Identify the problem
The problem presented to the organizations affects the entire company but is mostly rooted in the accounting and managerial department. The problem is rooted in the practice of accounting and especially with regards to forensic accounting. This has had the effect of reducing the profitability and accountability of the company as well as reducing the accountability of individuals in the company.
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This has affected management as it has had to shift its focus from other activities to attend to the ever increase attention demanded by the problem. The problem in this scenario is brought about by two situations. The problem is defined through the limitations of the statutory audit. The increase in the misappropriation of funds in the company, and the failure of audits – especially the statutory audit to act on the misappropriation of the corporate fund. ( Paul, 2006)
Define criteria, goals, and objectives
The objective of the decision to be made will be to ensure that the problem presented in by the corporate funds is well addressed. The main aim will be to ensure that there is accountability of the corporate funds in the entire organization. Other objectives attached to the new decision will include the increase of efficiency in the accounts department, the improvement of self assessment in the accountancy department, and reduced supervision of the activities related to the accountancy department.
The decision made will also provide grounds for analysis on the effectiveness of the different accounting practices. It will seek to establish the difference in efficiency between normal auditing and statutory auditing. What method is more effective, and why? (Langdon, 2001)
Evaluate effects of the problem
There are several adverse effects being experienced by the company as a result of reduced efficiency in the accountancy department. One of the adverse effects is with regards to profitability. The company is becoming less and less profitable due to the reduced efficiency in the accountancy department. Due to the fact that there is no efficiency in the audit practice, the firm continues to loose more and more revenue.
The company’s image in the marketplace and the community continues to be dented with the reduced levels of efficiency in the accountancy department. This department is also responsible for the extra involvement of other departments in trying to resolve the problems that are present in the accountancy department. The level of trust and accountability attached to the accounting department has affected the client base.
More and more clients continue to pull out of the client base due to the reduced levels of efficiency in the accounting department. The company has also found itself on the spot with regards to the laws that govern the entire practice of accountancy. The company has had to deal with lawsuits that have been filed by clients who were not satisfied with the manner in which the company conducted its accounting practices.
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Making the Decision
Identify causes of the problem
The main cause of the problem is the lack of an efficient accounting system. The problem is made even worse with the involvement of extra resources in solving the problem. The lack of an efficient audit system affects the quality of the reports generated by the company through the accounting department, and this acts as the main cause of the current problem. ( Paul, 2006)
There are a number of alternatives that the company can opt for so as to counter the problem presented by the accounting department. The company can choose to do away with the current accounting department and install another one. The company can also choose to do away with the current accounting department and outsource its accounting requirement work to another organization. The company can choose to set up an interim accounting department as it looks into the problems facing the current accounting department. (Langdon, 2001)
Evaluate impacts of alternatives
Each of the alternatives presented by this situation holds a specific impact on the company. The alternatives present the company with different options with regards to the way forward. It is imperative that the company makes a decision that will change its current situation. In the event the company chooses to do away with the current accounting department and outsource its jobs to another organization,, it stands to gain as well as loose.
The company will have the opportunity to retain its customers through increasing the customer confidence in the accounting practice. The client base may increase as a result of the shift. This option might also affect the customers who had faith in the current accounting firm adversely. They may think negatively about the manner in which the company deals with its problems. This option also presents the company with a cheap option of getting its accounting needs attended to.
In the event the company should choose to install an interim accounting department while it works on the problem, it stands to gain some benefits as well as encountering some adverse effects. The benefits will include customer retention as well as employee involvement. This option will increase the confidence the clients have attached to the accounting practice being provided by the company. The company will also have a chance of training a new team that will avoid the mistakes that have been made by the previous team.
This option is very expensive. The company shall have to maintain two teams, invest time and other resources in training the new team, as well as dealing with the old team and the problem at hand. ( Paul, 2006). The best option the company might opt for is the installation of a new accounting firm with the old accounting department being made to undergo changes as the new team is trained. (Kirby, 2007).
The decision will be evaluated by how efficient the new team is with regards to the problems that were being faced by the old team. The evaluation of the decision made will also be set on how well the company is able to deal with the problem at hand while installing the new team. (Langdon, 2001).
Kirby, G. R. & Goodpaster, J. R. (2007). Thinking: An interdisciplinary approach to critical and creative thought (4th ed.). Upper Saddle River, NJ: Prentice Hall.
Langdon, K. (2001). Smart things to know about decision making (1st ed.). Oxford: Capstone.
Paul, R. & Elder, L. (2006). Critical thinking: Tools for taking charge of your learning and your life (2nd ed.). Upper Saddle River: NJ: Prentice Hall.