Inventory and Costs - 2187 Words

IIM Lucknow, Noida Campus MANAGEMENT ACCOUNTING –II Assignment – II, Daniel Dobbins Distillery, Inc (Case Analysis) Submitted By: Rahul Srivastava (WMP08034) Vinay Joshi (WMP08045) ANALYSIS Company History * Founded in 1880 in Oakwoods by Daniel Dobbins. * Major product is Old Trailridge Bourbon Whisky * High quality of whisky due to the unusual iron-free spring water used in the distillation process and the specially prepared fire-charred white oak barrels used in the aging process. * David Dobbins takes over in 1973. * Constant demand over the years * High demand surge forecasted due to maturity of Baby boom generation. Manufacturing Process * Ingredients controlled by laws. * Barrels can†¦show more content†¦You just cant age 50% more whiskey for the same amount of money. * The inventory account can only be charged with those costs associated with the direct production of whiskey, and our warehousing costs are handling or carrying costs, certainly not production costs. * The manufacturing process doesnt stop with the newly produced bourbon; why it isnt even marketable in that form. Aging is an absolutely essential part of the manufacturing process, and I think the cost of barrels and part of the warehouse labor should be treated as direct costs of the product. * Warehousing and aging costs are an absolutely essential ingredient of our final product. * Direct costs are those costs that are necessary to convert raw materials into the whiskey that goes into the aging barrels. * This is our cost of approximately $1 per gallon and includes the cost of raw materials going into the product such a s grain, yeast, and malt; the direct labor necessary to convert these materials into whiskey; and the cost of any other overhead items that are needed to permit the workers to convert grain into whiskey. The Problem The main issue at Daniel Dobbins Distillery, Inc. is a disagreement among the senior management with regards to the allocation of costs. Specifically, it is a question of whether to include Ageing Costs, Cost of Barrels, and Warehouse Expense as a part of inventory (in which case itShow MoreRelatedInventory and Cost839 Words   |  4 Pagesfields. (The Norwegian currency is the krone, which is denoted by Nkr.) The company uses a sob-order costing system arid applies manufacturing overhead cost to jobs on the basis of direct labor-hours. At the beginning of the year, the following estimates were made for the purpose of computing the predetermined overhead rate: manufacturing overhead cost, Nkr360,000; and direct labor-hours, 900. The following transactions took place during the year (all purchases and services were acquired on account): Read MoreImplementation Of The Cost For Inventory1018 Words   |  5 Pagesguidance on initial measurement of inventories. 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In FY 2014, ratio augmented by 2.8 days as compared to FY 2013 due to decrease in cost of salesRead MoreChapter 7 Financial Accounting Reporting and Interpreting Cost of Goods Sold and Inventory Solution10350 Words   |  42 PagesChapter 7 Reporting and Interpreting Cost of Goods Sold and Inventory ANSWERS TO QUESTIONS 1. Inventory often is one of the largest amounts listed under assets on the balance sheet which means that it represents a significant amount of the resources available to the business. The inventory may be excessive in amount, which is a needless waste of resources; alternatively it may be too low, which may result in lost sales. Therefore, for internal users inventory control is very important. On

Audit †Solutions for Chapter 2 Free Essays

string(60) " comes to responsibility for corporate governance failures\." * Solutions for Chapter 2 * Corporate Governance Review Questions: 2-1. Corporate governance is defined as: â€Å"a process by which the owners and creditors of an organization exert control and require accountability for the resources entrusted to the organization. The owners (stockholders) elect a board of directors to provide oversight of the organization’s activities and accountability back to its stakeholders. We will write a custom essay sample on Audit – Solutions for Chapter 2 or any similar topic only for you Order Now † The key players in corporate governance are the stockholders (owners), board of directors, audit committees, management, regulatory bodies, and both internal and external auditors. -2. In the past decade, all parties failed to a certain extent. For detailed analysis, see exhibit 2. 2 in the chapter and repeated here: Corporate Governance Responsibilities and Failures Party | Overview of Responsibilities| Overview of Corporate Governance Failures| Stockholders| Broad Role: Provide effective oversight through election of Board process, approve major initiatives, buy or sell stock. | Focused on short-term prices; failed to perform long-term growth analysis; abdicated all responsibilities to management as long as stock price increased. Board of Directors| Broad Role: the major representative of stockholders to ensure that the organization is run according to the organization charter and there is proper accountability. Specific activities include: * Selecting management. * Review ing management performance and determining compensation. * Declaring dividends * Approving major changes, e. g. mergers * Approving corporate strategy * Overseeing accountability activities. | * Inadequate oversight of management. * Approval of management compensation plans, particularly stock options that rovided perverse incentives, including incentives to manage earnings. * Non-independent, often dominated by management. * Did not spend sufficient time or have sufficient expertise to perform duties. * Continually re-priced stock options when market price declined. | Management| Broad Role: Operations and Accountability. Managing the organization effectively and provide accurate and timely accountability to shareholders and other stakeholders. Specific activities include: * Formulating strategy and risk appetite. * Implementing effective internal controls. * Developing financial reports. Developing other reports to meet public, stakeholder, and regulatory requirements. | * Earning s management to meet analyst expectations. * Fraudulent financial reporting. * Pushing accounting concepts to achieve reporting objective. * Viewed accounting as a tool, not a framework for accurate reporting. | Audit Committees of the Board of Directors| Broad Role: Provide oversight of the internal and external audit function and the process of preparing the annual accuracy financial statements and public reports on internal control. Specific activities include: * Selecting the external audit firm. Approving any non-audit work performed by audit firm. * Selecting and/or approving the appointment of the Chief Audit Executive (Internal Auditor), * Reviewing and approving the scope and budget of the internal audit function. * Discussing audit findings with internal auditor and external auditor and advising the Board (and management) on specific actions that should be taken. | * Similar to Board members – did not have expertise or time to provide effective oversight of audit fu nctions. * Were not viewed by auditors as the ‘audit client’. Rather the power to hire and fire the auditors often rested with management. Self-Regulatory Organizations: AICPA, FASB| Broad Role: Setting accounting and auditing standards dictating underlying financial reporting and auditing concepts. Set the expectations of audit quality and accounting quality. Specific roles include: * Establishing accounting principles * Establishing auditing standards * Interpreting previously issued standards * Implementing quality control processes to ensure audit quality. * Educating members on audit and accounting requirements. | * AICPA: Peer reviews did not take a public perspective; rather than looked at standards that were developed and reinforced internally. AICPA: Leadership transposed the organization for a public organization to a â€Å"trade association† that looked for revenue enhancement opportunities for its members. * AICPA: Did not actively involve third parti es in standard setting. * FASB: Became more rule-oriented in response to (a) complex economic transactions; and (b) an auditing profession that was more oriented to pushing the rules rather than enforcing concepts. * FASB: Pressure from Congress to develop rules that enhanced economic growth, e. g. allowing organizations to not expense stock options. Other Self-Regulatory Organizations, e. g. NYSE, NASD| Broad Role: Ensuring the efficiency of the financial markets including oversight of trading and oversight of companies that are allowed to trade on the exchange. Specific activities include: * Establishing listing requirements – including accounting requirements, governance requirements, etc. * Overseeing trading activities,| * Pushed for improvements for better corporate governance procedures by its members, but failed to implement those same procedures for its governing board, management, and trading specialists. Regulatory Agencies: the SEC| Broad Role: Ensure the accuracy , timeliness, and fairness of public reporting of financial and other information for public companies. Specific activities include: * Reviewing all mandatory filings with the SEC, * Interacting with the FASB in setting accounting standards, * Specifying independence standards required of auditors that report on public financial statements, * Identify corporate frauds, investigate causes, and suggest remedial actions. * Identified problems but was never granted sufficient resources by Congress or the Administration to deal with the issues. | External Auditors| Broad Role: Performing audits of company financial statements to ensure that the statements are free of material misstatements including misstatements that may be due to fraud. Specific activities include: * Audits of public company financial statements, * Audits of non-public company financial statements, * Other accounting related work such as tax or consulting. | * Pushed accounting concepts to the limit to help organizatio ns achieve earnings objectives. Promoted personnel based on ability to sell â€Å"non-audit products†. * Replaced direct tests of accounting balances with a greater use of inquiries, risk analysis, and analytics. * Failed to uncover basic frauds in cases such as WorldCom and HealthSouth because fundamental audit procedures were not performed. | Internal Auditors| Broad Role: Perform audits of companies for compliance with company policies and laws, audits to evaluate the efficiency of operations, and audits to determine the accuracy of financial reporting processes. Specific activities include: * Reporting results and analyses to management, (including operational management), and audit committees, * Evaluating internal controls. | * Focused efforts on ‘operational audits’ and assumed that financial auditing was addressed sufficiently by the external audit function. * Reported primarily to management with little effective reporting to the audit committee. * In some instances (HealthSouth, WorldCom) did not have access to the corporate financial accounts. | 2-3. The board of directors is often at the top of the list when it comes to responsibility for corporate governance failures. You read "Audit – Solutions for Chapter 2" in category "Essay examples" Some of the problems with the board of directors included: * Inadequate oversight of management. * Approval of management compensation plans, particularly stock options that provided perverse incentives, including incentives to manage earnings. * Non-independent, often dominated by management. * Did not spend sufficient time or have sufficient expertise to perform duties. * Continually re-priced stock options when market price declined. 2-4. Some of the ways the auditing profession was responsible were: * Too concerned about creating â€Å"revenue enhancement† opportunities for the firm, and less concerned about their core services or talents * Were willing to â€Å"push† accounting standards to the limit to help clients achieve earnings goals * Began to use more audit â€Å"shortcuts† such as inquiry and analytical procedures instead of direct testing of account balance. * Relied on management representations instead of testing management representations. * Were too often ‘advocates’ of management rather than protectors of users. 2-5. Cookie jar reserves are essentially liabilities or contra-assets that companies have overestimated in previous years to use when times are tougher to smooth earnings. The rationale is that the funds are then used to â€Å"smooth† earnings in the years when earnings need a boost. â€Å"Smooth† earnings typically are looked upon more favorably by the stock market. An example of a cookie jar reserve would be over-estimating an allowance account, such as allowance for doubtful accounts. The allowance account is then written down (and into the income statement) in a bad year. The result is to increase earnings in the subsequent year. 2-6. Users should expect auditors to have the expertise, independence, and professional skepticism to render an unbiased and justified opinion on the financial statements. Auditors are expected to gather sufficient applicable evidence to render an independent opinion on the financial statements. 2-7. The Sarbanes-Oxley Act was designed to â€Å"clean-up† corporate America, especially in the realms of financial reporting. The overall intent was to encourage better corporate governance; to make the audit committee the auditor’s client; encourage the independence and oversight of the board, and improve the independence of the external audit profession. There were certainly many factors that led to the Sarbanes-Oxley Act, but the failures at Enron and WorldCom will probably be pointed to in the future as the major factors that led to the act being passed when it was. The Congress intended to develop a new reporting process that would provide just cause for the public to again trust financial statements and the audit processes leading up to the audit opinion. 2-8. The PCAOB is mandated by Congress to set standards for audits of public companies and perform quality control inspections of CPA firms that audit public companies. In order to carry out these responsibilities, the PCAOB requires all firms that audit U. S. listed (public) companies to register with it. It performs annual inspections on all audit firms that audit more than 100 public companies each year. It performs less frequent inspections, usually once every three years, for audit firms that audit less than 100 companies annually. The PCAOB issues Inspection Reports for each inspection that is performed. The first part describes problems they encountered in their reviews of audits and that part is made public. The second part describes problems that the firms have with their quality control process. The second part is not issued publicly unless the firms fail to address the problems pointed out within a reasonable time frame – usually no more than a year. 2-9. Management has always been responsible for fairness, completeness, and accuracy of financial statements, but the Sarbanes-Oxley Act goes a step further by requiring the CEO and CFO to certify the accuracy of financial statements with criminal penalties as a punishment for materially misstated statements. The CEO and CFO must make public their certifications and assume responsibility for the fairness of the financial presentations. It thereby encourages organizations to improve their financial reporting functions. 2-10. Whistle blowing enables violations of a company’s ethical code to be reported to appropriate levels in an organization, including the audit committee. Because of its presence, potential violators know that there is a real possibility and simple avenue by which inappropriate actions may be revealed. As such, it contains a preventive component that is indirectly helpful to the audit committee in fulfilling its corporate governance role. 2-11. There are a number of provisions that are designed to increase auditor independence. First, Rule 201 of the Act prohibits any registered public accounting firm from providing many non-audit services to their public audit clients. Second, the audit committee became the â€Å"client† instead of management, and only the audit committee can hire and fire auditors. Third, audit partners are required to rotate every five years. Finally, the auditors are expected to follow fundamental principles of independence that have been enacted by the SEC (more details in Chapter 3). 2-12. Management is responsible for issued financial statements. Although other parties may be sued for what is contained in the statements, management is ultimately responsible. Ownership is important because it establishes responsibility and accountability. Management must set up and monitor financial reporting systems that help it meet its reporting obligations. It cannot delegate this responsibility to the auditors. 2-13. An audit committee is a subcommittee of the board of directors that is composed of independent, outside directors. The audit committee has oversight responsibility (on behalf of the full board of directors and its stockholders) for the outside reporting of the company (including annual financial statements); risk monitoring and control processes; and both internal and external audit functions. 2-14. An outside director is not a member of management, legal counsel, a major vendor, outside service provider, former employee, or others who may have a personal relationship with management that might impair their objectivity or independence. The audit committee is responsible for assessing the independence of the external auditor and engage only auditors it believes are independent. Auditors are now hired and fired by audit committee members, not management. The intent is to make auditor accountability more congruent with stockholder and third-party needs. 2-15. The primary point of this question is for students to understand that the audit committee’s role is one of oversight rather than direct responsibility. For example, management is responsible for the fairness of the financial statements. Auditors are responsible for their audit and independent assessment of financial reporting. The audit committee is not designed to replace the responsibility of either of these functions. The audit committee’s oversight processes are to see that the management processes for financial reporting are adequate and the auditor’s carry out their responsibilities in an independent and competent manner. 2-16. The audit committee has the ability to hire and fire both the internal auditor and the external auditor. However, in the case of the internal audit function, the audit committee has the ability to hire and fire the head of internal audit as well as set the audit plan and budget. The audit committee does not control regulatory auditors, but should meet with regulatory auditors to understand the scope of their work and to discuss audit findings with them. 2-17. The Sarbanes-Oxley Act applies only to public companies. Therefore, the Act does not require non-public companies to have audit committees. That is not to say that it does not happen or is not a good idea, however. Most stakeholders want an independent party to ensure that their interests are being considered. The AICPA recommends audit committees for smaller public companies. 2-18. The external auditor should discuss any controversial accounting choices with the audit committee and must communicate all significant adjustments made to the financial statements during the course of the audit. In addition, the processes used in making judgments and estimates as well as any disagreements with management should be communicated. Other items that need to be communicated include: * All adjustments that were not made during the course of the audit, * Difficulties in conducting the audit, * The auditor’s assessment of the accounting principles used and overall fairness of the financial presentation, * The client’s consultation with other auditors, * Any consultation with management before accepting the audit engagement, * Significant deficiencies in internal control. 2-19. The audit committee needs to ensure that the auditor is independent with respect to the annual audit. In order to ensure that independence, the audit committee must consider all other services that might be performed by the external auditor and approve any such services, in advance. If the audit committee approves the services, they are in essence saying that the provision of the services will not impair the auditor’s independence. 2-20. Good governance is important to the external auditor for a number of reasons, including, but not limited to the following. Good governance * usually leads to better corporate performance, reflects a commitment to a high level of ethics, integrity, and sets a strong tone for the organization’s activities, * requires a commitment to financial reporting competencies and to good internal controls, * reduces the risk that the company will have materially misstated financial statements. If a client does not have good governance, there are greater risks associated with the client. For example, their poor performance may lead to financial failu re and lack of payment of the audit fee. Or their poor governance may lead to improprieties in financial reporting, which puts the auditor at risk in terms of litigation (if the improprieties go undetected by the auditor). 2-21. The auditor might utilize the following procedures in determining the actual level of governance in an organization: * observe the functioning of the audit committee by participating in the meetings, noting the quality of the audit committee questions and responses, * interactions with management regarding issues related to the audit, e. g. * providing requested information on a timely basis, quality of financial personnel in making judgments, * accounting choices that tend to ‘push the limits’ towards aggressiveness or creating additional reported net income, * the quality of internal controls within the organization. * review the minutes of the board of directors meetings to determine that they are consistent with good governance, * review internal audit reports and especially determi ne the actions taken by management concerning the internal auditor’s findings and recommendations, * review the compensation plan for top management, review management expense reimbursements to determine (a) completeness of documentation, (b) appropriateness of requested reimbursement, and (c) extent of such requests. * review management’s statements to the financial press to determine if they are consistent with the company’s operations. 2-22. Good corporate governance is correlated with increased corporate performance as measured by return on equity, or return on capital. Generally, good corporate governance reduces audit risk as it is less likely that the organization will suffer from problems of management integrity, or would have an environment that might allow or permit fraud. Less audit risk implies that the amount of work to render an opinion on the financial statements would also be less than that required for a company with poorer corporate governance. 2-23. The three categories of audit standards are general standards, fieldwork standards, and reporting standards. General standards cover the characteristics of the auditor – technical training and proficiency, independence, and due professional care. Fieldwork standards provide guidance concerning planning and performing the audit. Reporting standards cover the essential elements of the auditor’s communication, including the opinion, the criteria against which the assertions were tested, and an explanation of the basis for the attestor’s opinion. 2-24. Due professional care is the expectation that an audit will be conducted with the skill and care of a professional. The standard of due professional care plays a role in litigation against auditors. Plaintiffs will try to show that the auditor did not do what a reasonably prudent auditor would have done. To evaluate the standard, a third-party also decides whether someone with similar skills in a similar situation would have acted in the same way. 2-25. There are three important dimensions identified in Exhibit 2. 5: * Scope of Information on which assurance is provided, * Nature of Organizations on which assurance is provided, * Domicile of Company being audited. These three dimensions influence the identification of applicable auditing standards as follows: * A U. S. public company filing annual reports follows PCAOB standards. A U. S. non-public company issuing financial statements, follows AICPA standards, * A foreign company filing financial statements in a different country follows International Standards or the standards of that country, * U. S. companies reporting on other than financial information follows AICPA Attestation or Assurance Standards. 2-26. For the most part, the standards issued by the IAASB are quite similar to that of the two U. S. based audit standard setter s. They differ in the following major ways: The auditor must assess the appropriateness of the accounting framework against which the audit opinion will be given (U. S. standards require only that the auditor communicate if the accounting is not consistent with U. S. GAAP. ) * IAASB utilizes a concept of Professional Skepticism rather than independence. * The IAASB utilizes a concept of ‘reasonable assurance’ compared with the U. S. evidence on sufficiency of audit evidence and due professional care, * The IAASB standards include both audit standards and assurance standards. 2-27. The IAASB Audit Standards are quite consistent with that of the PCAOB as well as that of the AICPA. Most of the concepts are the same, but are stated differently. They are very similar in the following ways: * Requirement of independence, * Gathering and evaluation of sufficient evidence, * Documentation of audit work, * Audit designed to minimize audit risk, * Due professional care vs. reasonable assurance, * Nature of the audit report The AICPA and the IAASB have announced a plan to work towards convergence of existing and future standards. The PCAOB has not yet announced a plan for convergence. 2-28. An audit engagement applies to the development of an opinion on an organization’s financial statements. It is planned that the financial statements will be used by third parties who do not have direct access to client data. The audit engagement is a form of ‘positive assurance’ in which an opinion must be rendered. An assurance engagement differs from an audit in a number of important dimensions: * It can apply to almost any assertion that management wants to make as long as there is agreed-upon criteria by which to test management’s assertion. It is preferable that the criteria are generally accepted. An assurance engagement generally requires a third party (although assurance can also be provided to the audit client), but it is an identified third-party as opposed to a potential user of financial statements, * Assurance can be given on individual items of a company’s financial statements, rather than the full set of statements. 2-29. Assurance enga gements are designed to provide ‘positive assurance’, i. e. the item being attested to is either properly presented, or is not properly presented. For example, one of the Big 4 firms provides assurance to the audience that the votes are properly maintained and counted for the Emmy Awards. A ‘limited assurance engagement’ does not contemplate a full audit or assurance engagement such that sufficient information (evidence) is gathered to warrant a positive statement about whether the item being assured is, or is not, properly presented. Rather, based on a more limited amount of work, the auditor either states that ‘nothing came to his or her attention – based on the limited procedures – that indicates something is not fairly presented’. This is often referred to as ‘negative assurance’. An even more limited assurance engagement is one in which the accountant expresses ‘no assurance’ whatsoever on the item being reported. -30. * Auditing Standards apply to the auditor’s task of developing and then communicating an opinion on financial statements and, where applicable, independent opinions on the quality of an organization’s internal control over financial statements to the board, management, and outside third parties. * Assurance Standards apply the auditor’s task of developing and communicating an opinion on financial information outside of the normal financial statements, or on non-financial information to management, the board, and outside third-parties. Assurance services are engagements in which a practitioner expresses a conclusion designed to enhance the degree of confidence of the intended users about the outcome of the evaluation or measurement of a subject matter against criteria. * Attestation Standards is a term used by the AICPA to describe assurance services that involve gathering evidence regarding specific assertions and communicating an opinion on the fairness of the presentation to a third party. Compilation and Review Standards refer to AICPA Standards that apply only to non-public companies where the board or a user has requested some assurance on the fairness of presentation of financial statements. These are referred to as negative assurance standards because the auditor does not gather enough evidence to support a statement as to whether the financial statements are fairly presented. 2-31. Independence means objectivity and freedom from bias. The auditor can favor neither the client nor the third party in evaluati ng the fairness of the financial statements The auditor must be independent in fact and in appearance. Independence in fact means the auditor is unbiased and objective. An auditor could be independent in fact if he or she owned a few shares of common stock in an audit client, but might not appear independent to a third party. Independence in appearance means that a third party with knowledge of the auditor’s relationship with the client would consider the auditor to be independent. Professional skepticism, as used in the standards promulgated by the IAASB, has a broader meaning in that it refers to all of the factors that would affect an auditor’s ability to exercise proper skepticism in an audit engagement. The factors to be considered vary from those associated with the individual, such as objectivity, to those associated with the structure of the firm. These are similar to the independence standards that emphasize both audit firm relationships to the client as well as objectivity. However, the IAASB emphasis on professional skepticism goes a bit further: an auditor could be objective, but not necessarily exercise professional skepticism, i. e. being open to potential explanations of events that are not consistent with the auditor’s prior experiences. Professional skepticism appears to be a broader term than independence. 2-32. PCAOB – sets audit standards for the audits of all public companies that are registered with the SEC AICPA * sets audit standards for audits of non-public companies * sets attestation standards for areas other than public company reports on internal control sets standards for assurance services that are less in scope than an audit, such as reviews and compilations IAASB – sets standards for financial statement audits on an international basis. Right now, the international standards are being increasingly accepted by all political jurisdictions, but particularly in Europe and many developing countries. Harmonization with U. S. will continue to be an objective. GAO – sets the standards for financial audits of governmental entities within the U. S. and certain other organizations that receive Federal financial assistance. Goes beyond financial statement audits and also provides standards related to program audits for economy and efficiency of operations. IASB – sets standards for the professional practice of internal auditing around the world. Incorporates other standards by reference where applicable. 2-33. General Standards: The audit and attestation standards both require adequate technical training, expertise, and knowledge. They also both require independence and due professional care. The attestation standards differ in that they explicitly require links between assertions and reasonable criteria and a reasonably consistent estimation process; the audit standards implicitly assume this link. Fieldwork Standards: The audit and attestation standards both require planning and sufficient evidence. The audit standards go a step further in requiring an understanding of the entity and its environment. Reporting Standards: The reporting standards are completely different. Each reflects the underlying purpose of the engagement, i. . , the audit is designed to test whether the financials adhere to GAAP, whereas the attestation is designed to test a broader and more diverse set of assertions. 2-34. An audit program follows good corporate governance in the following way: Good governance is critical to the development of sound controls in an organization. The stronger the controls, the less risk that the financial statements will be misstated. The development of audit programs follow the standards in determining that sufficient evidence is gathered in order to evaluate the assertions being addressed in the audit engagement. Further, the gathering and evaluation of that evidence must be done by auditors who are independent of the client – in both fact and in appearance. Finally, the work must be carried out by auditors that understand the standards and exercise due professional care in the conduct of the audit engagement. 2-35. The major planning steps are: * Meeting with the audit client * Developing an understanding of the client’s business and industry * Develop an understanding of the client’s financial reporting processes and controls * Develop an understanding of materiality Develop a preliminary audit program that identifies the audit objectives defined in chapter 1. 2-36. Materiality is defined as the â€Å"magnitude of an omission or misstatement of accounting information that, in light of surrounding circumstances, makes it probable that the judgement of a reasonable person relying on the information would have been changed or influenced by the omission or misstatement. â €  Materiality guidelines usually involve applying percentages to some base, such as total assets, total revenue, or pretax income and consideration of qualitative factors such as the impact on important trends or ratios. The base should be a â€Å"stable† account however, making total assets a better choice than pretax income. 2-37. The auditor would take a sample of all additions to PPE and verify the cost through reference to vendor invoices to determine that cost is accurately recorded and that title has passed to the company. If the company was considered high risk, the auditor might choose to physically verify the existence of the asset. Multiple Choice Questions: 2-38. d. 2-39. d. this is part of the profession’s problem, but not a cause of the failure. 2-40. a. 2-41. d. 2-42. a. 2-43. . 2-44. d. 2-45. b. 2-46. a. 2-47. f. Discussion and Research Questions: 2-48. a. The auditor might use the following approaches to determine whether a corporate code of ethics is actually followed: * observe corporate behavior in tests performed during the audit, e. g. approaches the company takes to purchasing goods, promoting personnel, and so forth, * observe criteria for promoting personnel; fo r example does performance always take on greater importance than how things are done, * observe corporate plans to communicate the importance of ethical behavior, e. g. ebcasts, emails, and so forth to communicate the importance of ethics, * review activity on the client’s whistleblowing website, or a summary of whistleblowing activities reported by the internal auditor, * read a sample of self-evaluations by corporate officers, the board, and the audit committee and compare with the auditor’s observations of behavior, * examine sales transactions made during the end of quarters to determine if the sales reflect ‘performance goals’ as opposed to the company’s code of ethics. b. Are auditors equipped to make subjective judgments? This should be a great discussion question because many young people are attracted to the accounting profession because there are rules and relative certainty as to how things are done. However, as the profession is evolving, more judgments are required in both auditing and accounting. Audit personnel need to be equipped to make judgments on whether the company’s governance structure operates as intended and whether there are deficiencies in internal control when it does not operate effectively. The profession believes that auditors can make such judgments. . Assessing the competence of the audit committee can occur in a number of ways. Fortunately, the most persuasive evidence comes from the auditor’s direct interaction with the audit committee on a regular basis. The auditor can determine the nature of questions asked, the depth of understanding shared among audit committee members, and the depth of items included in the audit committee agenda. Many audit committees h ave self-assessment of their activities using criteria developed by CPA firms, or by the National Association of Corporate Directors. The auditor should also review the minutes of the audit committee meetings and determine the amount of time spent on important issues. An external auditor should be very reluctant to accept an audit engagement where the audit committee is perceived to be weak. There are a number of reasons including: * The lack of good governance most likely influences the organization’s culture and is correlated with a lack of commitment to good internal control. * The auditor has less protection from the group that is designed to assist the auditor in achieving independence. The company may be less likely to be fully forthcoming in discussions with the auditor regarding activities that the auditor might question. d. Internal auditing is an integral part of good corporate governance. It contributes to corporate governance in three distinct ways: * It assists the audit committee in its oversight role by performing requested audits and reporting to the audit committee, * It assists senior manag ement in assessing the continuing quality of its oversight over internal control throughout the organization, * It assists operational management by providing feedback on the quality of its operations and controls. -49. a. Corporate governance is defined as: â€Å"a process by which the owners and creditors of an organization exert control and require accountability for the resources entrusted to the organization. The owners (stockholders) elect a board of directors to provide oversight of the organization’s activities and its accountability to stakeholders. † The key players in corporate governance are the stockholders (owners), board of directors, audit committees, management, regulatory bodies, and auditors (both internal and external). b. In the past decade especially, all parties failed to a certain extent. For detailed analysis, see exhibit 2. 2 in the chapter and reproduced below: Corporate Governance Responsibilities and Failures Party | Overview of Responsibilities| Overview of Corporate Governance Failures| Stockholders| Broad Role: Provide effective oversight through election of Board process, approve major initiatives, buy or sell stock. | Focused on short-term prices; failed to perform long-term growth analysis; abdicated all responsibilities to management as long as stock price increased. Board of Directors| Broad Role: the major representative of stockholders to ensure that the organization is run according to the organization charter and there is proper accountability. Specific activities include: * Selecting management. * Reviewing management performance and determining compensation. * Declaring dividends * Approving major changes, e. g. mergers * Approving corporate strategy * Overseeing accountability a ctivities. | * Inadequate oversight of management. * Approval of management compensation plans, particularly stock options that provided perverse incentives, including incentives to manage earnings. Non-independent, often dominated by management. * Did not spend sufficient time or have sufficient expertise to perform duties. * Continually re-priced stock options when market price declined. | Management| Broad Role: Operations and Accountability. Managing the organization effectively and provide accurate and timely accountability to shareholders and other stakeholders. Specific activities include: * Formulating strategy and risk appetite. * Implementing effective internal controls. * Developing financial reports. * Developing other reports to meet public, stakeholder, and regulatory requirements. * Earnings management to meet analyst expectations. * Fraudulent financial reporting. * Pushing accounting concepts to achieve reporting objective. * Viewed accounting as a tool, not a frame work for accurate reporting. | Audit Committees of the Board of Directors| Broad Role: Provide oversight of the internal and external audit function and the process of preparing the annual accuracy financial statements and public reports on internal control. Specific activities include: * Selecting the external audit firm. * Approving any non-audit work performed by audit firm. Selecting and/or approving the appointment of the Chief Audit Executive (Internal Auditor), * Reviewing and approving the scope and budget of the internal audit function. * Discussing audit findings with internal auditor and external auditor and advising the Board (and management) on specific actions that should be taken. | * Similar to Board members – did not have expertise or time to provide effective oversight of audit functions. * Were not viewed by auditors as the ‘audit client’. Rather the power to hire and fire the auditors often rested with management. Self-Regulatory Organizations : AICPA, FASB| Broad Role: Setting accounting and auditing standards dictating underlying financial reporting and auditing concepts. Set the expectations of audit quality and accounting quality. Specific roles include: * Establishing accounting principles * Establishing auditing standards * Interpreting previously issued standards * Implementing quality control processes to ensure audit quality. * Educating members on audit and accounting requirements. | * AICPA: Peer reviews did not take a public perspective; rather than looked at standards that were developed and reinforced internally. AICPA: Leadership transposed the organization for a public organization to a â€Å"trade association† that looked for revenue enhancement opportunities for its members. * AICPA: Did not actively involve third parties in standard setting. * FASB: Became more rule-oriented in response to (a) complex economic transactions; and (b) an auditing profession that was more oriented to pushing the rule s rather than enforcing concepts. * FASB: Pressure from Congress to develop rules that enhanced economic growth, e. g. allowing organizations to not expense stock options. Other Self-Regulatory Organizations, e. g. NYSE, NASD| Broad Role: Ensuring the efficiency of the financial markets including oversight of trading and oversight of companies that are allowed to trade on the exchange. Specific activities include: * Establishing listing requirements – including accounting requirements, governance requirements, etc. * Overseeing trading activities,| * Pushed for improvements for better corporate governance procedures by its members, but failed to implement those same procedures for its governing board, management, and trading specialists. Regulatory Agencies: the SEC| Broad Role: Ensure the accuracy, timeliness, and fairness of public reporting of financial and other information for public companies. Specific activities include: * Reviewing all mandatory filings with the SEC, * Interacting with the FASB in setting accounting standards, * Specifying independence standards required of auditors that report on public financial statements, * Identify corporate frauds, investigate causes, and suggest remedial actions. | * Identified problems but was never granted sufficient resources by Congress or the Administration to deal with the issues. External Auditors| Broad Role: Performing audits of company financial statements to ensure that the statements are free of material misstatements including misstatements that may be due to fraud. Specific activities include: * Audits of public company financial statements, * Audits of non-public company financial statements, * Other accounting related work such as tax or consulting. | * Pushed accounting concepts to the limit to help organizations achieve earnings objectives. * Promoted personnel based on ability to sell â€Å"non-audit products†. Replaced direct tests of accounting balances with a greater use of in quiries, risk analysis, and analytics. * Failed to uncover basic frauds in cases such as WorldCom and HealthSouth because fundamental audit procedures were not performed. | Internal Auditors| Broad Role: Perform audits of companies for compliance with company policies and laws, audits to evaluate the efficiency of operations, and audits to determine the accuracy of financial reporting processes. Specific activities include: * Reporting results and analyses to management, (including operational management), and audit committees, * Evaluating internal controls. | * Focused efforts on ‘operational audits’ and assumed that financial auditing was addressed sufficiently by the external audit function. * Reported primarily to management with little effective reporting to the audit committee. * In some instances (HealthSouth, WorldCom) did not have access to the corporate financial accounts. | c. There is an inverse relationship between corporate governance and risk to the auditor i. e. he better the quality of corporate governance, the lower the risk to the auditor. This relationship occurs because lower levels of corporate governance implies two things for the auditor: * There is more likelihood that the organization will have misstatements in its financial statements because the commitment to a strong organizational structure and oversight is missing, * There is greater risk to the auditor because the governance structure is not designed to prevent/detect such misstatements, and will likely not be as forthcoming when the auditor questions potential problems. -50. Element of Poor Corporate Governance| Audit Activity to Determine if Governance is actually Poor| Risk Implication of Poor Governance| The company is in the financial services sector and has a large number of consumer loans, including mortgages, outstanding. | This is not necessarily poor governance. However, the auditor needs to determine the amount of risk that is inherent in the current loan portfolio and whether the risk could have been managed through better risk management by the organization. The lack of good risk management by the organization increases the risk that the financial statements will be misstated because of the difficulty of estimating the allowance for loan losses. The auditor will have to focus increased efforts on estimating loan losses, including a comparison of how the company is doing in r elation to the other companies in the financial sector. | The CEO and CFO’s compensation is based on three components: (a) base salary, (b) bonus based on growth in assets and profits, and (c) significant stock options. This is a rather common compensation package and, by itself, is not necessarily poor corporate governance. However, in combination with other things, the use of ‘significant stock options’ may create an incentive for management to potentially manage reported earnings in order to boost the price of the company’s stock. The auditor can determine if it is poor corporate governance by determining the extent that other safeguards are in place to protect the company. In combination with other things, the use of ‘significant stock options’ may create an incentive for management to potentially manage reported earnings in order to boost the price of the company’s stock. The auditor should carefully examine if the company’s reported earnings and stock price differs broadly from companies in the same sector. If that is the case, there is a possibility of earnings manipulation and the auditor should investigate to see if such manipulation is occurring. The audit committee meets semi-annually. It is chaired by a retired CFO who knows the company well because she had served as the CFO of a division of the firm before retirement. The other two members are local community members – one is the President of the Chamber of Commerce and the other is a retired executive from a successful local manufacturing firm. | There is a strong indicator of poor corporate governance. If the audit committee meets only twice a year, it is unlikely that it is devoting appropriate amounts of time to its oversight function, including reports from both internal and external audit. There is another problem in that the chair of the audit committee was previously employed by the company and would not meet the definition of an independent director. Finally, the problems with the other two members is that there is no indication that either of them have sufficient financial expertise. This is an example of poor governance because (1) it signals that the organization has not made a commitment to independent oversight by the audit committee, (2) the lack of financial expertise means that the auditor does not have someone independent that they can discuss controversial accounting or audit issues that arise during the course of the audit. If there is a disagreement with management, the audit committee does not have the expertise to make independent judgments on whether the audit or or management has the appropriate view of he accounting or audit issues. | The company has an internal auditor who reports directly to the CFO, and makes an annual report to the audit committee. | The good news is that the organization has an internal audit activity. | The bad news is that a staff of one isn’t necessarily as large or as diverse as it needs to be to cover the major risks of the organization. The external auditor will be more limited in determining the extent that his or her work can rely on the internal auditor. The CEO is a dominating personality – not unusual in this environment. He has been on the job for 6 months and has decreed that he is streamlining the organization to reduce costs and centralize authority (most of it in him). | A dominant CEO is not especially unusual, but the centralization of power in the CEO is a risk that many aspects of governance, as well as internal control could be overridden. The auditor should look at policy manuals , as well as interview other members of management and the board – especially the audit committee. The centralization of power in the CEO is a risk that many aspects of governance, as well as internal control could be overridden. This increases the amount of audit risk. | The Company has a loan committee. It meets quarterly to approve, on an ex-post basis all loans that are over $300 million (top 5% for this institution). | The auditor should observe the minutes of the loan committee to verify its meetings. The auditor should also interview the chairman of the loan committee to understand both its policies and its attitude towards controls and risk. There are a couple of elements in this statement that carries great risk to the audit and to the organization. First, the loan committee only meets quarterly. Economic conditions change more rapidly than once a quarter, and thus the review is not timely. Second, the only loans reviewed are (a) large loans that (b) have already bee n made. Thus, the loan committee does not act as a control or a check on management or the organization. The risk is that many more loans than would be expected could be delinquent, and need to be written down. The previous auditor has resigned because of a dispute regarding the accounting treatment and fair value assessment of some of the loans. | The auditor should contact the previous auditor to obtain an understanding as to the factors that led the previous auditor to either resign or be fired. The auditor is also concerned with who led the charge to get rid of the auditor. | This is a very high risk indicator. The auditor would look extremely bad if the previous auditor resigned over a valuation issue and the new auditor failed to adequately address the same issue. Second, this is a risk factor because the organization shows that it is willing to get rid of auditors with whom they do not agree. This is a problem of auditor independence and coincides with the above identification of the weakness of the audit committee. This action confirms a generally poor quality of corporate governance. | 2-51. a. External auditors are supposed to perform audits of financial statements to ensure that the statements are free of material misstatements. They work for each of the parties to a certain extent and since they are independent, they will not favor any party over the other. The auditors are an independent and objective attestor that evaluates the quality of financial reporting and conveys an opinion to all parties involved in corporate governance. b. Some of the ways the accounting profession was responsible were: * Were too concerned about creating â€Å"revenue enhancement† opportunities, and less concerned about their core services or talents * Were willing to â€Å"push† accounting standards to the limit to help clients achieve earnings goals * Began to use more audit â€Å"shortcuts† such as inquiry and analytical procedures instead of direct testing of account balance. Relied on management representations instead of testing management representations. c. The term â€Å"public watchdog† implies that auditors will look over the business world and stop bad things from happening. In terms of financial statements, Arthur Levitt said, â€Å"We rely on auditors to put something like the good housekeeping seal of approval on t he information investors receive. † The term â€Å"public watchdog† places a great deal of responsibility on the shoulders of auditors to protect the public’s interests. 2-52. bc. Cookie jar reserves are essentially funds that companies have â€Å"stashed away† to use when times get tough. The rationale is that the reserves are then used to â€Å"smooth† earnings in the years when earnings needs a boost. â€Å"Smooth† earnings typically are looked upon more favorably by the stock market. An example of a cookie jar reserve would be over-estimating an allowance account, such as allowance for doubtful accounts. The allowance account is then written down (and into the income statement) in a bad year. Auditors may have allowed cookie jar reserves because they are known to smooth earnings, and smooth earnings are rewarded by the market. On the flip side, fluctuating earnings are penalized, and present more risk to the company of bankruptcy or other problems. The Sarbanes-Oxley Act addressed the issue by creating an oversight body, the PCAOB, but also addressed the issue in other ways. For example, Congress felt that creating more effective Boards would decrease the use of earnings management. Allowing improper revenue recognition is one thing that auditors may have done in their unwillingness to say â€Å"no† to clients. For example, companies shipped out goods to customers at the end of the year for deep discounts and allowed returns at the beginning of the next year. This practice is known as channel stuffing. Since the goods had a great chance of being returned, it would be improper to recognize all as revenue. Again, auditors were unwilling to say â€Å"no† to clients. Greed is probably the reason here. If companies claim more revenue, their stock would grow in the short-term, making management richer, and making management more willing to give pay raises to their auditors. With the establishment of stronger audit committees and certification of financial statements in the Sarbanes-Oxley Act, this kind of accounting trickery will certainly decrease. Creative accounting for MA included the use of the â€Å"pooling† method of accounting. Pooling allowed acquiring companies to value existing assets at historical costs and did not require the recognition of goodwill for the acquisition. Because true costs (values) were not shown on the financial statements, management was often encouraged to bid up prices for acquisitions with the result that many of them were not economic. The creative accounting also shielded the income statement from charges that would have otherwise hit income including: goodwill amortization, depreciation, and depletion expenses. Greed, the same reasons as the revenue recognition issue, was most likely the motivation for this creative accounting. Discussion between an educated audit committee and auditor plus certification of financial statements required by Sarbanes-Oxley will certainly address this issue. Assisting management to meet earnings. Too often, auditors confused ‘financial engineering’ with value-adding. In other words, auditors often sought to add value to their clients by finding ways to push accounting to achieve earnings objectives sought by management. These earnings objectives then played a major role in escalating stock prices – all desired because of the heavy emphasis of management compensation on stock options. Incentives were misaligned. Most of management compensation came in the form of stock options. Better audit committees, increased auditor responsibility, identification of users as the client of the auditor, and management certification of statements will address the issue via requirements of the Sarbanes-Oxley Act. 2-53. a. Some ways that the impact of the Sarbanes-Oxley Act affects the external audit profession: * The creation of the PCAOB puts a watchful eye on the accounting industry. * Reporting on internal controls is required by the external auditor, adding to their workload but also strengthening their value to organizations and giving them more assurance when giving an audit opinion. Auditors can now feel more comfortable taking issues to the audit committee * Audit partners must rotate off every five years. This will create a difficult transition at every client every five years. * With the cooling off period, audit partners or managers cannot take jobs with clients as easily. b. The Sarbanes-Oxley Act encourages effective internal audit functions for all public comp anies. The internal audit profession has been active in assisting companies in complying with the internal control provisions of the Act. c. This could be argued either way. On one side, the legislation clearly creates a â€Å"watchdog† of the accounting industry, which decreases the power and prestige as the profession is no longer self-regulated. On the other hand, the Act and recent business press has brought a lot of attention to the accounting industry, which has educated the world about the role of accountants in the economy, and possibly increased their power and prestige. Now, there is a general feeling that the public accounting profession has reestablished itself as a watchdog for investors and see the audit committee as their primary client. Overall, the consensus seems to be that the profession has regained a great deal of its prestige. 2-54. a. The Sarbanes-Oxley Act changed responsibilities of management in the following ways: * Requirement that CEO and CFO certify the financial statements and disclosures * Requirement that companies provide a comprehensive report on internal controls over financial reporting * Requirement to describe whether they have implemented a Corporate Code of Conduct, including provisions for whistleblowing, and processes to ensure hat corporate actions are consistent with the Code of Conduct. b. Under The Sarbanes-Oxley Act, management is no longer the â€Å"client. † The auditor reports to the audit committee, who is independent of management. With these changes, the auditor should be able to be â€Å"tougher† on management because the audit committee will be demanding it. However, the auditor still has to work with management to gain access to needed information, as well as un derstanding management intent as management intent drives some accounting treatments. . The CEO and CFO, as members of management, are ultimately responsible for the financial statements. The chair of the audit committee and the external auditor are then responsible to a certain extent, probably more in the minds of the public than in reality. Finally, the Director of Internal Audit is the least responsible of the group, as they are essentially employees of management and the audit committee. 2-55. a. The audit committee must be comprised of â€Å"outside† independent directors, one of whom must be a financial expert. The audit committee now has the authority to hire and fire the external auditor, and will therefore serve as the auditor’s primary contact, especially for accounting and audit related issues. In addition, the audit committee sets the scope for and hires internal auditors. They must review the work of both parties. b. The audit committee certainly takes on much more responsibility with the new standard. They will now be much more informed about the audit function and financial reporting processes within their company. The auditor must report all significant problems to the audit committee. For auditors, the reporting relationship should reinforce the need to keep the third-party users in mind in dealing with reporting choices. c. The audit committee is basically in a position of mediator, but not problem solver. One member must be a financial expert, but all members must be well versed in the field. This financial knowledge can help the audit committee to understand the disagreement. Ultimately, the auditor has to be able to give a clean audit opinion. If they believe a certain accounting treatment to be wrong, they do not have to give that clean opinion. In this way, neither the audit committee nor management can necessarily solve a dispute. d. The accounting choice is acceptable, and thus, the financial statements are fairly presented in accordance with GAAP. The fact that the auditor believes there is a better treatment should be communicated to important parties as follows: * Management – the communication should be made directly, and the rationale for the auditor’s opinion should be explained to management and documented in the working papers. The working papers should also include the client’s rationale for the chosen accounting treatment. Audit Committee – Both management’s chosen treatment and the auditor’s preferred treatment should be communicated to the audit committee. Preferably the communication would include both verbal communication and written communication. The rationale for accepting management’s accounting treatment should also be communicated. * Users of the Financi al Statement – There is no required communication to the outside users of the financial statements as long as the auditor has concluded that the financial statements are fairly presented in accordance with GAAP. 2-56. . An audit committee is a subcommittee of the board of directors; it is responsible for monitoring audit activities and serves as a surrogate for the interests of shareholders. Audit committees should preferably be composed of outside members of the board, that is, members who do not hold company management positions or are closely associated with management. b. The following information should be discussed with the audit committee: * A summary of the auditor’s responsibilities under GAAS. Auditor responsibilities change over time as new standards are issued. The audit committee should always be aware of the nature of the audit function within the organization. * Initial selection or major changes in significant accounting policies that could have a material affect on financial statement presentation. The audit committee needs to know how the choice may affect both current reports and future financial reports as well as the rationale for the choice because it is presumed that companies select the accounting principles that best reflect the economic substance of their transactions and are thus changed only when dictated by standard-setting bodies or when the economics of the situation change. The process utilized by management to make significant estimates and other management judgments such as loan loss reserves in banks and savings and loans and insurance reserves in insurance companies. * Significant audit adjustments that may reflect on the stewardship and accountability of management, even if management agreed to make the adjustments. * The auditor’s review of and responsibility for other information contained in an annual report (outside of the audited financial statements). * All major accounting disagreements with management, even if such disagreements are eventually resolved to the auditor’s satisfaction. The auditor’s knowledge of management’s consultation with other auditors regarding accounting or auditing issues. * Any significant accounting or auditing issues discussed with management prior to the acceptance of the audit engagement – in particular, any positions taken regarding the proper accounting of controversial areas should be disclosed. * Any difficulties encountered in performing the audit, especially any activities undertaken by management that might be considered an impairment of the audit function. * Internal audit plans and reports and management’s responses to those reports. The extent to which the client has implemented a comprehensive plan of risk assessment and the organization’s plans to mitigate, share, control, or otherwise address those risks. * Any known internal control weaknesses that could significantly affect the financial reporting process. The rationale for this communication is that the board of directors through How to cite Audit – Solutions for Chapter 2, Essay examples

Multiple Essay Example For Students

Multiple Essay Personality DisordersMultiple Personality Disorder (MPD) or Dissociative Identity Disorder (DID) wasfirst recognized in the 1700s but was not understood so therefore it wasforgotten. Many cases show up in medical records through the years, but in 1905,Dr. Morton Prince wrote a book about MPD that is a foundation for the disorder. A few years after it was published Sigmund Freud dismissed the disorder and thisdropped it from being discussed at any credible mental health meetings. Sincethen the disorder has been overlooked and misdiagnosed as either schizophreniaor psychosis. Many in the medical profession did not believe that a person couldunknowingly have more than one personality or person inside one body, even afterthe in the 1950s Three Faces of Eve was published by two psychiatrist. In 1993,records showed that three to five thousand patients were being treated for MPDcompared to the hundred cases reported ten years earlier. There is still asincrease in the number of cases being reported as the scientific communitylearns more and more about the disease and the public is becoming more and moreaware of this mental disorder. There are still many questions left unansweredabout the disease, like Is it genetic? or Is a certain type ofpersonality more vulnerable to the disorder? but many aspects of howpeople come by the disorder are already answered (Clark, 1993, p.17-19) MPD iscommonly found in adults who were recurrently abused mentally, physically,emotionally, and/or sexually as young children, between birth to 8 years of age. The child uses a process called dissociation to remove him/herself from theabusive situation. Dissociation is when a child makes up an imaginarypersonality to take control of the mind and body while the child is beingabused. The child can imagine many personalities but usually there is apersonality for every feeling and or emotion that was involved during the abuse(BoyyM, 1998, p.1). As an adult, the abused child finds it hard to keep track oftime and may have episodes of amnesia. Other symptoms that will appear in adultswith MPD are depression, auditory and visual hallucinations (hearing voices) andsuicidal thoughts. Another major symptom is when the adult has no recollectionof their childhood. The adult with MPD has no idea they were abused as childrenand also unaware of the other personalities living inside of their head(Multiple Personality Disorder-fact sheet, 1996-99, p.1). Multiple PersonalityDisorder is when there is the presence of two or more distinct identitiesor personali ties, each with its own relatively enduring pattern of perceiving,relating to, and thinking about the environment and self(BoyyM, 1998,p.1). There can be anywhere from two to over a hundred different personalities. Usually each personality will fall into one of the following categories: core,host, protectors, internal self-helper, fragments, child members, preteen,teenager, adults, artistic/music, cross-gender, cross-colored, animal members,inanimate members (BoyyM, 1998, p. 2-3). The host personality is the person whois the multiple, this is the original personality, or the one that created theother personalities, but is unaware of them. The most common apparent identitiesare the child, persecutor, rescuer, and helper. The child is the identity thatis under the age of twelve. They behave as children often sucking thumbs,twisting hair, like to eat cookies, throw tantrums, and use child-likevocabulary. The Persecutor identity is the self-destructive identity that isviolent and angry. Persecutor identities usually have a drug/alcohol problem andgenerally put the host at risk. The rescuer personality is usually devoid ofemotion but logical, able, proficient, and responsible. The helper personality knows the most about the history of the multiple; they generally want to helpeveryone for the general good. The helper personality is the personality that ismost helpful in therapy because they usually know about all the other identities(Clark, 1993, p.80-83). Subpersonalities are not only part of a person with MPDbut they are also evident in emotionally normal persons as well. Although, in anormal person, he/she remembers when their subpersonality takes over, but in aMPD patient, the personality disconnects from the host that the host can notremember what happens. When a traumatic experience happens, whether positive ornegative, a subpersonality will develop. In a normal person, the splitting isbroken into an ok self and a not ok self. In a multiple,the personalities are more defined; they are broken into smaller fragments thatdisassociate from the human host (Rowan, 1990, p. 7, 20). In the book by TerriA. Clark, M.D., it shows the distinct the personalities are in several cases. I talso displays how each identity can be different from the other identities andthe host. In one of Clarks cases, Veronica, one of the personalities of herpatient Regina, showed up for the weekly appointment instead of Regina (notethat it really was Regina, but she was a different identity). Clark noticed achange in the appearance of Regina on her arrival and noted the difference inher voice. Veronica (Regina) continued to speak to Clark as if it was the firsttime they had met. Although, Veronica knew about Clark, Reginas personal life,and therapy, this was the first time Clark had met this personality. Clarkdiscovered while talking to Veronica that she had a separate business which sheran on the weekends, and when Veronica was in control of the body. Regina had noidea about the business; Veronica used the fake name and an Art Gallerystelephone number in which to run her business. Veronica even had a differenthandwriting than Regina. According to Clark, each personality has its owndi stinct features, such as handwriting, fashion taste, hobbies, and culinarytaste. In most cases, there will always be personality that writes with theirleft hand, while the host and other identities write with their right. InReginas case, Veronica wore different clothes than Regina and she had aninterest in fine art. Each personality of a host, when asked, will tell you theyhave a certain type of hair color and cut, height, weight, and even gender(Clark, 1993, p. 73-78). The problem with having all these personalities is thatthey do not mesh well. Consequences can arise from having so many differenttraits inside one body like eating and sleep disorders, depression, anxiety, andsubstance abuse (Smith, 1993, p.1). Each alter also has their own name, thesenames can come from anything but there are three common factors that influencethe alters name. Some alters are just born with the name, this is when the alteris modeled after a real or fictional character. Some alters are named afterem otional responses, such as Sad One or Angry Janie. Many alters are named forthe specific job they are supposed to do, like Director, Helper or Avenger. Thenames chosen have been created by a child so they are most likely modeled aftera fictional or real character. Although the host will have no idea of the otherpersonalities and will not respond to the names at first, the alters respond tothe birth personalities name (Clark, 1993, 90-91). The circumstances that theidentities get the host into can also become a problem. The different alterswhile in possession of the body can go somewhere where the host does not knowand then leave and the host is left with no idea how he/she got there and how toget back. In Sybil, one of the first times she realized she had a problem waswhen she had to leave her Columbia University Chemistry Lab when somethingbroke. The last thing she remembered was standing at the elevator but when sheregained consciousness she was in the warehouse district of Philad elphia. Milesfrom where she had been before in New York and it was five days later(Schreiber, 1973, p. 23-36). The persecutor identity has a tendency to leave thehost in dangerous situations. Carla, one of Clarks patients, had a persecutoralter named Godiva. Godiva was always putting Carla in sticky situations likeGodiva would pick up men at bars and bring them home or go home with them. Carlawould come to consciousness with an unknown man in her bed and she would passout, another alter would have to come out and rescue Carla. CJ (Carlas bigburly male alter) would come out punch the guy and leave. Christine (Carlaslogical alter) would come out and handle the situation using her negotiationskills. At other times Timmy (the young boy who was an escape artist) would comeout talk his way out of the situation, leaving the man so bewildered because hewas with a woman who thought she was a young boy. When this occurred it wouldleave the other alters upset at Godiva (Clark, 1993, p.99). The re are threedifferent types of relationships that alters can have between each other. Thefirst one is, one-way amnesia, this is when alter number one knowsabout alter number two but alter number two does not know about number one. Thesecond relationship is two-way amnesia exist when neither alter knowabout each other(Clark, 1993, p. 87). Cocognizance, the thirdrelationship, is when all the alters know about each other but the hostpersonality knows about none of them. The host will hear conversations inhis/her head, these conversations are between the alters. This is when thealters know the host personality but is unable to affect it as long as the hostis in control (Clark, 1993, p. 87-88). The cause of MPD is severe trauma, mostof the trauma happens at a young age and the violator is usually someone who thechild knows. In satanic cults, children mistreated and abused, to intentionallycause MPD, do not know everyone who is involved in the abuse. Examples given byClark are children pu t in a coffin with rats, snakes, and bugs then buriedalive. Later the satanic cult leader or priest will rescue the child thereforemaking the child feel obligated to that person. In satanic cults, children arealso raped. During the rape, men and women would violate the child they wouldalso violate the child with objects such as a knife, an upside down crucifix,and other objects (Clark, 1993, 181-198). The child gets to the point where theythink they are going to die, and they disassociate themselves from thesituation, this is when the personalities are born. Other types of abuse areemotional and psychological abuse by a parent. One of Clarks patientsremembered under hypnosis a time when she was two. Her mother took her outsideput her in a tree and told her to jump, the child after a slight hesitation didso, and the mother stepped back, watched the child fall to the ground, andlaughed. These traumatic events and others are the cause of MPD (Clark, 1993,105-106). No matter how bad the abuse was and how many different personalitiesare present; a MPD patient can be cured. The process to recovery for a MPDpatient is long and hard. The personalities are not being made to disappear butto become one. There has to be a fusion of all the alters into the host, thehost has to learn to express all the emotions, that for so long, another alterwould take care of for them. Although some MPD patients are harder than othersto fuse, but all patients can be cured. Patients that were subject to SatanicRitual Abuse are more difficult to fuse due to the threats that the cult made orare making on their lives. A patient that was in a cult must have lost allcontact with the cult before successful fusion can take place. When fusion issuccessfully accomplished, the host person can handle their emotions as wherebefore fusion they were unaware of many common emotions (Clark, 1993, 208-213). Fabric And Jewelery In Sir Gawain And The Green Knight Essay(1993). More Than One (1st edition). Nashville, TN: Oliver-Nelson Books, 17-19,73-78, 80-83, 87-88, 90-91, 99, 105-106, 181-198, 208-213. Multiple PersonalityDisorder; helpline fact sheet (1996) . Rockville, MD: NationalInstitute of Mental Health. New Student Bible, New International Version (1991). Grand Rapids, MI: Zondervan Publishing House. Rowan, John (1990). Subpersonalities: The People Inside Us (1st edition). New York: Routledge, 7,20. Smith, William H., PhD. (1993). Overview of Multiple Personality Disorder. Schreiber, Flora Rheta (1973). Sybil (1st edition). New York: WarnerBooks, 23-26.

Social computing in global businesses

Introduction Human beings have always lived in groups and societies from the beginning of their existence on the planet. Being in groups and congregations fulfilled many basic human needs, such as, safety, cooperation in getting food, water or shelter. The presence of societies and groups also helped in getting approval from others. Humans like to interact with one another and be heard, accepted and followed.Advertising We will write a custom essay sample on Social computing in global businesses specifically for you for only $16.05 $11/page Learn More This human tendency and need for belonging to groups is what ignited the spark of social computing; the phenomenon will be the focus of this white paper. The establishment of societies, groups and interactions that connect many people online is just an imitation of human behaviour in the real world. The difference is that social computing uses IT and the internet as the main medium of communication rather t han face-to-face communication used in real life. During the course of this paper we will try to cover some information about social computing. We will discuss its meaning and definition; then we will briefly talk about its history and how it came to existence in its modern form. The different types of social computing applications and mediums will be mentioned and how they are used to create and promote interactions between people. The use of social computing for businesses takes a different path than the one used for personal interactions. For organisations to utilise social computing, they have to know the benefits they can gain from using such a powerful tool. The different benefits companies can get from using social computing will also be discussed. This will illustrate to the reader that it is not just individuals who can benefit from social computing, but businesses can also gain enormously from such tools. In order to show how some global businesses have used social computi ng, we will also include some examples of companies that are actively using social computing to improve their business practices. Focus will also be given to their communication strategies with all members of their value chain. Additionally, since we know that our audience is in the U.A.E., we will discuss how organisations and businesses in the United Arab Emirates can use the power of social computing to improve their profitability and their relationships with customers, suppliers, staff and all the other entities that they deal with. Definition of social computing Social computing started during the 1960’s with the recognition of the idea that computers are used for communication and not just for computation (McDonald 12). Social computing can be defined as â€Å"the shared and interactive aspect of online behaviour† (Rouse 30). Some of the major elements of social computing include blogs, wikis, instant messaging, Twitter, social networking, RSS, and social bookmar king sites (Rouse 9).Advertising Looking for essay on communications media? Let's see if we can help you! Get your first paper with 15% OFF Learn More Social computing is the practice of expanding the contacts of our business and/or social relations through creating connections with individuals. The supreme potential of the Internet promotes social computing through web-based groups created for that purpose. Social computing creates interconnected Internet communities that help persons to make contacts. Web sites dedicated to social computing are many, such as, Friendster, Linkedin, Spoke, and Tribe Networks, IBM and Microsoft. Social computing is a collection of technologies driving a remarkable evolution of the Web in growth and investment. Social computing is based on digital systems that support online social interaction. Social interactions can occur through email, sharing photos, and instant messaging. Such interactions are typically social for the reason that t hey are mainly about communicating with people. Also, there are other kinds of online social activities such as creating a web page, offering something on eBayâ„ ¢, following others on Twitterâ„ ¢, and editing in Wikipedia. These activities involve people that one may not know. Social computing is about how digital systems support social interactions. It engages people by providing communication mechanisms for interactions, chatting, sharing information, processing and displaying traces of online interfaces (McDonald 15). History of Social Computing Social computing has been around for quite some time. Some people may say that it dates back to the 1960’s. At that time, scientists and experts in IT started to realise that computers can be used for communication as well as computation. In 1961 Simon Ramo discussed the possibility of many people being connected together through the use of computers. He said â€Å"it is a degree of citizen participation unthinkable today.à ¢â‚¬  (Ramo 1) In 1968 a book written by Licklider and Taylor called â€Å"The Computer as a Communication Device† was published. The book spoke about the emergence of interactive communities that joined people from different geographical areas together. They had common interests and were using IT systems as their main method of communicating. Even though the discussion about using computer systems to connect people started in the early 1960’s, it wasn’t until the 1970’s that computer-based communication had started. The earliest systems that utilized computers in communication between people included Emissary and Eis systems. They were used for what experts called computer conferencing. Furthermore, in the 1970’s the University of Illinois introduced PLATO Notes. Mailing lists were introduced for the first time ever on ARPANET (Advanced Research Projects Agency Network). (Licklider and Taylor 2).Advertising We will write a custom essay sampl e on Social computing in global businesses specifically for you for only $16.05 $11/page Learn More After these programs opened the door, the 1980’s saw an increase of IT systems that used computers to connect people. Social interactions through online text conversations increased, and bulletin boards emerged. Also the 80’s saw the introduction of Internet Relay Chat and USENET. USENET was started as an online community that users could utilise to communicate with each other. They could discuss different issues of mutual concern through posts and threads on topics. Another way of using computers for communication in the 1980’s was bulletin boards. They mimicked traditional bulletin boards used by people to post topics or issues of interest to different members of society. In the 1990’s advances continued in IT infrastructure, and so did developments in communication technology. The introduction of the web in the 90’s helped to advance social computing greatly. It caused a revolution by increasing connection speeds and bandwidths. Nonetheless, when the web first started, social interactions and communication between people were limited to content that people used to upload on webpages. Most of them shared links with other users; this is quite different from the social computing that exists today. Webpage uploads were the beginning of dramatic changes in the way people interacted with each other over extended geographical areas. Little regard would be given to distance or natural barriers in this platform. The internet actually made the idea of social computing in its current sense a reality. People didn’t have to be on the same local network or in the same area in order to interact and communicate with each other. In the late 1990’s and the beginning of the 21st century, IT systems became more capable of facilitating communication between people and entities in a way that used computation al power. Not only did this allow people to interact directly with each other, but it also fed results back into the system in a way that enriched social interactions. The systems became more tailor-made for individual users. An example of this application is feedback or suggestions that one gets when using search engines like Google, YouTube, Amazon or EBay. Nowadays social computing applications and functions are an essential part of almost any website. Businesses have recognized the importance of such applications and are using them very heavily to increase interactions with customers, suppliers and other members of the value chain. This increased dependency on social computing is causing these websites and applications to become an integral part of people’s daily lives.Advertising Looking for essay on communications media? Let's see if we can help you! Get your first paper with 15% OFF Learn More Types of social computing applications One of the types of social computing applications that create the above-mentioned benefits are web blogs. These are online journals in which an author or a series of authors publish material on particular topics. Content may be anything from cooking recipes, sports, business, politics, scientific work or entertainment. Blogs allow users to engage in discussions by either linking a particular blog in another forum or by making commentaries about a blogging topic. Businesses can utilise this application in order to capture knowledge about their industries. They may also have internal blogs that provide employees with a platform to make personal contributions (Fun Wagner 248). Wikis are applications that allow users to make contributions about particular topics from scratch through hypertext. It is a collaborative authoring tool which aggregates into an open source of information, such as Wikipedia. Users and administrators can provide quality co ntrol in order to increase reliability of this form of social computing. The mode of application is highly useful to enterprises because it allows them to share knowledge. Companies can discover new trends about their products or services. A business can also learn about stakeholder concerns, and thus improve its business operations. Peer to peer networks are applications that allow users to share multimedia content as well as storage and bandwidth. People often use them to share music and videos. This feature explains why many internet stakeholders have a bias against P2P networks since they facilitate copyright infringement. Nonetheless, a number of companies in the business industry have embraced these technologies as methods of distribution. P2P networks may also increase marketability of content when only short versions of a file are available for sharing. Customers may be prompted to purchase the original version of a file. Social networking websites are sites that join users to their contacts and acquaintances in an online community. Common sites include Facebook and twitter. Facebook allows one to invite others (who may or may not be strangers) to become friends with him in his online community. Businesses may use Facebook as an internal emailing system or as a promotional avenue for products and series. It can also strengthen business associations by building networks. Twitter is another social networking website that allows individuals to read short messages (tweets) and respond to them by following the user. Businesses can use this platform to stay in tune with industry trends, boost their networks, expose their brands, monitor their image, engage with facts and expand their consumer base (Rasmus Salkowitz 8). Video sharing websites such as YouTube are revolutionary social computing platforms as well. They allow entities to share clips about any matter they regard as important. This may range from sports, politics, music and many other issues. Busi nesses may make advertisements, explain product use or announce new corporate strategies through YouTube. The video element in this type of application makes it quite cutting edge and transforming. Photo sharing websites like Flicker allow members to upload, tag and view photos. In these websites, it is possible to get feedback from concerned members. Companies can harness these websites in order to promote some of their new offerings. They can increase their popularity through this avenue. Businesses may think of Flicker as an internet-based location for photographic posters. Social bookmarking services are similar to photo sharing applications because they also allow users to tag items. Here, social bookmarking services are only allowed for books, not photos. One well-known example is Delicious. In this application, users share links and give feedback about the most relevant one. Only communities with similar interests can belong to one social site. Peer to peer video and communic ation services may also be regarded as aspects of social computing. Skype is an example of such an application. It allows users to communicate in real time through video and audio. Businesses may utilise this mode of social computing in order to facilitate that personal touch with clients. Customers can also give reviews about products through Skype, and this may enhance business outcomes. Benefits of social computing Communication Enterprise social computing facilitates communication in companies. Knowledge can flow across boundaries, hierarchies and information silos in social media. Members of an organisation can access a place where they can engage in informal conversations. Improvements made from fast communication often translate into higher production. For instance firms can launch products at very fast rates if operational teams are always in constant communication with marketing and procurement teams. In the past, many companies used knowledge management solutions to improv e communication. Social computing provides an edge over older communication solutions because it deals with new knowledge. Knowledge management was confined to the conveyance of existing knowledge. Many of these platforms stored old and outdated material that lacked relevance to workers’ daily activities. Social computing sustains the ever-changing stream of enterprise knowledge. Not only does social computing increase communication rates, it also enhances the quality of communication. Social media tools allow companies to preserve memory within their structures. Since business environments are changing rapidly, then companies need to capture knowledge as soon as it develops. To increase usefulness of information, people need to know the context and content of the material. Social tools make this quality a reality by preserving knowledge at a rate that equals its dissemination. Finance or business outcomes Financial benefits of enterprise social computing come from improved r eturns. Social tools allow companies to discover emerging opportunities in their business processes and practices. Organisations can discern opportunities for innovation when they use social software appropriately. Such opportunities lead them to develop innovations frequently. Social media tools help firms to manage, analyse, track and find gaps that can then be leveraged (Bughin et al. 5). Many companies may fail to achieve financial results from social software because their primary focus is adoption rather than operational efficiency. Firms that demonstrate success in social computing tend to dwell on tangible aspects of operation. They identify challenges in operations and then use social media to tackle those problems. In fact, this focus on outcomes is what helps many organisations to overcome scepticism against the technologies. Employees who witness increases in performance metrics will see the use of social software and will continue to use it. Consequently, companies will continue to generate more financial revenue. Staff improvement Employees that embrace social media can identify experts easily, and thus solve problems easily. They can use online community networks such as Socialcast to meet with their peers. The latter is a micro blog that assists sales persons to correspond with members of the sales industry. Users of enterprise social computing can thus consult other people about problems that may be new to them (Miller et al. 15). Enterprise social media differs from other traditional methods of information seeking because it is transparent and saves time. One may look for answers by searching for previous discussions on the same. However, if no one has ever posted such information, then the concerned person can be the first one to do so. This ability to identify experts easily makes social computing quite advantageous to organisations. Marketing Most people often think of social computing in this sense. Companies use social networking website s in order to market themselves either directly or indirectly. Some of them may inform customers about product or service updates. Others may educate customers about various ways of using their products. They can build relationships with clients by conversing with them. Alternatively, organisations can use social media to build brands. Businesses also get to familiarise themselves with particular trends, which gives them a competitive edge. Twitter is especially useful in this area because firms can monitor the pulse of their visibility (Dachis Group 11). Examples of successful use of social computing As discussed earlier, social computing leads to staff improvement. A company that demonstrated these abilities was IPC Inc. It is a healthcare institution that used social software to harness distributed knowledge. Physicians in this company faced daily challenges that were new to them. Many of these professionals used social software to contact other physicians. Through this avenue, t hey could converse about clinical matters or patient challenges. Their version of social software provided them with access to about 1000 doctors in real time. If a physician had to make a critical decision about a certain patient, and was uncertain about it, all he had to do was communicate with the other physicians. The hospital improved its response times as well as its quality of care. Besides, it led to greater physician satisfaction because doctors were not working alone (Miller et al. 19). Some companies embrace social software in order to increase business performance or boost financial revenue. One organisation that enjoyed this reward was OSIsoft. The company identified a challenge that social networking could solve; poor problem resolution. Prior to implementation of enterprise social computing, the customer support department was unable to respond quickly and accurately to customer inquiries. This minimised customer satisfaction and hence business outcomes. After the ado ption of social software, OSIsoft easily accessed experts based on relevant topics. Customer support staff could also engage in ongoing discussions with engineers about technical issues that customers needed to know. All learning was documented through wiki articles. Some of the information came from call logs while others stemmed from experts. Employees took on the responsibility of creating knowledge as it was not just a duty assigned to a small team. In the end, problem resolution improved dramatically. Customers were satisfied and this increased the amount of business they brought to the company. OSIsoft reaped tangible financial results because of social media use (Miller et al. 27). Most firms utilise social computing in order to boost their marketing strategies. In fact, when one talks about social technology, most people will automatically think about Twitter and Facebook. While consumer driven applications are vital in organisations, deeper analyses of collaborative tools n eed to be done (O’Driscoll 29). However, it is still necessary to look at case studies of companies that harnessed these consumer-driven technologies. One company that demonstrated the power of social networking in marketing was Toyota. In 2010, the company had quality control issues with their automobiles. They needed to recall a vast number of units, and this took a toll on their brand image. The company decided to target social networking website users in order to minimise this damage. At any one time, there were almost a dozen Toyota employees monitoring Facebook and other social networking websites for commentaries about the company. The workers would respond to complaints and comments as soon as they arose thus ensuring that Toyota would not fall prey to negative publicity. After about 6 months, not only had the firm managed to salvage its reputation, but it expanded its Facebook fan base by about ten percent (Messinger et al. 190). Therefore, social computing allows co mpanies to target consumers directly concerning various aspects of marketing, such as, branding. Educational institutions have also used social computing to improve marketing performance. One such entity was Phoenix University. It has several online programs that it offers students all around the world. In order to enhance their experience, the institution created documentaries that talk about the institutional rules and regulations. Furthermore, the firm needed to reach a vast pool of potential clients. It did this by publishing reviews and video testimonials on YouTube. These allowed interested individuals to access information at their fingertips. Furthermore, it placed the firm at the top of search results about online tertiary institutions (Messinger et al. 220). Retail organisations can also use social computing in order to learn about and meet client needs. Best Buy is an example of a company that successfully did this. It asked Facebook members about their best vampire movie s. The company acted on those responses by placing all the popular ones on sale. As such, Best Buy demonstrated that social computing can be a low-cost strategy of getting feedback from customers. This enables firms to meet their needs directly and more effectively. Aside from the marketing function, some firms have used social computing in order to facilitate communication. As Peter Kim explains in a YouTube video on the power of people, a certain restaurant in Texas utilised its Facebook page as a platform for strengthening its ties with staff members. The area in which the restaurant was located was burnt by a huge fire. Many of the company’s employees lost their belongings and homes as a result. Employees used the restaurant’s Facebook page to air out their grievances. It was a place where they could get solace from colleagues. The organisation leveraged on social computing to enhance its business-to-employee relationship (Kim). How to use social computing to impro ve business practices in UAE Social computing can revolutionise the way companies carry out businesses in the UAE. It is not enough for companies to use social media in order to market new products or reach new clientele; firms need to create sustained value through this phenomenon. UAE companies need to use social computing to develop their business in all realms; that is, in supplies, human resources, operations, marketing and public relations (Dachis Group 5). Firms in this country need to apply the concept when dealing with collaboration between two or more employees. They should also embrace it when optimising their supply chains. Social computing can also lead to better business to customer engagement. The phenomenon can contribute to organisational strategy in the area of connections, analytics, culture and even content exchanges. Companies in the UAE need to realise that social computing will cause them to harness market trends that can drive their business models into the f uture (Parameswaran Whinston 765). Employees and consumers have altered their power over brands as well as IT processes. Workers are using social computing to get past the chain of command inherent in previous technological tools or processes. Customers are taking control of how their brands are perceived, so organisations in the UAE need to embrace this business-transforming idea (IBM 8). In order to understand how social computing will gain relevance in the UAE business climate, firms need to demonstrate certain features after its adoption. Social business can assist firms in becoming engaged. They will become deeply connected to employees, partners, and most importantly, customers. As a result, most of these organisations will become more efficient and productive. Social computing will also increase transparency in an organisation by elimination of boundaries that may exist in a company. Sometimes these boundaries can prevent a business from sharing information or utilising cert ain assets. Lack of transparency may also minimise access to experts, social computing would eradicate that problem. Social business would also improve business practices in the UAE by eliminating boundaries in the above mentioned areas. Companies will also increase their rates of doing business if they take on social computing. They can anticipate problems and address them early on. Firms can also harness new opportunities that will give them an edge over their competitors (Schwartz 1). Social computing enables businesses to capture knowledge, and hence boost their financial outcomes. For UAE organisations to compete favourably, they need to harness as much information as possible. However, the business climate in the country has changed; a lot of companies exist and transactions take place virtually. This calls for a different approach to harnessing knowledge from stakeholders in order to boost a company’s competiveness (Schwartz 1). Social computing can improve communicati on within UAE organisations and outside. Companies can reach their customers, suppliers and partners in real time in order to have conversations with them. Workers can share ideas and insights about certain challenges and thus boost organisational outcomes. Furthermore, the phenomenon will also assist UAE firms in improving staff performance. First organisations can attract appropriate talent through collaborative media. They can also retain talent by allowing their staff to mix work priorities with social needs. This creates a community that has high levels of organisational loyalty. Perhaps one of the most direct and obvious benefits of social computing is strengthening marketing efforts in the UAE. These applications will allow companies to reach customers in new and exciting ways. They will facilitate relationship marketing and also expand consumer pools (Parameswaran Whinston 765). Conclusion Social computing empowers businesses to increase creativity, organise business strate gies and strengthen social interactions. This means that they can reach new clients, facilitate better internal communication, keep up with industry trends, increase business outcomes (financial returns), strengthen employee commitment and communicate with partners more easily. Social computing leads to better financial, human resource, marketing and communication outcomes. Works Cited Bughin, Jacques, Angela Byers Michael Chui. How social technologies are extending the organisation. Nov. 2011. Web.. †¹http://www.mckinseyquarterly.com/High_Tech/Strategy_Analysis/How_social_technologies_are_extending_the_organization_2888†º Dachis Group. The definition of social business. June 2012. Web. †¹http://www.dachisgroup.com/2012/06/the-definition-of-social-business/†º Fun, Rachael Christian Wagner. â€Å"Weblogging: A study of social computing and its impact on organisations†. IT and value creation 45.2(2008): 242-250. Print. IBM. IBM social business. 2012. Web.. †¹http://www.ibm.com/smarterplanet/us/en/socialbusiness/overview/index.html†º Kim, Peter. The power of people. 2012. Web.. †¹https://www.youtube.com/watch?v=VIMR3uHMWz4†º Licklider, Jack Taylor Robert. The computer as a communication device 1968. Web.. †¹http://www.comunicazione.uniroma1.it/materiali/20.20.03_licklider-taylor.pdf. †º McDonald, David. Social Computing, 2011. Web. †¹http://www.interaction-design.org/encyclopedia/social_computing.html†º Messinger, Paul, Eleni Stroulia, Kelly Lyons, Michael Bone, Run Niu, Kristen Smirnov, Stephen Perelgut. â€Å"Virtual worlds – past, present and future: new directions in social computing.† Online communities and social network 47.3(2009): 204-228. Print. Miller. Megan, Aliza Marks Marcelus DeCoulode. Social software for business performance.2011. PDF file. Web.. †¹http://www.deloitte.com/assets/Dcom-UnitedStates/Local%20Assets/Documents/TMT_us_tmt/us_tmt_%20Social%20Softwar e%20for%20Business_031011.pdf†º O’Driscoll, Tony. â€Å"Transforming collaboration with social tools.† Technology Forecast 3: 1-68. 2011. Web. Parameswaran, Manoj Andrew Whinston. â€Å"Social computing: an overview.† Communications of the Association for Information Systems 19(2007): 762-780. Print. Ramo, Simon. Teaching machines and programmed learning: a source book. Washington, DC: NEA, 1961. Print. Rasmus, Daniel Rob Salkowitz. Social computing in the enterprise 2009. PDF file. 22 Jun. 2012 †¹http://download.microsoft.com/download/8/3/A/83A83256-4BC7-4512-9C73-2B6AB50F144E/Social_Computing_in_the_Enterprise.pdf†º Rouse, M. Social computing. 2010. Web.. †¹http://searchwinit.techtarget.com/definition/social-computing-SoC†º Schwartz, Jonathan. â€Å"If you want to lead, Blog.† Harvard Business Review Nov. 2005: 1. Print. This essay on Social computing in global businesses was written and submitted by user Malice to help you with your own studies. You are free to use it for research and reference purposes in order to write your own paper; however, you must cite it accordingly. You can donate your paper here.