Essay On Case Study on Accounting Firms
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Consultancy and accounting services are essential in any form of business regardless of its scope or nature. As long as the business deals with monetary transactions, it requires accurate and up to date account records to ensure sustainability. The case study on a major scandal involving the Enron Corporation presents significant aspects that revolve around the accounting profession. The case study dates back to September 2001, but it is still very significant in analyzing accounting agencies today. The case study has details on the issues that affect strategic planning in any organization and particularly businesses that are based on the provision of accounting and consultancy services.
Strategic planning is one of the aspects that were seriously affected by the scandal. Strategy in any business determines how different operations and activities are handled. Accounting is a dynamic field that keeps on changing. This forces business owners to re-evaluate their strategies regularly in order to meet the market demand. Schwartz & Co, LLP which is a small accounting firm, can be used to study the operations and occurrences with the accounting profession.
Following the Enron Corporation’s scandal and changes that have taken place in the accounting field, Schwartz & Co, LLP was forced to make changes in its policies, strategy and the way business operations were run in this company. Schwartz & Co is a partnership with 14 core employees and 3 interns and provides services to over 1000 clients. The main idea behind the formation of the partnership was to establish an effecting differentiating enterprise wide strategy in order to overcome aggressive competition and cope with the rapidly changing business environment both in the long term, present and intermediate period.
Decision making is another key issue that is very evident in the case study. The Enron scandal led to several major decisions in different accounting firms. One of the major decisions involved re-evaluating how business operations were run. As a result of the scandal, all businesses that provide accounting services had to change their operations in order to fit in the new market definition that had been brought about by the scandal.
Apart from making decisions on basic planning accounting firms were forced to invest heavily on staff appraisal and training. Employees needed to be trained on the new regulations and legislation passed following the Enron scandal. Most accounting firms experienced problems in deciding the most appropriate method of resource allocation to make sure that their businesses were running normally.
The other key issue is dealing with competition and maintaining a health competitive environment between accounting firms and other businesses that are within the same classification such as law firms and financial institutions. Accounting firms are unique in that they provide highly personalized services to their clients. Services offered by law firms reassemble those offered by accounting firms since both require personalized interaction with the client.
Just like law firms accounting firms have to ensure that their services meet the different customer needs. Ensuring quality services ensures that accounting firms secure top rankings in the professional service industry. Law firms are allowed to specialize in several different areas. This specialization sometimes overlaps into other fields such as the tax law. Computation of tax rates has been the duty of accounting firms.
When law firms engage in such activities, they create a competitive environment where accounting firms are required to upgrade their services to avoid losing grip of the market. Accounting firms must ensure that their employees are well endowed to handle disciplines such as the tax law, as well as their counterparts in the legal firms.
Accounting firms also receive competition from financial institutions such as banks and firms that provide actuarial services. Financial institutions are classified under the professional services industry just like accounting firms. Over the years banks have gained immense relevance in the business environment and are currently playing major roles in providing and managing finances for businesses.
Today, it is possible to get account audits and statements showing a company’s revenue. A few decades ago this was the sole responsibility of the accounting firms. The involvement of banks in managing business finance is a source of competition that accounting firms have to handle. Accounting firms should be well equipped with skills and information for them to remain relevant in the business environment.
Firms that provide actuarial services are also a major source of competition for accounting firms. The role of actuarial firms in the business environment is to provide insurance services for businesses. These firms engage in activities such as calculating risks and providing compensation in cases where a protected risk occurs and results in damage of company buildings and inventory. Accounting firms also provide special accounting services for businesses. This reduces the scope covered by accounting firms since they are supposed to handle all accounting services. To cope with this competition, accounting firms must ensure that they have the necessary expertise required in handling actuarial accounting.
The field of professional accounting comprises of several services and duties which makes accounting highly relevant to businesses. However, business owners always look for services that ensure convenience and adopt strategies that reduce their expenditure. Therefore, the relevance of accounting firms is dependent on the quality of service and the impact that they have on the individual business enterprises that they serve.
The main services under accounting include auditing, offering advice on tax planning and compiling financial records. In some cases, accountants provide services as employees to a particular organization or as independent firms. In the same context, some firms specialize on pure accounting or consultancy.
A good alternative towards dealing with the changing business environment, which is a major challenge facing accounting firms would be to invest in providing as many services as possible. Clients prefer working with firms where they can get several services all under one roof. For instance, an accounting firm that provides all the fundamental accounting services, accounting services relating to tax law and actuarial accounting services is in a better position and is able to draw more clients than one that has limited coverage of services.
Another alternative would be to combine accounting and consultancy and offer them jointly. This strategy works well in an environment where the demand is not satisfactory. Providing the two services jointly helps in drawing more customers and retaining the ones that already exist. A client or business owner who receives accounting services from a particular company would obviously prefer to receive consultancy services from the same company, instead of consulting a different service provider.
This is because a person who handles a company’s account records has a clear understanding of the business and its finances and is likely to provide correct guidance regarding financial issues or tax planning.The last alternative but not least in terms of significance would be globalization of services. This may sound like an unachievable goal for a small or newly established accounting firm but with proper planning, strategy and time anything is achievable in the business environment.
An accounting firm that provides services in several states or countries all over the world is better than one that is limited by national or continental borders. Apart from having a wide coverage of the market such a firm is highly preferred by international organizations. Therefore, a firm that provides services globally is likely to have several clients which translate into higher profits as well as potential for further growth and expansion.
Even so, engaging in international service provision requires higher levels of competence and facilities. Such a firm requires experts with specific skills required in the individual country’s accounting system. Basically, a firm that decides to engage in international business must be well equipped in order to meet the high demand that exist in the international business environment.
Pros & Cons
The alternatives available for accounting firms have their advantages and disadvantages. However, the severity of the disadvantages is based on the scope or nature of a business and the preparedness of the management in meeting the requirements of the market. Having a comprehensive coverage in the market is the goal of any company regardless of how long the business has been in operation.
All strategies that a company or firm adopts point towards increasing the number of customers or increase the number of sales. From the case study, Schwartz & company is a small firm yet provides services to several businesses regardless of their size or permanence in the business environment. This company also invests heavily on the customer relations. This is a good strategy in retaining customers as well as attracting others. Regardless of its size Schwartz & company has managed to control a wide scope of the market by ensuring that their customers are satisfied. Client’s satisfaction is always given the first priority while the other concerns are dealt with after the customer’s needs are adequately met.
A company that majors in several or all fields of accounting is well endowed with information and skills in handling different tasks. Since Schwartz &company deals with several aspects of accounting, the company has managed to develop a work force that is well experienced in handling different tasks. This company has been ranked as the best in providing tax services for a long time now.
High level of expertise combined with personalization of customer services are the key things that make Schwartz & company a leader in the provision of accounting and consultancy services. In the audit department Schwartz & co has had the best staff that played a major role in ensuring that the company remains at the top of the rank when compared with other companies. With Schwartz Corporation, tax projections are made at the end of every year way before the tax deadlines which are usually around April.
Schwartz Company has drawn a lot of gain from offering accounting services alongside consultancy services. The consultants are well endowed in providing consultancy services in areas like tax planning, financial planning, and managing wealth particularly for trusts among other services that fall under accounting. Members of staff in this department have identified their main strength and work towards developing it. Their main strength is their commitment to excellence. Staff members are always proactive when solving problems affecting their client’s even new problems that they may have never tackled in the past.
There also exist some disadvantages that are associated with the alternatives that exist in the area of professional service industry. Engaging in international business operations has a number of shortcomings. Firms that engage in international accounting and consultancy risk a huge capital investment in terms of assets, offices and employing a large number of staff members. If the management to such a firm is not careful, the firm might end up making losses particularly if investments are made without proper considerations on the regions potential.
The business world is always undergoing changes and competition increases every day. The main factor that contributes to these changes is the fact that people are always joining and leaving the field of business. Although Schwartz & co is doing well in the field of accounting, other firms may overtake or out do it in service provision. New firms and business people joining professional service industry have more superior skills and are more ambitious.
To put up with anticipated competition, the company must come up with ways of coping with the anticipated competition in the future. Schwartz & company should also invest heavily on staff appraisal and ensuring that members of staff are updated on the changes and modifications on the legislation. This will ensure that the services offered by the company are relevant in the current business system.
There are several concerns that may arise from the implementation of the above recommendations. An obvious implementation consideration is cost whereby a company may view the recommendation as a daunting investment. However, cost is nothing compared to the sustainability of a business. Considering a competitive field like accounting and consultancy, it is imperative to main high level of service and maintains the best customer relations.
The state of the economy is also another consideration. For a declining economy, it would be insignificant to invest heavily on short term factors. It would be better to invest on long term factors rather than short term factors. Investing on the long term factors allows some time for the market to recover from the decline. Another consideration would be the state of the firm. A small firm may lack enough capital or experience that is required in making huge investments. The investor or owner of the firm must first understand the requirements of the investments and get a rough idea of what to expect in the new business level.
Taking an example of the Enron scandal if the accounting firms had set appropriate strategies and policies, they would have been able to overcome the effects of the scandal. Otherwise, preparedness would have reduced the effects of the scandal on the running and management of businesses under professional service industry. Generally business owners should understand that the business environment has never and will never be static. The field of business is always changing, and it is the duty of business owners and management to ensure that they are well equipped and prepared for changes and variations that occur during the running of businesses. This will help in ensuring sustainability of businesses and companies.