Organisational Change - Kuwait Oil Company - Free Essay Example

Sample details Pages: 10 Words: 2870 Downloads: 2 Date added: 2017/06/26 Category Management Essay Type Research paper Did you like this example? Organizational Change Executive Summary: This study gives an overview of the organization which was taken for study. This study discusses the internal and external changes that take place in the Kuwait Oil Company. The external changes that take place outside the Kuwait Oil Company were found out to be technical changes, employment relationship and workplace communication. Don’t waste time! Our writers will create an original "Organisational Change Kuwait Oil Company" essay for you Create order Internal change factors are identified as Labour force trends and development in employment laws. The eight steps in the change process are also discussed in this study. This discussion includes the changes that were caused by the following: Labour force trends Development in employment laws Workplace communication Technological changes The employment relation Various changes that can be adapted to make the Kuwait Oil Company as a successful one are discussed at the end of each section. Training and communication are the two factors which minimize the negative actions of the change. Contents External Environment Changes: Labour force trends: Changes in the employment law: Internal Environment changes: Workplace communication: Technological changes: The employment relationship: Conclusion: Bibliography Introduction: Kuwait Oil Company came into being in year 1934. The company is actually an Anglo enterprise with the participation of English and Middle East people in its set up. The company therefore came into being with the joint efforts of BP or British Petroleum and Gulf Oil Corporation which is now called Chevron. The major activities of the company include oil exploration, drilling and development of well that extracts oil and natural gas from the earth floor. The major part of the production of the company goes in export to other countries in the Middle East, Europe and Asia. At present the Kuwait government has complete 100% stake and control over the Kuwait Oil Company. The company was taken over wholly by the government in year 1975. This way the company at present is a wholly owned government enterprise. The structure of the company is as follows. (KuwaitOilCompany, 2014) External Environment Changes: The things that happen outside an organization is known as external factors.These external factors affect the internal function of a business.The objectives and strategies of a business can be affected by these external factors.External factors which affect the business are listed below: Social factor Legal factor Economical factor Technical factor Competitors These external changes cannot be controlled by any organization. (Hillstrom, 2006)Labour force trends and changes in the employment law are the external factors we are going to discuss in this study. Labour force trends: Any change in the labour force trend cannot be controlled by any organization.Kuwait Oil Company also cannot control the changes that are ongoing in the labour force trends.The labour force trend has a greater impact on the performance of Kuwait Oil Company.Each and every employee in an organization does not possess the same age, education, skill and gender.An organization must have the capacity to manage these characteristics in order to receive maximum contribution and commitment from their employees. A highly educated employee may not have a required skill to accomplish a task, in such case it is the duty of the HR manger to guide and train the employee to accomplish the task provided to him.Objectives of an organization cannot be achieved when an employee lacks certain skills required for doing a particular task. The HR department can effectively control the issues emerging from the labour force trends.The conflict between the human beings is inevitable because human beings are unique with their own mindsets.These problems stem from employee perceptions about their work environment and conflict between an employee and organizational needs. It is the responsibility of the organization to adopt certain changes to find the solutions of this conflicts.With the help of various approaches to job design like implementing realistic job previews and by reducing the employeeà ¢Ã¢â€š ¬Ã¢â€ž ¢s role conflict, stress, work overload and ambiguity, the problem caused due to labour trends can be effectively addressed (DiCecio, 2008). The issues that emerged in Kuwait Oil Company due to labour force trends are discussed below: Issues: Lack of skills When the employee gets promoted he may lack education qualification. Attrition rate Solutions to the issues caused due to labour force trends are discussed below: Kuwait Oil Company can adopt a proper HR policy.Performance appraisal can be used to review the performance of employees working for Kuwait Oil Company.Based on the results of performance appraisal program employees can be given training to achieve their personal goals as well as organizational goals and objectives.Attrition rate in the Kuwait Oil Company is due to the retirement of senior employees as well as resignation of other employees.A suitable recruitment policy can be adopted by the employees to close the vacancies that arise due to the retirement as well as resignation of employees of the Kuwait Oil Corporation. Changes in the employment law: A small change in the employment law affects the performance of the organization to a greater extent.Based on the employment law HR department can take care of the changes to be done in the Kuwait Oil Company.HR department can revise the contract of each employees based on the changes that are implemented in the employment law.It is the duty of the HR department to check out the working conditions and safety measures of the Kuwait Oil Company. The HR department must ensure the safety level of the employees.The HR department checks the recruitment to the retirement process is as specified by the employment law of Kuwait. Compensation to the employees is given as per the employment law. As per the employment law of Kuwait, the HR department of Kuwait oil Company must give priority to the Kuwait nationals in the recruitment process. The terms and conditions present in contract are based on the employment law of the employment law of Kuwait. Proper communication channel can be used to communicate about the recent development in the employment laws to the empoloyees.Changes in the policies of the organizations due to the employment law must be communicated to the employees.When there is a change in the employment law regarding the safety and security measures it is the responsibility of the Kuwait Oil Company to implement these changes.When there is a change in the policy related to salary, Kuwait Oil Company management identifies the change and take necessary steps to implement the change in their organization. Internal Environment changes: The changes in the internal environment are proactive and occur due to organizationà ¢Ã¢â€š ¬Ã¢â€ž ¢s own policies. Internal forces for change come from the organization.Some internal changes are: Technology changes Workplace communication Employment relationship Workplace communication: Communication commonly means transmission of commonly meaningful information.Communication in work place may be either oral communication or written communication. (Von, 2013) Communication function in organizations: Communication is the number one tool in organizations.It is the most powerful tool and significant characteristic of man kind.Nothing will happen without communication.Sucess of any management depends more on their ability to communicate with labour.Communication is nothing but the process of interchanging facts, view points and ideas between person placed in different positions by effective communication.Effective communication only will lead the team to work satisfactorily in the organization. (Von, 2013) Importance: For ensuring good coordinations,communication is a must.Most of the problems for human occur due to lack of communication.Communication is the process of initiating,transmitting and receiving information.Among these three stages,if any one la cks, definitely it will lead to misunderstanding of concept. (Von, 2013) There are a number of thoughts and concepts related to communication. The process of communications includes the following steps that are followed by Kuwait Oil Company. From the above diagram it is clear that the message from sender gets encoded and then sent through the message channel. Thereafter on reaching the right place it is decoded and then received by the appropriate person. The message receiver mostly gives the feedback. It should be noticed here that any interference is the whole process should remain out and should not disturb the whole process. Need for communication: To establish and spread goals of an enterprise widely. To develop plans for further achievement. To organize human and other resources in the most effective and efficient way. To lead,direct,motivate and create a good working environment. (Von, 2013) Communication flow in the organization: Communication flows in three directions in the Kuwait Oil Company.They are: Downward communication Upward communication Horizontal or lateral communication Downward communication: In this type the information is sent from the higher level to the lower level.The communication may be oral or written type.Oral communications are instructions,speeches,meetings,telephone,loudspeakers and written communications are memoranda,letter,handbooks,pamphlets,policy statements,procedures and electronic news display.Sometimes information may loss as it comes down the chain of command and it consumes move time.So feedback system is necessary for this type of communication. (Von, 2013) In the Kuwait Oil Company communication flows downward when the superior gives instruction about the work to be done by the subordinate.When the management communicate their objectives and policies to the subordinates we can experience a downward flow of communication. Upward communication: Upward communication flows from subordinates to superior as per organizational hierarchy.There is a chance of passing irrelevant information to their boss.The information may be modified or filtered from real think.The top level management can know about the production performance,marketing information and financial data and so on.This upward communication is mainly applicable for participative and democratic organization.The informations may be in the form of suggestion, appeal and grievances,complaints,counseling,group meeting,open-door policy,morale questionnaires,exit interviews and ombuds person. (Von, 2013) In the upward communication the subordinates give feedback about their superiors. In the Kuwait Oil Company the informations may be in the form of suggestion, appeal and grievances,complaints,counseling,group meeting,open-door policy,morale questionnaires,exit interviews and ombuds person. Horizontal or lateral communication: The information is passed between the same level of organization.This type of communication is mainly implemented in peed-flow information.It helps to better understanding of information and to coordinate towa rds the management goal.In Kuwait Oil Company lateral communication is followed between departments. Communication can be either oral or written.Written communication is passing of information in writing from one person to another through posters,circulars,leaflets,etc.In oral communication information is passed on orally from one person to another.It can be done by face to face, in meetings or by telephone etc. (Von, 2013) Barriers to effective communication in Kuwait Oil Company: Following are the barriers for effective communication: Physical barriers Personal barriers Organizational barriers Semantic barriers Mechanical barriers Physical barriers: It includes physical distance,distracting noises and other interferences.Difficulty in passing of message mainly increases with increase in physical distance. Personal barriers: It arrives from motives,attitudes,judgement and emotions.Finally it leads to psychological distances.It may be caused due to problems in encoding and decoding others sentiments,attitudes and motives. Organizational barriers: Usually information flows through hierarchical structure in organization in downward communication.So, there are many chances of information being filtered. Semantic barriers: It refers to the relationship of signs to their reference.It arises due to limitations of the symbolic system.Symbols may reach a personà ¢Ã¢â€š ¬Ã¢â€ž ¢s brain through any of the senses such as feeling or hearing.Generally,symbols may be classified as language,picture or action. (Von, 2013) Mechanical barriers: It includes inadequate arrangement for transmission of n ews,facts and figures,poor office layout,defective procedure as and practices. Following rules can be followed for effective communication in Kuwait Oil Company: The information to be passed must be simple and clear. A two way communication channel can be created. A mutual twist and relationship to open cordial can be developed. A proper time can be chosen to deliver the message. Regular feedback can be taken from the subordinates by the superiors. Empathetic listening can be induced by Kuwait Oil Company. Try to develop flexibility and customize the message according to the need of the audience. Technological changes: The Technological changes include the coming of new technologies, new products and services and various other innovations. The technological progress has a serious impact on the organisational change. The organisation change thus requires to be made as per the competitive technological change in the industry. The use of latest machines, high outputs, more variety and various other features needs to be added in the production process so as to make the product and service. Inability to bring about the technological change would result in no orders for the company, comparatively lesser output and lesser profits for the organisation. Thus brining technological change is the need of the hour so as to fight back competition and sustain in the business. Moreover the technological upgrades bring with them high quality, high output and proves to be more cost effective. Thus organisation in search of all the above features need to bring technological upgrades so as to improve its position in the industry and bring itself to a comfortable level of business and thereon profit margins. (Bakker Schaufeli, 2008).Both manufacturing and service organizations are increasingly using technology as a means to improve productivity and market competitiveness. Kuwait Oil Company uses technology at the bottom level of management to the high level of management. Technology is used in refining and also in decision making process.Technology change include a change in the problem solving and decision making approach and changing service methods.When the Kuwait Oil Company implement new technology, employees are not aware of the new technology.So the management of Kuwait Oil Company can provide a training to their employee in carrying out their work with the help of new technology.Kuwait Oil Company can hire well trained professionals and engineers to rectify the errors that occur in their refining machines and information technology used by them.By using advanced technology Kuwait Oi l Company can achieve its goals and objectives.It can be also able to produce quality products to its customers. The employment relationship: Employment relationship is the legal link shared by the employer and the employee.The relationship between the employer and employee is based on mutual dependency. It is the duty of every employer to treat their employee with proper respect.We can witness conflict and problems in organizations with good policies. Employment relationship can be affected by the following: Breaching the employment agreement Disputes over application of an agreement Unfair bargaining Compliance with the employment law Management style Communication Arrears of wages In order to prevent greater loss these problems must be solved at the initial stage or else it may cause greater loss to both the employees and the employers. (development, 2005) The employer and the employee can try to solve the disputes between them before taking the assistance of Employment Relation Authority. In Kuwait Oil Company, the common problem that occurs in the employment relation is the breach of employment law. In such situation the employer can discuss with the trade union of to sort out the issues if the issue could not be settled they can seek the help of the Employment relation authority.The employment relation can be also affected by the work place conflicts.Workplace conflicts include pay, working hours, performance issues, different goals, misunderstanding between the employer and the employee, issues regarding workload, profession, health and safety and level of cooperation. (development, 2005) The issues which change the equation of employment relations hip are issues related to working hours, workload issues and misunderstanding between the employees and employers due to salary.The following methods can be adopted to sort out the issues that arise due to the employment relationship: Maintaining proper communication channel to reduce misunderstanding. Hiring more workers to reduce the workload and working hours of the existing employees. Conclusion: Rapid change in the technology also affects the business process. . In this study changes such as workforce trends, developments in employment law, workplace communication, technological change and employment relation. Labour force trends are identified as age, education, skill level and gender of employees. The issues which arise due to labour force trends were found out to be lack of skill and education and high retirement rates. These issues can be avoided by providing proper training to the employees. Any development or changes in the employment laws can be implemented with the help of HR department. The communication in the Kuwait Oil Company is affected due to physical barriers such as noisy transmission and inconsistency in communication. These issues can be avoided by following an effective communication method. Bibliography Bakker, A.B. Schaufeli, W.B., 2008. Positive organizational behavior: Engaged employees in flourishing organizations. Journal of Organizational Behavior, pp.147-54. development, c.i.o.p.a., 2005. Change agenda. DiCecio, R., 2008. Changing Trends in the Labor Force: A Survey. FEDERAL RESERVE BANK OF ST. LOUIS REVIEW. Hillstrom, 2006. USlegal. [Online] Available at: https://definitions.uslegal.com/m/managing-organizational-change/ [Accessed 15 December 2013]. KuwaitOilCompany, 2014. Board of Directors. [Online] Available at: https://www.kockw.com/sites/EN/Pages/Profile/Leadership/Boards-of-Directors.aspx [Accessed 20 April 2014]. Von, J.W., 2013. nwlink. [Online] Available at: https://www.nwlink.com/~donclark/leader/leadcom.html [Accessed 15 December 2013]. 1 | Page

Analysis Of Never Let Me Go - 1318 Words

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Managerial Strategy For Tourism Development â€Myassignmenthelp.Com

Question: Discuss About The Managerial Strategy For Tourism Development? Answer: Introduction Tourism in Australia is a significant part of the Australian economy. The total involvement of travel and tourism to GDP (Gross domestic product) was AUD 183.2 Billion (USD136.2 Billion) and contributed 10.9% of GDP in 2016. Besides, domestic tourism is a significant component of the tourism industry because direct involvement of travel and tourism to GDP was high in 2016. Tourism Research Australia provides the research data in both domestic and foreign market which aids in decision making related to marketing and tourism industry (Australian government, 2015). This report presents the relevant tourism issue in relation to the Australia. It also defines the evolution of Tourism from its origin to present times. Further, it discusses the different type of tourist that country target. It also evaluates the attitude of local population towards tourists. It describes the government and organization controls that affect interactions between locals and visitors. It also defines the impact of control on interaction between locals and visitors. Along with this, it explains the future hold for Australias tourism industry. Relevant tourism issue in relation to the Australia Following are relevant tourism issue in relation to Australia: In Australia, shortage of skilled labor is relevant tourism issue. It is analyzed that tourism area is growing rapidly hence there is a requirement of both well trained and inspired people for tourist. There are few people in Australian tourism industry that can speak multiple languages and have proficiency in high-tech computer skills. For example, Intercontinental Sydney double bay hires especially those people who have knowledge of multiple languages and computer skills to deal with the visitors. However, employees have no good understanding about tourist statistics and how to deal with customers (Amelung, and Nicholls, 2014). As a result, inadequate education and training generates not only financial losses but also generates lost opportunities and incapability to adapt the emerging tourism issues. Minimum Salaries, recruitment, and retention There are a large number of online and front-line workforces in the travel industry who gets the minimum amount of salary hence they have the low level of loyalty towards their jobs. In addition, it discourages the employees to change their job with high extent of promptness. As a result, this high level of employees turnover creates complexities in training because if a person leaves the company without notice then tourist information has lost (Australian government, 2015). Furthermore, it is challenging for five-star hotels that which people are responsible for contacting with visitors and to whom visitors will contact. For example, Duxton hotel, Park Hyatt Sydney, and Four season hotel Sydney have recruited the particular person to deal with visitors in Australia. In addition, there is a high level of job dissatisfaction and customer satisfaction in the Australian tourism industry due to low recruitment, high turnover, and retention. Another reason is that there is a shortage of a vailability of proficient employees in travel and tourism industry (Bonsn, et. al., 2015). The evolution of Tourism from its origin to present times Tourism is a cultural, social and economical occurrence which involves the peoples movement from a country to outside their domestic environment with the intention of personal and professional. These people are also called visitors that can be excursionists or tourists, and non-residents or residents. Further, tourism companies mainly focus on expenditures. From colonial days, travel and tourism idea has been originated in Australia. It is natural as compared to people who lived long at one from their house (Australia, 2017). Tourism is horizontal to increase the wealth and security of people and also settled down to people. When people return to old countries and visit on the kin then it refreshes old memories of them. Further, Australia has increased the awareness of its places in all over the world, especially, promoted the domestic tourism. In recent scenario, tourism is beneficial to increase the income of people because Travel and Tourism Company facilitates the private cars to large visitors to visit in different domestic places and also facilitates the three-week paid annual holiday packages to customers. In Australia, the government has introduced the long-service leave hence a large number of Australian now travels in tourist places (Australian Government, 2017). Furthermore, the government invests in the development of new and effective facilities, alteration in organization structure, and technique of tourist management, promotion, and development to promote the tourism industry. Type of tourists that country target with justification Australia targeted a different type of people for tourist purpose, which is discussed as below: International tourists New Zealand visitors are an essential part of Australian tourism industry because it concentrated on the short tourist packages with iconic tourist attraction places such as Gold Coast, Sydney, Cairns, and Uluru. It also visited in Zoo to view the Australian native animals like koala and kangaroo. Therefore, these target population is effective to increase the wealth of local people (Bonsn, et. al., 2015). Backpackers Another target of tourist in Australia is backpackers, especially, young people who belong to North America and Western European countries (particularly Britain). These people spend more time in Australia and tend to travel around in more of the areas. A large number of backpackers are working in holidays because it enables them to stay a long time in that country. Besides, working holiday visa in Australia is available for people who belong to 18 to 30 aged and belongs to Western European citizens. It is also available for certain developed countries like Japan, Taiwan, Canada, Hong Kong and South Area (Corporate plan, 2017). Domestic tourism The domestic tourism market is also targeted by the Australian government in which a large number of people are targeted who is night visitors. Domestic tourist is particularly visited on caravan and campaign sites because government facilitates the overnight accommodation. As a result, it increases the demand of tourist due to accommodating facility (Wilkinson, 2016). Australia is a leading domestic traveler due to a large amount of seaside resorts towns in each state. Further, it is situated on nearest to good surfing beaches; plentiful national parks and mountain retreats, wine growing areas, fishing places together with domestic visitation is the key tourist spot in Australia (Durand, and Fournier, 2017). Attitude of local population towards tourists As per the view of the Local population (2010), a large number of visitors are visited in Australia hence local people should have open-mindedness towards the tourist. Some local people make negative aspects about the tourist such as the secure environment. But, a large number of people have a positive attitude towards the tourist because they feel that tourism provides economic, social and environmental benefits to them in long-term. It is analyzed that some local people see the visitors as a threat because they feel that tourist declines their own values at high extent. This perception creates difficulty for developing regional tourism. Along with this, local people make some negative perception for the tourists due to a different culture. The native people are indecisive hence they always feel that which visitor can bother them. This situation is happening because they have inadequate information regarding visitors and also have lack of contact with visitors (MacCannell, 2013). Al though, tourist belongs to different religions and dressing, yet some local people always have a positive attitude towards them because they think that tourists are key earning source for them. Government and organization controls that affect interactions between locals and visitors Australian government makes policy to influence the people to travel throughout Australia. It also promoted international tourism through marketing as it will be beneficial to gain economic benefits of Australian from tourism (Tourism Australia, 2017). It also creates a policy regarding safety and security for tourist that helps to encourage the sustainable travel and tourism industry in Australia. Local government and tourism organization both make policies regarding developing in local areas with high safety (Markovi?, and Klari?, 2015). Together with, state tourism organization aids the tourism development and marketing of tourism areas for gaining the awareness about these destinations and persuades more tourists. Impact of above control on interaction between locals and visitors There are different controlling steps and policies made by government and tourism organization in an organization. These policies enhance the interaction between locals and visitors because these policies are related to safety and security in tourist areas. These controlling measures have also created the positive experience for local population and visitors in Australia because these policies are associated with cleanness and calmness (Mason, 2015). Future hold for Australias tourism industry It is analyzed that Australian tourism industry is influential for both foreign and domestic tourists because continue tourism growth have contributed towards increasing employment and national income. Government and investors plan to add the extra weights with respect to industrys attractiveness as it will strong growth in demand for foreign and domestic tourism for travel and tourism services. Furthermore, investment in Australian tourism industry aids the growth in infrastructure and enables the travel and tourism industry to provide effective services to tourists. The government has targeted to double the expenditure to approximately $140 billion annually on overnight tourists till 2020 (Packer, et. al., 2014). Besides, it makes different corrective action to increase the attractiveness of travel of tourism industry. In this way, it has planned to provide approximately AUD$629 million funds over 4 years. Along with this, government maintaining the existing freezes on traveler movement charge and also plan to not increasing the charges for tourists and working holiday makers visas. It has also announced the premium clearance facilities for international tourists on their pays basis within international airports. The government has also provided approximately $115 million to develop the Western Sydney Airport together with approximately $26 million for rail improvement and $89m for other actions at the airport site. It will also provide approximately $50 million over 4 years to encourage wine tourism and Australian wine overseas (Smaranda, and Daniela, 2012). Besides, the Australian government has cut the tax that will provide economic advantages to tourism operator. In this way, it has declined the companys tax rate to improve the travel and tourism industry. As a result, these policies have made by the Australian government to improve the travel and tourism attractiveness and to attr act the tourist towards different places of Australia (Tarlow, 2016). Conclusion It can be concluded that there is certain relevant tourism issue in relation to Australia named Shortage of proficient employees, and Minimum Salaries, recruitment, and retention. It can be evaluated that travel and tourism providing different economic benefits from its origin to present times. In addition, it can be illustrated that Australia has targeted a different type of tourist to get the benefits from them such as international tourist, backpackers, and domestic tourist. Furthermore, it can be discussed that local population has both positive and negative attitudes towards the tourists. It is also evaluated that there are different controlling measures are initiated by organization and government that builds positivity in the interaction between locals and visitors. Further, the government has planned to invest in travel and tourism industry for future growth of Australia. References Amelung, B., Nicholls, S. (2014). Implications of climate change for tourism in Australia.Tourism Management,41, 228-244. Australia (2017). AUSTRALIA'S HISTORY. Retrieved from: https://www.australia.com/en/facts/history.html Australian government (2015). Australias International Tourism Industry. Retrieved from: https://www.pc.gov.au/research/completed/international-tourism/international-tourism.pdf Australian Government (2017). Tourism Research Australia. Retrieved from: https://www.tra.gov.au/ArticleDocuments/185/Tourism_Investment_Monitor_2015_FINAL.pdf.aspx?Embed=Y Bonsn, E., Royo, S., Ratkai, M. (2015). Citizens' engagement on local governments' Facebook sites. An empirical analysis: The impact of different media and content types in Western Europe.Government Information Quarterly,32(1), 52-62. Corporate plan (2017). Tourism WA CORPORATE PLAN 2016-17. Retrieved from: https://www.tourism.wa.gov.au/Publications%20Library/About%20Us/Corporate_Plan_2016-17.pdf Durand, C., Fournier, S. (2017). Can Geographical Indications Modernize Indonesian and Vietnamese Agriculture? Analyzing the Role of National and Local Governments and Producers Strategies.World Development,98, 93-104. Local population (2010). Tourism theories. Retrieved from: https://www.tourismtheories.org/?p=842 MacCannell, D. (2013).The tourist: A new theory of the leisure class. USA: Univ of California Press. Markovi?, I., Klari?, Z. (2015). Attitudes of Local Population of Tourism Impacts on Destination SustainabilityCase of Croatia.Turizam,19(3), 98-110. Mason, P. (2015).Tourism impacts, planning, and management. UK: Routledge. Packer, J., Ballantyne, R., Hughes, K. (2014). Chinese and Australian tourists' attitudes to nature, animals and environmental issues: Implications for the design of nature-based tourism experiences.Tourism Management,44, 101-107. Smaranda, S., Daniela, M. (2012). Tourism Organization and Coordination in Australia and the Managerial Strategy for Tourism Development.Journal of Knowledge Management, Economics and Information Technology,2(5), 1-10. Tarlow, P. E. (2016). Issues facing the travel and tourism industry. Retrieved from: https://eturbonews.com/136067/issues-facing-travel-and-tourism-industry Tourism Australia (2017). Whos who in the tourism industry? Retrieved from: https://www.tourism.australia.com/en/news-and-industry-tools/resources-for-industry/whos-who-in-tourism-industry.html Wilkinson, J. (2016). Australian federal budget to drive future tourism growth. Retrieved from: https://hotelmanagement.com.au/2016/05/04/australian-federal-budget-drive-future-tourism-growth

Accounts Auditing Planning Beginning of the Engagement

Question: Discuss about the Accounts Auditing Planning for Beginning of the Engagement. Answer: Part A: Audit planning The planning of audit starts at the beginning of the engagement. The planning for the audit should not be a discrete and separate part in auditing. The audit planning of the company sincerely starts after completion of previous years audit. ISA 300 has given guidance in relation to the audit planning. The guidance has to be followed and following facts to be considered as the part of the planning; The risk assessment will be the first part which will include nature, timing and the extent of risks. The audit procedure has to be planned further to assess nature, timing and the extent of audit planning. Other planned audit engagement that has to be carried out is to be mentioned (ACCA, 2016). Preliminary judgment of materiality Materiality is the factor that makes difference to the users of annual report. Auditing never gives 100% assurance of the quality of the audit. According to AUS 306, materiality actually means information which is either omitted or misstated and would potentially have negative impact on allocation of the scarce resources. If the materiality is to be understood from the point of view of Bob's Bikes, an example would help significantly to understand what materiality is all about. Bob's Bikes had a cost of sales $53,271 compared to sales of $ 201,515 in 2016 and cost of sales in 2015 was $63,595 when sales was $187,450. If for some reason cost sales figure was overstated by $1000 in 2015 would not have material impact on the annual report of the company but if it is overstated by $5000, then it would have material impact on the financials. Analytical review As the data of trial balance of Bobs Bikes indicate that there would be some serious doubts on accumulated depreciating figure of the company. In machinery the company had the accumulated depreciation of $ 46,041 in 2016 and in 2015 it was $ 24,375. The depreciation on the assets have been increased significantly from $$ 24,375 to $ 46,041. This figure has to be analysed. The wages in 2016 declined at $ 46,816 compared to $53,000 in 2015. The reason for the decline has to be verified. The other income figure was $25,000 in 2015 but it was reported as $1000 in 2016. The auditor has to see the source of the other income. The cost of sales has declined to $53,271 despite increase in sales in 2016 compared to $63,595 of 2015, when the sales was lower (Pcaobus, 2016). Five accounts selected and rationales According to the data provided in the trial balance some prima facie irregularities or more appropriately doubts have been found against following accounts; Accumulated depreciation on machinery Wages Other income Cost of sales Depreciation In above all of the accounts the rationale of significant increase in accumulated depreciation on machinery has to be found out. On the other hand the significant decline in wages, other income, cost of sales have to be analysed. The disproportionate increase in deprecation to accumulated depreciation is to be analysed during audit (ACCA, 2016). Part B: Sample selection The sample selection is being recognized by ACCA. According to ACCA, the economical way of conducting audit is sample selection. The ordinary test will not be economical. It is also advised for 100% testing of data where there is limited high value data available. The sample techniques used in the manner that is appropriate the auditor. Here in this case three samples have been chosen from the revenue part. 24/07/2015 SJ Accounts receivable 4400 23/10/2015 SJ Accounts receivable 7245 25/03/2016 SJ Accounts receivable 6180 The data will be crossed checked with the vouchers and the day book. The cash balance and the bank balance for the proper reflection of those values is also to be verified. The data once verified will indicate that company has rightfully included all sales figures (Accountingscholar, 2016). Explanation/demonstration of sampling technique The sampling technique shall be of the mix of three methods random, systematic or haphazard. The samples have to be chosen randomly and haphazard way was the auditor is nearly sure that no material omission or misstatement has taken place. Where the auditor has the doubt about the quality of accounts and high value deals, the auditor shall use systematic approach in sample picking and testing. It should be more of a comprehensive effort from the part of auditor. Benefits of selected sampling technique In case of randomly and haphazard way of choosing samples, it gives an indication that the accounts maintained in the proper manner or not. Whether there was any suppression of facts to be found out from randomly picked samples. It is important to understand that high value transactions would be rightly chosen by the auditor and the systematic approach in sample checking would be appropriate in those transactions (Pcaobus, 2016). Part C: Considerations in substantive testing and collecting audit evidence The important aspect of substantive testing is gross testing of one or more account or sector. If some mistakes and errors are found in the expenses segment, then it becomes imperative to conduct substantive testing on all transactions related to that sector or the industry. The reason for substantive approach is to choose and pick the high value transactions or the transactions with 1% doubt. The substantive approach would yield better result in terms of auditing and pin pointing the actual issues related to the business. The reasons for checking one sector thoroughly are to find out the mistakes in the business and the policy of the company. The substantive approach in picking the accounts has helped the auditors to resort to the conclusion that the accounting in part b is indicating more of occurrence. There are still entries that are important part of ascertaining fair accounting practice is missing. There would be several other transactions that needed to be included in the accounting process. The tracing and vouching are important in auditing but vouching is more appropriate as it first selects an item and then starts finding the links of the items from accounting entries and the concerned vouchers and records. The journals and the ledgers are first checked against the item and then vouchers are matched against the item. Another important assertion would be reconciliation. The reconciliation of the banks and the cash items and the cash flow with cash balance would indicate the proper financial statement of the company. The reconciliation would indicate any mistake or omission or suppression of accounting facts (Accountingexplained, 2016). The reconciliation process would indicate the actual cash position of the organization. The cash balances would be reconciled with bank balances and the cash flows. The discrepancy would be wide open. Any difference in the cash balance and the cash flow statement balance would indicate discrepancy in the accounting procedure or omission or willful misstatement (Auasb, 2001). The important aspect of materiality indicates that negligible mistakes do happen in industry but a bigger mistake has no place to consider as just omission. Here the transaction of $20,000 cannot be ignored. The criteria for materiality are well known; 5% discrepancy in income from continuous operation % to 1% of revenue or expenses % to 1% of assets These are the simple examples. But $5 million difference in revenue figure of $3.5 billion Company is immaterial but $5 million difference in revenue figure of $35 billion Company is material fact. Here the transactions are indicating that the company has barely managed to reach $200,000 sales where the omission or misstatement of $20,000 is really material as it represents 10% of the revenue. If the testing are mainly related to control instead of substantive testing, these bigger mistakes relevant. The size of the mistake is worrisome from the point of view of control and substantive testing. The transaction is significantly large and should have been included in the accounting. It has to be found out whether it is barely a omission or willful misstatement of the fact or the suppression of the fact. These sorts of mistakes put the doubt on the control system of the company (Study, 2016). The other information regarding remuneration of the promoter, the related party transactions, the transactions at the arms length are important aspect of auditing. There is no scope for any mistake from the point of view of the auditors. Scams do happen in those transactions where material facts are suppressed for the benefit of the promoter and for the evasion of income tax. In concerning to the transaction of the part A case, the substantive test would resume its relevance only if there is misstatement of various accounting entries. If the accounting entries are mainly related to one sector, it needs to be verified with substantive testing. The complete testing of one segment of accounting is like checking of all expenses or matching of revenue with expenses by each entry would be considered as part of substantive testing. Bibliography ACCA. (2016, 09 28). AUDIT SAMPLING. Retrieved 09 28, 2016, from www.accaglobal.com: https://www.accaglobal.com/zm/en/student/exam-support-resources/fundamentals-exams-study-resources/f8/technical-articles/audit-sampling.html ACCA. (2016, 09 28). PLANNING AN AUDIT OF FINANCIAL STATEMENTS. Retrieved 09 28, 2016, from www.accaglobal.com/: https://www.accaglobal.com/an/en/student/exam-support-resources/professional-exams-study-resources/p7/technical-articles/audit-financial-statements.html Accountingexplained. (2016, 09 28). Bank Reconciliation. Retrieved 09 28, 2016, from accountingexplained.com: https://accountingexplained.com/financial/cash-and-equiv/bank-reconciliation Accountingscholar. (2016, 09 28). What is Materiality? Retrieved 09 28, 2016, from www.accountingscholar.com: https://www.accountingscholar.com/determine-materiality.html Auasb. (2001). AUS 306- Materiality and Audit Adjustments. Retrieved 09 28, 2016, from www.auasb.gov.au: https://www.auasb.gov.au/admin/file/content102/c3/AUS_306.pdf Pcaobus. (2016, 09 28). AU Section 350. Retrieved 09 28, 2016, from pcaobus.org: https://pcaobus.org/Standards/Auditing/pages/au350.aspx Pcaobus. (2016, 09 28). Audit Risk and Materiality in Conducting an Audit . Retrieved 09 28, 2016, from pcaobus.org: https://pcaobus.org/Standards/Auditing/pages/au312.aspx Study. (2016, 09 28). SUBSTANTIVE AUDITING TESTS. Retrieved 09 28, 2016, from study.com: https://study.com/academy/lesson/substantive-procedures-in-auditing-definition-lesson-quiz.html