Rodolfo Furniture Store Budget Analysis Free Essays

Rodolfo Furniture Store Budget Analysis Edric Hernandez-Cruz Gisela Franqui-Atiles Valerie Santiago-Rodriguez Yachira Rodriguez-Cuevas University of Phoenix PR Campus ACC / 561PR Rafael Marrero Diaz November 9th, 2012 Rodolfo Furniture Store Budget analysis is important for any corporation. From small businesses to large enterprises; all organizations evaluate the numbers in order to get a picture of where the company stands economically. This will serve as a basis in order to make decisions as to the direction the entity would like to go. We will write a custom essay sample on Rodolfo Furniture Store Budget Analysis or any similar topic only for you Order Now Erroneous decisions can lead to bad decisions that may end up in losses for the company. Rodolfo Furniture is on the verge of making a shift from a furniture maker to distributer. Yet only if the ethical accounting practices have been place into the production of the analysis; can Rodolfo Furniture decide on its future. Budgeting: Risks Associated with Sales Forecast The preparation of the usually begins with a sales forecast. The sales forecast and the anticipated inventory levels determine the production to be budgeted. Furthermore, the company’s sales forecast along with its experience, and collection policies determine the cash inflows for the company. In the scenario, Rodolfo uses his company’s flexible budget, as a guide, to determine the costs that should have been for an attained level of activity. For, instance if his company intended to manufacture or produce 50,000 units, the budget must have been prepared for 49,000 units, 51,000 units, 52,000, and so on. Major risks in sales forecasting Production risks In a manufacturing environment, like the illustration Rodolfo’s scenario, sales forecast determine production schedules. The companies use such forecasts to determine the exact amounts of raw materials and production issues; they need to have an idea of what they are to produce. Two problems can occur, sales under forecast or sales over forecast. Under forecast sales refers to the fact when the manufacturer may not produce enough product to meet customers’ demands. This will result in an increase in production times which in turn may increase costs; this will also frustrate customers and may even lead the company to losses. In the other hand, over forecast sales refers to the amounts of raw material to be purchased and excessive amounts of finished products to be sold. This excessiveness of raw materials may tie up the capital available to use and the excess finished product will make the company incur in warehouse storage costs; both excesses if repeated constantly may put the company at risk of bankruptcy. Resource risks When sales are over forecast, underutilized workers may have to be reduced. This action will result in a bad image for the company and will break the trust/bond that was built between the company and the workers as they will feel betrayed. If the sales are under forecast, it will happen the exactly opposite, the company will lack of workers to meet demands. This can result in bad image, losses, service levels will be affected as workers would have to work overtime to cover for the company which can lead to sicknesses and excessive absenteeism. Financial risks This type of errors affects the company’s financial health. The excess of material will lead to excessive costs of unnecessary storage since the excess should have never occurred. Also, over forecast can result in the purchase of unnecessary machinery. Furthermore, if the company forecasts erroneously in a consistent manner, this can lead the company into a raise in the interest by lenders. Sales forecast are prepared using data available, the more reliable and certain the data is the more accurate the budget is expected to be. Ethical considerations in the preparation of budget Before the development of a budget it is wise to consider the ethical involvements that can be present during it process. Incentives to lie and cheat are Rodolfo tempting actions for managers. Horngren (2008) stated, â€Å"It is common for managers of larger units with more resources to have higher pay, higher status, and greater prospects for promotion† (p. 301). This is common ethical flaw from the workers. The organizations have to prepare ways to identify, minimize and discourage this kind of behaviors. Subsequent use of the budget After completing the budget process, the information populated contains useful components that benefit the manager’s strategies behavior. According to Horngren (2008) there are four major benefits of effective budgeting. The mention benefits are: evaluation of activities, formalization of planning, performance evaluation, communication and coordination. By following the Rodolfo Furniture Scenario the four major benefits helps the mention company presented at the outgoing sentences. For the first benefit the main idea is the reevaluation of the actual activities and the evaluation of the opportunities to embrace new ones. The scenario display at the week 2 assignment, the foreign competitors surpass the actual company production because of the high-tech solutions use by them. The first benefits assist with the decision of changes in this matter. With the formalization of planning is an essential phase that every company has to experience. This benefit encourages managers to prepare contingency plans for the performing of immediate actions, pre-planned, at the moment of crisis. For the performance evaluation the most important fact is that the results of the recent analyze performance helps to take a more precise action because of the recent events than comparing with the last year performance. For the Rodolfo Furniture Scenario applies, because of the latest changes in the business, related to their company’s specialty, that is affecting gravely to his sales and requires an instance action. Lastly with communication and coordination this process allows the managers to create a macro communication because involves the input of employees from top to bottom and vice versa. Consider how the organization’s code of ethics requires an ethics analysis for any performance tool. Companies have developed a code of ethics or conduct as a tool to prevent the misuse of power, fraud, conflict f interest, money, and other. Mostly all ethical dilemmas start with dysfunctional incentive, poor supervision, and wrong personal habits. To ensure the reliability of the information and prevent situation of misleading or faulty information from accountants the Sarbanes-Oxley Act was created. This 2002 Act requires regulations in the financial practice and a code of ethics â€Å"for seniors financial officers, applicable to its principal financial officer and comptroller or principal accounting officer, or persons performing similar functions† (Horngren, 2008, Chapter  1). Now managers has to approved and been concern of the budget. Also requires external auditors to examine the company. These regulations in the accounting system search for the reliability of the information provided. But it needs high ethical standards from the personnel. The Institute of Management Accountants develop a code of conduct require to CPAs and CMAs that integrated integrity, confidentiality, credibility and competence. Ethics should be the priority in a company. To encourage others and prevent unethical behavior, unnecessary pressures should be recognize and detained. Sometimes dysfunctional incentive arises when managers or accountings are assessed on the performance concerning to budget amounts. The ethical standards of an organization are necessary to guide, measure, and analyze the performance of the personnel. Most important a code of ethic is essential to maintain the integrity and confidence of the company. References Horngren, C. T. (2008). Introduction to Management Accounting (14th ed. ). Retrieved from The University of Phoenix eBook Collection database.. How to cite Rodolfo Furniture Store Budget Analysis, Essay examples

Case Study Stakeholder Identification and Prioritization

Question: What are the ways for identifying and prioritizing stakeholders? Answer: Introduction: This particular study has provided an in-depth understanding of the importance of business ethics inside the organization. Business ethics is one of the most authentic applied form of maintaining moral values and principles at the business process based on which the organizations like to precede their business. In this assignment, the study has focused to emphasize on the case study based on which the answer of three questions have been provided. This particular study highlights how the managers apply their methods in order to identify the stakeholder of their organization. The business framework of Mitchell et al. (1997) in the article A Case study of Stakeholder Identification and Prioritization by Managers has also given emphasis. What are the ways for identifying and prioritizing stakeholders? In order to identify the stakeholders, managers should first understand who the stakeholder is.Stakeholders may be an individual or a group, inside or the outside of an organization. Employees can be one of the major important stakeholders who are intimately associated with the management project of the organization. On the other hand, it can be the external customers, suppliers with the presence of whom the organization can never be run successfully(FishbeinAjzen, 2015). Therefore, while identifying the stakeholder, the managers have to follow different steps so that they can choose the right person for their company whether they are customer or the employee. Managers have to go through the methodological process based on which they can understand the current stakeholder for their project. Manager should identify those persons who have a greater impact on that particular field. On the other hand, if the managers decide to launch a new product in the market, they should identify those types of customers who would be able to purchase the product. Otherwise, this product would never be able to create a demand in the market. Therefore, identifying a proper stakeholder in the business goal is very much important for running the entire process of business systematically. Conclusion: The entire study deals with different methods of identifying the stakeholders maintaining the business values and ethics inside the organization. Several ways of identifying appropriate stakeholders inside the organization by the managers have been discussed in detail in this particular assignment. Apart from that, the study has also focused to explain the different components of managerial practices mentioned by Mitchell et al. (1997). In addition, my own point of view has also been mentioned in this particular study about the methods of identifying appropriate stakeholder in the business process. Physician Aid In Dying: The term Physician-Aid-in-Dying refers to a tradition in which a physician provides a capable, permanently ill patient with a medicine for a lethal dose of medication, only on the request of the patient when the patient has no desire to live and wishes to end his or her own life. The practice highlights the requirement that a patient must be able to take such decision only when they have limited life anticipation which is only limited to six months described under the authorisation of Washington. The term highlights that the physician provide such assistance to those patients only who are about to die and seek the help to control the time and circumstances of death as they suffering seems to be intolerable. In the above stated case both the divorced fifty-five year old man who is suffering from arthritis pain along with insomnia and the middle aged women suffering from leukaemia refused to undergo chemotherapy as because both the patients does not have the desire to live since their suffering has taken a huge toll on their life and their mental conditions does not support their life supporting system. Recent study has shown that both the physician and the patient undergoes prolonged and detailed discussion on ending the life support. When a patient makes an informed decision to refuse to take the life supporting health treatment their wishes are often respected given the amount of sufferings they undertake. Hence the right of a competent patient refusal to accept those sustaining treatment is legally supported by law. However a critically ill patients who only has limited number of days left of his life may ask for a dosage of pain relief medicine which generally has side effects which may make haste death for example impairing respiratory system. Since the primary objective is to relieve the suffering of patients where as the secondary motive is to hastening death which is recognised as an anticipated and often accepted side-effect in critically ill patient. A look at Ethics in the Global Market Place The term ethical issue or situation relates to a person or an organistion which authorises them to make a choice between the available alternatives which should be evaluated whether it is ethical or unethical. The above case study is of Foxconn which is a Taiwanese firm having its operations in china dealing in electronics. There are two kinds of Globalisation, one involves marketing and the other involves production. Hence at present the study shows that globalisation has positive impact in sourcing the goods and service all around the globe. Therefore Foxconn which is a globalised company produces and assembles customer oriented electronics products at a lightning fast speed. However the company has a prolonged history of unethical practice. Majority of employees have complained about the long working hour and the overtime they work in the factory for which they are not even paid rightly so. Of late it has been learnt that foxconn emphasises school students for internships as they can avoid the signing contract than those normal workers, which ultimately deprives the young workers from trade union as students are not employees of the company and hence they are not under any regulations to be protected by the labour laws. Foxconn treats its workers in an in human manner which often leads to employees of the company to question them about the ethical working of the company. Workers in Foxconn are subjected to long working hours with no outside connecting link and they often dont have the permission to talk to each other as life inside the factory is difficult. Workers often complain that they dont have the facility to meet or talk to their family and sleep in small room with strangers for which they have to pay. The human resource management of the company is responsible for maintining the working the working hour of the employees at factory along with the working conditions. It is the duty if the factory supervisor to maintain the time record of employees and reporting the same to the departmental managers. The time record must record the total number of hours worked by each employees in the factory. On the other hand if a global companies like apple who wishes to outsource work with the third party generally looks for ethical model of a company with its working environment. If a company has maintains proper working environment and meeting the regular norms of labour laws then it may attract foreign company for outsourcing its work at cheaper cost. Reference List: Fishbein, M., Ajzen, I. (2015).Belief, attitude, intention, and behavior: An introduction to theory and research. Hoffman, W. M., Frederick, R. E., Schwartz, M. S. (Eds.). (2014). Business ethics: Readings and cases in corporate morality.John Wiley Sons. Jennings, M. (2014).Business ethics: Case studies and selected readings. Cengage Learning. Weiss, J. W. (2014). Business ethics: A stakeholder and issues management approach. Berrett-Koehler Publishers.

Spice Girls - Spice Girls free essay sample

If you enjoy listening to pop/rock music, you will really enjoy the Spice Girls album. It has two top hits on the radio today. One is called If ya wannabe my lover and the other is Say youll be there. They are very popular right now. They are among the top ten in the world. The group consists of five girls. Each has a different role in the music they play, but they all work together to make their music cool and popular to teenagers today. This is the Spice Girlss first self-titled album. I bought it about a week ago and enjoyed every minute I have listened to it. Even their music videos are really awesome. Its one of the best compact disks of my collections. Whenever I turn on the radio and the songs come on, I recite the whole song word for word. We will write a custom essay sample on Spice Girls Spice Girls or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page I think that the group is going to be around for quite a while. Everyone is listening to them, and I think you should really, really consider buying this album. You would really enjoy it. Its worth spending the $15 dollars. The album is the best.

Human Resource Importance of Individuals

Human Resource Importance of Individuals Introduction Human thinking, physical input and strategy have always been at the middle of human survival and development. Without such input, it’s difficult to fathom how development would have come by. However, since human beings have always been there, it has always been easy to dismiss their input as something which is easily replaceable through other people.Advertising We will write a custom research paper sample on Human Resource: Importance of Individuals specifically for you for only $16.05 $11/page Learn More With skills development and competition gaining center stage however, many companies now realize that human capital is far more superior that the monetary and the machinery investment that people make in businesses. This is because without an efficient human capital, then the machinery and monetary capital invested in a business cannot bear much fruit. Importance of individuals For business entities or organizations to exist, Stockley (2 ) notes that there has to be people to run them. Such include the organization/business owners, leaders, shareholders, employees, members and directors among others. Individuals come up with strategies of how business has to be run and hence the success or failure of the same largely depends on them. In the contemporary world, plain human capital is no longer enough to ensure that a business or an organization performs to its best. Faced with increasing competition and changes in the working environment, organizations have had to ensure they hire the best talent, train and equip them with the necessary skills and also motivate them well in order to ensure that the employees are retained in the company. In addition to the contribution that individuals make to an organization or a business establishment, Family Business Battleground (7) notes that â€Å"the collective attitudes, skills and abilities of people† make a significant contribution to productivity in the work place. T his means that even where groups are credited for good performances, the individuals who constitute the groups are responsible for the group outcomes. Even in the environment where technology is being adopted to improve performance and competitiveness in specific business fields, it is apparent that technological knowledge can easily be aped from one market player to the other. With human knowledge and skills which are better than the competitor’s, an organization is able to retain the competitive edge for longer. On a more self-assessing note, one realizes that technological development which is being touted as the solution to most of the challenges experienced in businesses today would not be possible were it not for the individual innovators and researchers who turned ideas conceptualized in their minds into tangible technological equipment, which are being used today.Advertising Looking for research paper on psychology? Let's see if we can help you! Get your first paper with 15% OFF Learn More Even in a world where artificial intelligence is predicted as a possible substitute to human intelligence in the future, Ahmed (10) notes that it can only be used to augment the knowledge possessed by people rather than replace it. This is because beside the skills and knowledge required to work in a specific environment, individuals also rely on their intuition and common sense in decision making, something that the artificial intelligence enable devices such as robots do not possess. Human input in technology has however led to the creation of artificial intelligence, which in turn has led to more efficiency and speed in the modern work place. Conclusion Most of the advances made in human development are courtesy of individual human input. As such, the individual remains a fundamental figure and the most important capital resource in the society to date. Ahmed, Asif. â€Å"Replacing Humans with Machines: The Insurance Industry has b egun to Leverage Artificial Intelligence to Cut Costs and Improve Efficiency. But Technology Will Never Completely Supplant Human Reasoning†. The Free Library by Farlex. March 2002. Web. Family Business Battleground. The importance of human Capital in Business. Dec. 2009. Web. Stockley, Derek. Human Capital Concept- Definition and Explanation. Feb. 2005. Web.

Socical computing Essay Example | Topics and Well Written Essays - 3000 words

Socical computing - Essay Example on management tool is social computing, which is the social aspect of interaction of people via computer systems and networks such as the internet, and encompasses a number of internet-based applications such as email, blogs, instant messaging, social book marking, social networking service, wikis, and polls (Dasgupta, 2010). Social computing has been identified to add value to the organization in a number of by enabling the management and development of business information assets (Tredinnick, 2006, pp. 228-234). Social computing tools such as wikis, blogs, and social networking sites offer a solution to information management related issues due to the inherent networking nature, which allows users to find, explore, and solve organizational problems. Moreover, social computing provides a platform for developing or improving on employee networks and permits participation (Ropes, 2010), which can lead to better employ performance, hence improved organizational performance. Furthermore , social computing can lead to more innovation, better staff abilities, and increase staff efficiency if competently employed as a powerful information management tool. This paper seeks to discuss and critically analyse the benefits, potential disadvantages and challenges of using social computing as an information management tool in the organization, and its future prospects. The advantages that this paper will focus on include enhanced customer relations, contributions to product development and innovation, increased productivity and efficiency, and general impact on employee information sharing and turnover levels. The disadvantages will be focusing on related security and privacy risks, loss of brand loyalty and fragmentation and cluttering of information. The critical analysis of social computing is, therefore, limited to the aspects of social computing that entail the various ways through which it influences information management in the organization. Such aspects include social

Leadership and Ethics Essay Example | Topics and Well Written Essays - 2000 words

Leadership and Ethics - Essay Example The task and duty of managers, leaders and administrators is to apply moral and ethical principles to business world and meet social responsibility issues and take into environmental concerns. As a decision maker experiences the outcome of a moral choice, not just the external outcome but the internal one as well, the entire decision-making process can be affected. Self-esteem may increase or decrease, leading to modifications (or not) in the perceptual net, the analytic tools, the approach to synthesis, choice, and action planning. Such a learning process is clearly, if slowly, unfolding with the implementation of affirmative action programs in the United States. Racial and gender discrimination are perceived and analyzed differently by most of us today than they were twenty years ago (Crane and Matten 2004). In order to know what the business can do for the community, it must first thoroughly know and understand its own resource capability in the areas of money, manpower, equipment, space, and managerial and technical expertise. Once this is known, then it can be correlated with the various community needs to determine how helpful, if at all, the company can be to the c ommunity. It may be as simple as supplying a few employees for local volunteer work to assisting the community in an in-depth study program or building program in a particular area. It is just as important to know the community and its needs as it is to know the company's capabilities. Someone within the company must work with the community to become familiar with the community needs, or the company must establish some type of internal committee or board to study community problems (Sims, 2003). The committee or board should be composed of people from the company and various representatives of community organizations. Finally, once a program selection has been made it must be carefully monitored; this must involve both review and control. Proper monitoring will enhance the image of the company and improve the chance of program success. Project feedback and follow-up will ensure that the project is being executed within time and funds limitations (Beauchamp and Bowie 2003). Courage is necessary if one is to improve the world. Once you open the door on differences, you have crossed into new intellectual territory forever. There is no turning back to the simple pleasures of taxonomies and typologies about who human beings are. Competitor selection policies contain provisions by which the corporate strategist seeks to consolidate his control over the competitors in his colony (Crane and Matten 2004). He can consolidate control, according to Porter, by placating good competitors, turning bad competitors into good competitors, and attacking bad competitors who could not become good competitors. The corporate strategist who governs this colony is no fool when it comes to dealing with good competitors. According to Porter, the effective corporate strategist "must allow good competitors enough successes to lead them to perpetuate their strategies" (Beauchamp and Bowie 2003). This allowance is a central feature of the strategic convention by which the strategist and his good competitors get along. The upshot is that the difference between successful and unsuccessful competitor selection is the strategist's ability to placate and to punish his

Non-Audit Services (NAS) Impact on Auditor Quality

Non-Audit Services (NAS) Impact on Auditor Quality The provision of Non-Audit Services (NAS) by auditors to their audit clients reduces total costs, increases technical competence and motivates more intense competition. However, the recent corporate collapses in the US, Australia and elsewhere, was surprising our attention. The issue of Enron arouses great concerns on corporate governance revealing the audit independence problem when CPAs provide audit and NAS for the same clients. In the view of the fact, now a days because of NAS, the audit practice is questionable, whereas third parties believe that without independence, there is no value for accounting and auditing practices (Salehi, M., 2009). Therefore, regulatory has been drawn to the issues of auditor provided NAS and audit quality. In fact, these services do not necessarily damage auditor independence or the quality of NAS. Because of that, this paper contributes to seen the impact of NAS on auditor quality. INTRODUCTION OF NON-AUDIT SERVICES Traditionally, audits have provided Certified Public Accountant (CPA) firms with a large percentage of their overall revenues. However, for many years consulting services constituted a relatively minor portion of the firms revenues. In recent years, firms have expanded the scope of services they offer to audit and other clients such as NAS. Today NAS provided more than 50 percent (%) or more of the total revenues earned by the CPA firms. As Accounting Today in USA (2001, April) states, the income of accounting firms in 2000 showed that the proportion of international and national assurance service was 35%, whereas that of tax advisory service and management advisory service accounted for 21% and 44% respectively. It shows that management advisory service has become the source of total income of accounting firms. NAS generally refer to the services above or beyond the related audit services or services other than traditional CPA work. Many scholars in their studies use different terms for some relevant issues, namely Management Advisory Services (MAS) and Management Consulting Service (MCS). According to Purcell and Lifison (2003), NAS as traditional CPA works including assurance, investment assurance, commerce registration and accounting affairs, tax advisory service, management advisory service, finance and investment advisory service, public offering, mergers and acquisitions services, information technology advisory service and others. However, there are three basic principles of the prohibition of specified NAS is predicated: An auditor cannot function in the role of management; An auditor cannot audit its own work; and An auditor cannot serve in an advocacy role for its client. Most of the firms growth comes from NAS that CPAs provide for their clients when dealing with auditing affairs (Purcell and Lifison, 2003). So, what the motivation and attraction in provision of NAS to companies? Firth (1997a) contends that companies usually entrust outside consultants/firms for service in the following situation: One-off assignments Urgent problems Expert techniques Arbitrating initial disputes Seeking advise Decrease the risk overall management The economic causes for offering NAS include; Growth opportunities Personnel attraction and retention Meeting clients needs Risk diversification opportunities The Sarbanes-Oxley Act 2002 states that NAS provided to a client should not be more than 5% of the total auditors remuneration; otherwise, the client must obtain pre-approval from its audit committee, as non-audit fees paid in excess of this percentage would deem the auditor as not being independent. In Malaysia, under Malaysian Institute of Accountant (MIA) suggests that audit firms should not accept any appointment if they are also providing NAS to a client; whereby the provision of NAS would create a significant threat to their professional independence, integrity and objectivity. Effective June 1, 2001, Bursa Malaysia (previously known as Kuala Lumpur Stock Exchange or KLSE) requires all listed companies to disclose non-audit fees in their annual reports. This is to protect shareholders interests and to increase corporate transparency. Consistent with the practices in other Commonwealth countries such as Australia and the United Kingdom (UK), which also have made it a requirement that non-audit fees of listed companies to be disclosed in the annual report. THE ISSUES OF NON-AUDIT SERVICES The main question/issue that arises when auditors provide or could provide both audit and NAS is whether the auditors are able to conduct their audits impartially, without being concerned about losing or failing to gain additional services, and the subsequent economic implications for the audit firm (Lee, 1993). Auditors seek to provide NAS because of the considerable economies of scope that ensue, i.e. cost savings that arise when both types of service are provided by the same firm. However, the result from several researchers show that the joint provision of audit and non-audit services gives rise to economic rents, which create incentives for audit firms to compromise their objectivity, e.g., waive audit adjustments, to retain audit clients (Palmrose 1986; Simunic 1984). For disclosure of NAS, investors should have enough information to enable them to evaluate the independence of a companys auditors. The proposed rules would bring the benefits of sunlight to the auditor independence area by requiring companies to disclose in their annual proxy statements certain information about, among other things, the NAS provided by their auditors and the participation of leased personnel in performing the companys annual audit. Generally a company required to disclose the fee paid for each NAS performed by its auditor and the fee charged for the annual audit. An exception to these general disclosure requirements is that issuers would not have to describe a NAS, nor disclose the fee for that service. In NAS and its independence, England and Australia have asked companies to publish audit and NAS fee in their annual financial report. According to Dopuch et al (2003) found that disclosure of NAS reduced the accuracy of investors beliefs of auditors independence in fact when independence in appearance was inconsistent with independence in fact. THE EFFECT OF NON-AUDIT SERVICES The dramatic increase in the nature, number, and monetary value of NAS that accounting firms provide to audit clients seen may affect their independence. Accordingly, the proposals specify certain NAS that, if provided by an accounting firm to an audit client, impair an auditors independence. Sami and Zhang (2003) investigated the effect of non-audit services on the backdrop of SECs revised rule that stressed perceived audit independence. They suggested that investors perceive that NAS impair auditors independence. According to Defond et.al. (2000) regulators are concerned about two effects of NAS. One is a fear that NAS fees make auditors financially dependent on their clients, and hence less willing to stand up to management pressure for fear of losing their business. The other is that the consulting nature of many NAS put auditors in managerial role. From the SEC regulations mandating fee disclosures (SEC, 2000), Auditors services relationship raises two types of independence concerns. First, more the auditor has at stake in its dealing with the audit client, particularly when the NAS relationship has the potential to generate significant revenues on top of the audit relationship. Second, certain types of NAS, when provided by the auditor, create inherent conflicts that are incompatible with objectivity. While, according to Firth (1997b), synergy would occur between auditor and auditee when an accounting firm provides audit and NAS simultaneously and consequently it would influence independe nce of auditor. Simunic (1984) indicates that CPA providing NAS would decrease the possibility for presenting the true financial statements and would influence the users of the statements on the recognition of CPA independence. It would further affect audit quality, the reliability of financial statements and the judgment of decision-making. How NAS Can Affect Auditor Independence? The dramatic expansion of NAS may fundamentally alter the relationships between auditors and their audit clients in two principal ways. First, as auditing becomes an ever-smaller portion of a firms business with its audit clients, auditors become increasingly vulnerable to economic pressures from audit clients. Large non-audit engagements may make it harder for auditors to be objective when examining their clients financial statements. Under any circumstances, it can be difficult for an auditor to make a judgment that works against the audit clients interest. Where making that judgment may imperil a range of service engagements of the firm, of which the audit is a fairly small part, it may be unrealistic to expect that an auditor can ignore completely what the firm stands to lose by the auditors action. Second, certain NAS, by their very nature, raise independence issues. Providing certain NAS to an audit client can lead an audit firm to have a mutual or conflicting interest with the client, audit its own work, advocate a position for the client, or function as an employee or management of the client. However, not all NAS pose the same risk to independence. Only these specific NAS that impair independence, namely: Bookkeeping or other services related to the audit clients accounting records or financial statements of the company. The prohibited services are: (a) Maintaining or preparing the companys accounting records; (b) Preparing the financial statements or the information that forms the basis of the financial statements that are required by the company and; (c) Preparing or originating source data underlying the companys financial statements. Design and implementation of financial information systems that aggregate source data or generate information that is significant to the financial statements taken as a whole, unless it is reasonable to conclude that the results of these services will not be subject to audit procedures during the audit of the companys financial statements. This rule does not preclude the external auditors from working on hardware or software systems that are unrelated to the companys financial statements or accounting records. Appraisal or valuation services, fairness opinions or contribution-in-kind reports or other opinions or reports in which the external auditors provide an opinion on the adequacy of consideration in a transaction, unless it is reasonable to conclude that the results of these services will not be subject to audit procedures during the audit of the companys financial statements. This rule does not prohibit the external auditors firm from providing such services for non-financial reporting purposes (e.g., transfer pricing studies, cost segregation studies and other tax-only valuations). Actuarial services involving amounts recorded in the financial statements and related accounts for the company where it is reasonably likely that the results of these services will be subject to audit procedures during an audit of the companys financial statements. This prohibition extends to providing the company with any actuarially-oriented advisory service involving the determination of amounts recorded in the financial statements and related accounts for the company other than assisting the company in understanding the methods, models, assumptions and inputs used in computing an amount. Internal audit outsourcing services relating to the internal accounting controls, financial systems or financial statements of the company. This prohibition on outsourcing does not preclude the external auditors from providing attest services related to internal controls, evaluating the companys internal controls during the audit or making recommendations for improvements to the controls, or management from engaging the external auditors to perform agreed-upon procedures engagements related to the companys internal controls. Management functions. This rule prohibits the external auditors from acting, temporarily or permanently, as a director, officer or employee of the company or performing any decision making, supervisory or monitoring function for the company. However, the external auditors may assess the effectiveness of the companys internal controls and recommend improvements in the design and implementation of internal controls and risk management controls. Human resources functions. The external auditors may not seek out prospective candidates for managerial, executive or director positions, act as negotiator on the companys behalf such as determining position, compensation or fringe benefits or other conditions of employment or undertake reference checks of prospective candidates. The external auditors may also not engage in psychological testing or other formal testing or evaluation or recommend or advise the company to hire a specific candidate for a specific job. Broker or dealer, investment adviser, or investment banking services. The external auditors are prohibited from serving as promoter or underwriter, making investment decisions on behalf of the company or otherwise having discretionary authority over the companys investments, or executing a transaction to buy or sell an investment of the company, or having custody of assets of the company. Legal services that could be provided only by someone licensed, admitted or otherwise qualified to practice law in the jurisdiction in which the service is provided. Expert services in an advocacy capacity unrelated to the audit. This precludes engagements that are intended to result in the external audit firms specialized knowledge, experience and expertise being used to support the audit clients positions in adversarial proceedings. This prohibits the external auditors from providing expert opinions or other services to the company or a legal representative of the company for the purpose of advocating the companys interests in litigation, or regulatory or administrative investigations or proceedings. This rule does not however preclude the company from engaging the external auditors to perform internal investigations or fact-finding engagements including forensic work and using the results of this work in subsequently initiated proceedings or investigations. Any other service that the Audit Committee determines is impermissible. According to Zulkarnain (2006), in Malaysia, scholars reported that only a small number of the shareholders and auditors that participated in their study believed that NAS provision increased their confidence in auditor independence. On the other hand, Teoh and Lim (1996) found that the provision of NAS was ranked as the second most important factor that undermines auditor independence. Arrunada (1999) pointed out that joint provision of audit and NAS would reduce overall costs, raises the technical quality of auditing, enhance competition and need not prejudice auditor independence or the quality of NAS, which would ultimately increase auditor independence (Goldman and Barlev, 1974). Based on the standard organization analysis, Arrunada (1999) showed that cost savings gained from the joint provision of audit and NAS will be transferred to customers as a decrease in price in both markets, and also that the provision of NAS would result in an increase in client- and firm-specific assets, where firm-specific assets would always have a positive effect on independence. This argument is supported by Grout et al. (1994), who argued that permitting auditors to perform joint services would reduce auditors dependence on a single client and encourage them to diversify as a consequence. Opponents to the joint provision of audit and NAS claimed that auditors would not perform their audit services objectively and that joint provision would impair perceived independence because ultimately they would be auditing their own work or acting as management (SEC, 2001), and managements power over the auditor could be increased due to auditors reliance on fees received (Canning and Gwilliam, 1999). Thus, it may influence their mental attitude, impartiality and objectivity, and independence of thought and action (Flint, 1988). The year 2002 had seen the biggest corporate collapses in the United States history that have raised lots of questions regarding auditors independence. For example, Arthur Andersen, being the auditor of the three biggest bankruptcies, Enron, WorldCom and Global Crossing, was heavily criticized for the collapses. It is said that Andersen was purportedly stressing more on non-audit services (NAS) than the audit itself. Auditing profession as a whole has been badly blamed for the collapses and changes were being proposed to ensure that audit firms reduce their over-reliance on NAS (The Star, 2002). As a result, to ensure the independence of auditors and to protect the interest of investors, the accounting profession in most countries has come up with a code of ethics as a guidelines for auditors competency and independence. In Malaysia, under MIA rules that become effective January 15, 2002, professional independence is considered impaired if total fees arising from provision of NAS to a client is 20% or more of the audit firms total annual fees received for two or more consecutive years. Before 2001, the regulators in Malaysia emphasized only on the disclosure of audit fees in the companies annual reports, as required by the Companies Act 1965. Several studies have examined whether the provision of non-audit services impairs audit quality. However, the previous studies report seems conflict in the results depending on the proxy of audit quality used. Teoh and Lim (1996) found that the disclosure on non-audit fees would influence and impair audit independence. A survey done by Gul and Teoh (1986) in Malaysia, suggests that the provision of NAS reduces public confidence in auditors independence. The auditor can be interpreted to compromise its independence if the provision of NAS is significantly tied to the issuance of clean audit opinion. Wines (1994) found that the auditors of those companies that received clean reports over the period derived a significantly higher proportion of their remuneration from NAS fees than the auditors of companies that received at least one audit qualification. This finding suggests that auditors are less likely to give qualified reports to clients financial statements when high levels of NAS f ees are involved. Firth (2002) found that companies that have relatively high consultancy fees are more likely to receive a clean audit opinion due to the non-audit work clearing up problem areas at the client company; or it might be due to high consultancy fees, thus impairing auditor independence. Ayoib, Rohami and Nor (2006) suggests that non-Big Five auditors are less independent when issuing audit reports for NAS purchased companies. This is also consistent with the preposition that large auditors are more independent than smaller auditors (DeAngelo, 1981). The results imply that audit opinion is dependent on the amount of NAS fee. It could be argued that small auditors could not resist against management pressure when issuing qualified opinion. Frankel, Johnson and Nelson (2002) suggest that their results provide evidence that auditor independence is compromised when clients pay high nonaudit fees relative to total fees. Securities and Exchange Commissions (SEC) concern about the growth of nonaudit fees relative to audit fees during the 1990s (e.g., see Levitt 2000). The SECs concern that the growth in the provision of nonaudit services compromises audit firm independence is based on the premise that the provision of nonaudit services increases the fees paid to the audit firm thereby increasing the economic dependence of the audit firm on the client. Based on the use of discretionary accruals and earnings benchmarks as proxies for biased financial reporting, Hollis, Ryan and Brian (2003) find evidence supporting the claim that auditors violate their independence as the result of clients paying high fees or having high fee ratios. DeAngelo (1981) models that as the economic bond between the audit firm and client increases the audit firms dependence on the client increases. Nonaudit fees further increase the client auditor bond by increasing the portion of audit firm wealth derived from a client (Simunic 1984; Beck et al. 1988). Nonaudit fees can also threaten independence when clients use them as contingent fees. Magee and Tseng (1990) note that while contingent fees are explicitly prohibited by audit standards, clients can create contingent fees by withholding profitable nonaudit services when the auditor does not allow the client to report its preferred financial condition. Costs and Benefits of Restricting Certain Non-Audit Services (proposals by SEC) There is increasing concern that the growth of NAS provided to audit clients affects the independence of auditors. If investors lose confidence in auditors ability or willingness to provide an unbiased and impartial examination of companies financial statements, then investors trust in the reliability of publicly available financial information, and in the integrity of the securities markets, may be damaged. Currently, accounting firms may not provide certain services to their audit clients without impairing their independence. The Securities Exchange and Commission (SEC) proposals extend and clarify those restrictions that should be used to evaluate the effect of NAS on an auditors independence and by designating certain NAS that if performed by an auditor for an SEC registrant that is an audit client, impair the auditors independence. The SECs proposals on the provision of NAS may affect to: 1. Benefits (a) Investors. For the reasons explained above, the SEC believes that the proposals will enhance auditor independence and thereby enhance the reliability and credibility of financial statements of public companies. SEC expect these benefits to inure primarily to investors who, if the proposals are adopted, should be able to review public companies financial statements with greater assurance that reliance on the statements will lead to more informed investment decisions. (b) Public Accounting Firms. SEC anticipates that the proposals will confer two primary benefits on public accounting firms: The proposals should clarify what NAS may be provided to an audit client without jeopardizing auditor independence. The proposals could improve competition in the market for the provision of NAS by public accounting firms. Because the restrictions on providing NAS to an audit client would apply equally to all accounting firms, the overall impact of the proposed restrictions may be to re-distribute the restricted NAS among the public accounting firms. 2. Costs SEC proposals on NAS may impose costs on issuers and public accounting firms. (a) Issuers. The proposed amendments have the effect of restricting issuers from purchasing certain NAS from their auditors. (b) Public Accounting Firms. Some public accounting firms provide a wide variety of services both to audit and non-audit clients. Our scope of services proposals is likely to affect these firms in several ways. The primary cost for these firms is that they individually may lose one source of revenue because they will no longer be able to sell certain NAS to their audit clients. CONCLUSION In conclusion, evidence suggests that although auditors have market based incentives to remain independent, auditor independence may be threaten when an auditor provide NAS to their clients and is reasonable that the NAS actually impair independence and quality of auditor. Hillison and Kennelley (1988) had recommended three additional alternatives to a total prohibition of NAS provision to audit clients: Offer NAS to non-audit clients only, Prohibit certain types of NAS, or Permit all types of NAS with full disclosure requirements. However, some professional and academic seen it seemed not much enough to protect auditor independence and It would further affect auditor quality. Thus, national and international professions should be redefined accounting and auditing regulation as well as scanted new regulation regarding to NAS and giving clear picture about that services to auditors as well as investors and heavy penalties, to whom overriding these regulation.