Chapter 2 - integration Flashcards
Integrated control
Is about co-ordinating information within and between different control systems, such as management control, production control, environment control, project control and HR control.
Accounting
A process of collecting, summarising, analysing and communicating information to enable users of that information to make informed decisions. It involves the provision of information about aspects of the performance of an entity to a particular group of people with an interest, or stake, in the organisation - we can call these parties stakeholders.
Accounts
Written records detailing an organisations performance in relation to a specific aspect of performance.
Accountability
The duty to provide an account of those actions for which an organisation is deemed to be responsible. The accounts can take a variety of forms and would be provided to those stakeholders most affected by the activities of the organisation.
The number and nature of accounts will be influenced by managers judgements about an organisations responsibilities and its associated accountabilities
What are the responsibilities of an organisation?
Fundamentally a normative question. May vary between professionals and more broadly between countries.
Different viewpoints
“shows a fundamental misconception of the character and nature of a free economy. In such an economy, there is one and only one social responsibility of business [and that is] to use its resources and engage in activities designed to increase its profits as long as it stays within the rules of the game, which is to say, engages in open and free competition, without deception or fraud.”
“Society (as a collection of individuals) provides corporations with their legal standing and attributes and the authority to own and use natural resources and to hire employees. Organisations draw on community resources and output both goods and services and waste products in the general environment. The organisation has no inherent rights to these benefits and, in order to allow their existence, society would expect the benefits to exceed the costs to society” (opinion)
As societies expectation change we would expect practices to evolve and change.
Materiality
In making the decisions about what information to report, most larger organisations undertake some form of stakeholder engagement to determine what information would be ‘material’ to the respective stakeholders. Information is considered to be ‘material’ if it is important (material to) the respective individual or group that is making a decision. That is, information is material if its presence or absence is likely to influence the decisions being made by readers of that information.
Once the managers of an organisation determine why they are reporting, and then to whom they are reporting, it is appropriate to engage those identified stakeholders to ask them what items of information they would like, or expect, to receive. Because the disclosure of information about social and environmental performance is largely voluntary, it is useful for readers of organisations’ reports to understand why particular information was disclosed and other information was not disclosed. This process is referred to as the ‘materiality determination process’ – the process of determining what to disclose to stakeholders and what not to disclose. Disclosing information about the materiality determination process, which can be directly related to our four-step accounting model, helps stakeholders to understand the context of why particular disclosures are being made by an organisation. To this end, larger organisations that produce social and environmental reports (or sustainability reports) will often provide information about their materiality determination process towards the commencement of the respective report in which they: * identify their key stakeholders (often explaining why they are deemed to be ‘key’) * explain how they engaged with the stakeholders (through general meetings, focus groups, survey, interviews, feedback mechanisms, etc.) * identify the aspects of performance the key stakeholders were most interested in * identify where in the organisational reports this information is reported.
Four step accountability model
Why should an entity report/provide an account?
To whom is that account primarily directed?
What elements of performance should be accounted for?
How should the account be presented?
