money  which  is  a  secondary  factor  but  the  primary  things  to  be  focused  on  is  the  intrinsic  factors  to  enhance  the  performance  of  the  employees

Ia.)

The aim of the research   paper is to evaluate the significance of the explanations as stated in the ISA 700 auditor’s report in decreasing the audit expectation gap.  As per the German auditor’s report there existed certain discrepancies in preparing audit reports as per the ISA 700 guideline. The aim of the research paper is to identify the effectives  of the policies stated in  the ISA 700 statements  to reduce the gap between  the expectations  of the management  of a business organization relating to the  audit procedure and the actual  results that is reflected in the audit procedure (Graham et al. 2012).  The research paper seeks to analyze the e implications of the ISA 700 framework as per the operational expenses of a business enterprise. In addition, it seeks to measure the actual financials position of the business enterprise without any bias.  As such, the primary responsibility of the research paper is to present a true and fair view of the financial state of a business organization.

Ib.) 

Auditors -   External  auditors , Internal  auditors	Financial  Statements
Financial  Analysts  -   Junior  Financial  Analysts     Senior Financial  analysts	Auditors report
Students  -     High school   students  ,  Middle school students	The profitability of a business enterprise.
Investors	The financial strength of the business organization  as well as the number of preference shares shares sold in the market   .

Ic.)

The manipulation checks relate to identifying the discrepancies in the auditor’s report as well as the accounting statements prepared in the year-ended financial statements. In addition, the manipulation checks referred to the preparation of the financial statements of a business enterprise in accordance to the necessary guideline and framework, which the business organization is supposed to adhere. According to Moser and Martin (2012),  The manipulation checks has been an essential part of the auditors job in carrying out authentic reports about the financial statements prepared in the business enterprise. Besides this, it remains essential to gather reports as per the manipulations made in the business enterprise. The total expenses of the organization shall be scrutinized as per the vouchers in the organization. (Parker and Guthrie 2014). Thus, undue manipulations would not be made which shall lead to a rise in the operational expenses of a business enterprise.

II

   II a)

According to both the studies the primary objective of the audit process was considered to be fraud detection until 20^th century. However the primary importance shifted from detection of the fraud to verify the details in the financial statements. The audit profession wanted to avoid discrepancies related to legal suits by the various business organization and general public.  It has been observed that fraud detection is prevalent in many firms and stake holders are discontent with the work of the auditors. The objective of the study is to assess the validity of audit estimates gap in Ghana both from auditors and stockbroker’s point of view (Agyei and Owusu 2014).

 II b)

 According to the study suggested by Okafor the difference between the degree of expected performance experienced by the user of both financial statement and the auditor is defines as the audit expectation gap. The study has also identified audit expectation gap as the difference between audit performers and the details conveyed though the audit. The method of data collection was based on questionnaire method.

According to Agyei and Owusu-Yeboah (2013), the report explains, the gap of audit expectation mainly exists due to subjectivity of the terms and concepts used in the auditing process. The concepts include “reasonableness, fair value, adequacy, materiality, reliability and relevance”. The study was conducted using sampling techniques.  The approach by Okafor is more rigorous as it is more focused towards quantitative research study by considering hypothesis 1 and hypothesis 2.

IIc)

According to Agyei and Gyamerah (2014), Albert Agyei’s the participants consisted of 72.5 % of male respondents and 27.5% of female respondents. Among the various respondents the work experience of 60% of the respondents had an experience of over 5 years, while 30% of the respondents were between 6 years and 10 years and rest had even higher amount of experience. 

The study conducted by Okafor consisted of participants from the accounting department of the University of Benin, Benson Idahosa University and Ambrose Alli University, and other investing public in Edo state.   (Okafor and Otalor 2013).

II d)

Acccording to Boateng and Agyei, (2013), the respondents in the study conducted by Albert Agyei revealed that 45% of the auditors agreeing to the statements and 45% disagreeing. The frauds detected in the financial statement were agreed by 65% of the total stock brokers.

The study conducted by Okafor revealed that it was the responsibility of the auditor to ensure the client with an accurate audit report including the financial statements. The main findings of the study revealed that 67.12% of the respondents didn’t know what was expected of the auditor’s as stated in the “statute books” and relevant documents. The response rate given Okafor is more accurate in nature.

II e)

Acccording to Ayuurebobi et al. (2015), the study by Albert Agyei is based on the parameters of agreement and disagreement of various variables. It also identifies that there was no expectation of gap among the auditors and the stockbrokers with relation to producing financial statements. Moreover there was no   the expectation of the gap was not present between auditors to the stockbrokers with respect to exercising the judgment in the selection of the audit procedures.

The study conducted by Okafor suggested that most of the participants believed that it was the responsibility of the auditor to ensure the client with accurate auditing data and financial data. (Otalor and Okafor 2013).

II f)

Accoroding to Kusi et al. (2015), the flaws identified in the model of Albert Agyei indicated several over expectations of the users of the audited analysis of the financial statements.

Several flaws in the model of Okafor suggested that more the public needed to be more educated toward their duties and responsibilities. The auditor’s report should have been further expanded to include disclaimer clauses stating the it is not a certificate or a guarantee related to the financial viability.

Conclusion and Recommendation

It can be concluded that the manipulations check also refer to identifying the discrepancies in the financial statement as well as the auditor’s report. It shall consist of stringent measures to that shall thoroughly examine the sales revenue earned as well as the income tax paid to the business organization.   The Government regulations have also affected the present compensation structure of the employees. The time when the Government starts to put more amount of fund on the construction companies,    the financial benefit earned by the employees will have an direct influence on the benefits reaped by the company 

Reference List

Agyei, A. and Gyamerah, S., 2014. The Awareness of Employees on Tax Relief Scheme in Ghana. International Business and Management, 9(1), pp.79-83.

Agyei, A. and Owusu, A.R., 2014. The Effect of Ownership Structure and Corporate Governance on Capital Structure of Ghanaian Listed Manufacturing Companies. International Journal of Academic Research in Accounting, Finance and Management Sciences, 4(1), pp.109-118.

Agyei, A., Aye, B.K. and Owusu-Yeboah, E., 2013. An assessment of audit expectation gap in Ghana. Int. J. Acad. Res. Account., Financ. Manage. Sci, 3(4), pp.112-118.

Ayuurebobi, K., Ngibise, B.A., Ngugi, A., Akpalu, A., Agbokey, F., Adjei, P., Punguyire, D., Bottomley, C., Newton, C. and Owusu-Agyei, S., 2015. Prevalence and risk factors for Active Convulsive Epilepsy in Kintampo, Ghana. The Pan African medical journal, 21.

Ballwieser, W., Bamberg, G., Beckmann, M.J., Bester, H., Blickle, M., Ewert, R., Feichtinger, G., Firchau, V., Fricke, F., Funke, H. and Gaynor, M., 2012. Agency theory, information, and incentives. Springer Science & Business Media.

Boateng, I.A. and Agyei, A., 2013. Microfinance in Ghana: Development, Success Factors and Challenges. International Journal of Academic Research in Accounting, Finance and Management Sciences, 3(4), pp.153-160.

Bragg, S. (2013). Accounting best practices. Hoboken, N.J.: John Wiley & Sons.

Chen, K.Y., Hou, T.S., Chen, T.P. and Wang, D.Q., 2015. The Compensation Payment Form and Art of Elderly Human Resources in Small And Medium-Sized Energy Enterprises.

Parker, L. and Guthrie, J., 2014. Addressing directions in interdisciplinary accounting research. Accounting, Auditing & Accountability Journal, 27(8), pp.1218

Foss, N & Stea, D 2014, 'Putting a realistic theory of mind into agency theory: implications for reward design and management in principal‐agent relations', European Management Review, vol. 11, no. 1, pp. 101-16.

Goel, D., 2012. Performance appraisal and compensation management: A modern approach. PHI Learning Pvt. Ltd..

Graham, J.R., Raedy, J.S. and Shackelford, D.A., 2012. Research in accounting for income taxes. Journal of Accounting and Economics, 53(1), pp.412-434.

Guthrie, K., Sokolowsky, J. and WAN, K.M., 2012. CEO compensation and board structure revisited. The Journal of Finance, 67(3), pp.1149-1168.

Hermanson, DR, Tompkins, JG, Veliyath, R & Ye, ZS 2012, 'The compensation committee process',Contemporary Accounting Research, vol. 29, no. 3, pp. 666-709.

Hoggett, J. (2012). Accounting. Milton, Qld.: John Wiley and Sons Australia, Ltd.

Horngren, C., Harrison, W. and Oliver, M. (2012). Accounting. Upper Saddle River, N.J.: Pearson Prentice Hall.

Ims, KJ, Pedersen, LJT & Zsolnai, L 2014, 'How economic incentives may destroy social, ecological and existential values: the case of executive compensation', Journal of Business Ethics, vol. 123, no. 2, pp. 353-60.

Kusi, B.A., Ansah-Adu, K. and Agyei, A., 2015. Evaluating Banking Profit Performance in Ghana during and post Profit Decline: A five Step Du-Pont Approach. EMAJ: Emerging Markets Journal, 5(2), pp.29-40.

O’Dwyer, B. and Unerman, J., 2014. Realizing the potential of interdisciplinarity in accounting research. Accounting, Auditing & Accountability Journal, 27(8), pp.1227-1232.

Okafor, C.A. and Otalor, J.I., 2013. Narrowing the Expectation Gap in Auditing: The Role of the Auditing Profession. Research Journal of Finance and Accounting, 4(2), pp.43-52.

O'Reilly, CA, Doerr, B, Caldwell, DF & Chatman, JA 2014, 'Narcissistic CEOs and executive compensation',The Leadership Quarterly, vol. 25, no. 2, pp. 218-31.

Osibanjo, A.O., Pavithra, S. and Adeniji, A.A., 2014. Compensation Management and Organisational Commitment in Developing Economies: Indian Perspective. Journal of Research in Management, Social Sciences and Technology, 8(8), pp.1-15.

Otalor, J. and Okafor, C., 2013. Imperatives of Bridging the Audit Expectation Gap and Enhancing the Credibility of Corporate Financial Information. International Journal of Business and Social Research, 3(5), pp.125-138.

Pepper, A & Gore, J 2014, 'The economic psychology of incentives: An international study of top managers', Journal of World Business, vol. 49, no. 3, pp. 350-61.

Pepper, A& Gore, J 2015, 'Behavioral agency theory new foundations for theorizing about executive compensation', Journal of Management, vol. 41, no. 4, pp. 1045-68.

Refe Baku, A.A., Ahenkan, A., Agyei-Boachie, S.Y. and Gyamfi, C.O., 2014. Climate Change and Business Education in Ghana: A Study of the University of Ghana Business School. In 2nd UGBS Conference on Business and Development 2014 Conference Proceedings (p. 315).

Su, X., 2014, January. Analysis on the measures to improve compensation management in SMEs in China. In 2014 International Conference on Global Economy, Commerce and Service Science (GECSS-14). Atlantis Press.

Van Puyvelde, S., Caers, R., Du Bois, C. and Jegers, M., 2012. The governance of nonprofit organizations integrating agency theory with stakeholder and stewardship theories. Nonprofit and Voluntary Sector Quarterly, 41(3), pp.431-451.

Warren, C., Reeve, J. and Duchac, J. (2012). Accounting. Mason, OH: South-Western Cengage Learning