Question

 

A. The value of information is the difference between the benefits realized from using that information and the costs of producing it. Would you, or any organization, ever produce information if its expected costs exceeded its benefits? If so, provide some examples. If not, why not?

 

B. Some individuals argue that accountants should focus on producing financial statements and leave the design and production of managerial reports to information systems specialists. What are the advantages and disadvantages of following this advice? To what extent should accountants be involved in producing reports that include more than just financial measures of performance? Why?

 

 

 

Answer 1

Answer A -

Yes, The value of information is the difference between the benefits realized from using that information and the costs of producing it. But many times, the cost of getting information exceeded from the value derived from the information. In these cases, cost of information becomes sunk cost as no value derived in the future form the expenses made to derived the information.

Information is associated with data, as data represents values attributed to parameters, and information is data in context and with meaning attached. In terms of communication, information is expressed either as the content of a message or through direct or indirect observation. Every organization produce information on a daily basis,

Example:

a) Example of Nokia Corporation they were the top seller throughout the world, of feature mobile phone in between 2000-2015 but the android mobile has vanished their business as they did not have information about the research and development cost infused by other competitor organization when they come to know about that the information gathered and fund infused, to cater them, but failed miserably as cost of information was too high due to delay in action and the market was capture by other competitors, In this case, information was relevant but received late and the cost was sunk for the Nokia.

b) Many Law firms lose cases due to the information they for the client after paying huge cost to the researcher but the client refused to bear the cost of such information as case winning reward is less than the cost expended to get the information,

Answer B-

Accountants generally known, as a person playing with the figure in a financial statement but actually they accountant are too different from this. The accountant has not the only duty to produce a financial statement, but asking management about the reporting about that, the information gathering by an accountant through his skills, he has the right to get reported in the report. However, following are the advantages and disadvantages of following this advice

Advantage to Accountant-

1- Less time to conduct work as management reporting, as time saved that is allocated to review management report production and review.

2- Less responsibility of the work.

3- Less conflict with the management over re-reporting or any debatable point.

Disadvantage to the Accountan-

1- Fail to replicate the true picture of the organization.

2- Chances of Flase management report.

3- Lack of clarity on the fraud reporting or reporting of adverse things.

4-Whole quality of audit gets impacted.

5- Less reliable.

An accountant should involve in the report reviewing, as to whether the question raised has been properly addressed by management though management report or not, if not what have been done to the red flagged transaction. So the accountant should be part of that.