Characteristics of Financial Control and Audit in The US and UK

 1. What are the common characteristics of financial control and audit?

Financial controls and audits in the United States and the United Kingdom are common characteristics across all countries (Das, Pinto & Suresh, 2008). These characteristics relate to how they ensure that a company’s operations are maintained. This characteristic is exhibited by companies that have been able to maintain their financial statements and records for long periods. There are different types of financial controls available in both the U.S. and the United Kingdom. These include statutory laws, reporting requirements such as auditing and accounting rules, executive compensation regulations, internal controls, and internal corporate governance (Kerzner et al., 2009). These characteristics depend on the level of risk as well as the extent of regulation and compliance with regulatory standards.

2. Which of these characteristics is most important to the organization and why?

Financial controls and audits are very essential to an organization. A good financial control can help an organization achieve its objectives. Poor financial controls can disrupt an organization. It’s important for organizations to have effective financial controls in order for them to operate effectively (Zimmermann, 2007). An effective financial control system is designed for a specific purpose. For example, when it comes to insurance or banking, some banks use it to provide credit to small businesses. On the other hand, other banks may use it as an opportunity to save money on fees. Therefore, it is very essential for an organization to have efficient financial controls and audits.

3. What are the primary purposes of having these characteristics?

A lot of information on financial controls and audits is provided through research by institutions such as CIPO. They need to conduct research and find out what types of assets, liabilities, capital structure, revenues, costs, taxes, and other aspects they need to know. The primary purposes of this information are to help the customers make decisions to buy from the right people, and also to make sure that the business operates smoothly and it’s profitable. Information regarding the most reliable sources of revenue can help the bank determine whether it needs to raise funds. If it has enough cash, then there is no need to borrow funds from the stock market. From these two perspectives, a bank will be able to understand the best strategies to earn more income. Lastly, through the analysis, information about risks comes into view. Risk management helps an organization reduce the possibility of the occurrence of problems in the future.

4. How do you recommend that stakeholders should address these issues?

There are many challenges that threaten our economy and cause financial instability. Some of these problems relate to poor corporate governance, ineffective accounting practices, low wages, environmental concerns, and even terrorism. A successful financial control system prevents the economic disruptions that these threats pose, enabling companies to create value and serve their clients effectively (Gibson, 2006). A good financial control can allow a corporation to receive tax credits that allow the company to grow and prosper at a faster rate. Such information can be helpful when making sound investments related to the growth or development of technology. When it comes to promoting transparency, an excellent financial control can enable the public to know exactly where companies stand financially. Without the current quality assurance policies, more than 150 million Americans could lose their jobs because of bad corporations. Good accounting practices promote accountability by ensuring every penny counts, and accountability. By following proper accounting procedures, firms will be able to get away from frauds that take place in industries. As a result, it becomes easier for companies to sustain profitability and growth. Finally, the presence of an audit in an organization is beneficial to consumers and businesses too. Every time your company receives a report, it makes you think twice before placing trust in someone else. Having a qualified auditor who ensures accounting procedures are followed will safeguard your reputation, increase credibility, and prevent situations that can lead to losses.

 

5. In which ways do differences exist between the U.S. and the United Kingdom in terms of governance? Are they comparable?

There are some similarities between the U.S. and the U.K. in terms of governance. One main similarity between the U.S. and the U.K. regards capital rules. Both countries need to maintain capital structure, but the way to preserve the same amount of money in each country differs. Because of this difference, most organizations find it difficult to comply with the same set of guidelines since they use various ways to get rid of excess capital which reduces dividends (Gibson, 2006). It is very difficult to manage an account book in both countries. Most organizations hire professional accounts and give the responsibility to those who manage them. For instance, accounting firms in the U.S. need to comply with international accounting principles while accounting firms in the U.K. need to follow Generally Accepted Accounting Principles (GAAP) (Kerzner et al., 2009). Overall, the complexity of capital regulations in the U.K. is not so much compared to that of the U.S. The difference in capital standards has contributed to changes in the way companies operate there (Kotler & Armstrong, 2005). Companies in Britain have to meet minimum capital ratios while companies in America have to pay more taxes to raise the capital. Furthermore, companies in both countries are required to hold adequate reserves. Although the British government pays more taxes to finance the U.S. economy, the reserve ratio for both is higher than the one in the U.S. Companies can invest in foreign markets without jeopardizing earnings in the U.S. However, the cost of doing this is high for businesses in America.

6. In addition to capital ratios, which of the following are also common in both countries?

The first one is employee incentive plans. Employee incentive plans are very common in both countries, yet they differ quite significantly (Gibson, 2006). The most common employee incentive plan in the U.S. is defined contribution (DC) plans. Employees in the U.S. work for 40 years, and after this time they are eligible for retirement benefits. After they retire from working, workers are allowed to continue working and still be entitled to their bonuses and raises. Dividends in the U.S. are based on individual performance (or rather the total value of sales). Thus, for each individual worker, his/her share comes out as a group’s output, and therefore he/she gets a sum as payment to him/her. Paying employees less for their efforts is not a new phenomenon; however, it has become popular over the years now. Another common incentive plan is the stock option. Workers in the U.S. have the ability to buy shares of stock with one year’s interest paid to them at a price of $0.65 per share. These shares can double up whenever an investor buys a stake worth $250,000 and keeps the remaining amount as dividends. Share purchases can only occur once every three years. On the contrary, in Britain, workers also have the opportunity of buying shares in companies without paying any interest or retaining any earnings in the process. These stocks can double up once every five years and become worthless after 12th. Additionally, the U.S. law allows workers to sell their shares when a person in the firm dies. Whereas in the U.K., the law prohibits this practice until the death occurs. Nevertheless, this loophole does not stop American workers from selling off their shares, making them richer when they die. The above factors make investors less interested in investing at present times. Yet, because of this fact, it seems that the two countries have some similarities in terms of ownership of shareholding in companies.

7. Why are there significant differences between the U.S. and the U.K.? What are the potential opportunities for success through these differences?

There are numerous differences between the U.S. and the U.K. in terms of ownership of shareholding. While the U.S. gives shareholders some form of shareholding, the U.K. gives their workers their own percentage. Since the workers have been granted special rights in America, there is more potential for them to excel in their field. Notable is the fact that the U.S. gives women a greater portion of their earnings than women get in England. Consequently, women have access to better education and a better standard of living in America compared to women of Britain. More specifically, women in the U.S. are likely to complete college within four years; whereas it’s hard for British women to finish college within four years. Other notable differences between the U.S. and the U.K. include the fact that the average annual salary in the U.S. is considerably higher than the average annual salary in the U.K. With a large proportion of the population being female, women find themselves in better positions of earning pay after completing school. Women and men get equal salaries and are eligible for equal pay for equal jobs. Women in both countries are also more likely to live longer lives than women living in the U.S. The biggest discrepancy is that American women spend their entire lives working as opposed to the life in England where they have spent the majority of their childhood. Moreover, women in the U. S. are likely to marry earlier compared to women. Also, unlike in the U.K., Americans live under the American constitution. All of these factors contribute to differences in the U. S. and the U.K. resulting from ownership of shareholding in companies. Potential opportunities for companies to succeed in these differences are in gaining and maintaining customer loyalty. Customers often decide to purchase goods and services from brands whose logos appeal to them. To gain repeat customers, companies need to change their logo images. People would likely be persuaded to purchase goods that feature a certain logo of a company.