Report about the Research in Accounting Practice

Question: Write a report about the issues faced by Strong Built Construction Company based upon financial accounting in simple form. Answer: Introduction This study deals with issues faced by Strong Built Construction Company based upon financial accounting in simple form. Strong Built Construction Company is Construction Company and maintains revenues at similar levels. Bill strong was the founding Director of Strong Built Construction Company (Spiceland, Thomas and Herrmann 2011). Strong Built Construction Company faced various issues that arise from profitability as well as compensation of executives. This particular construction company faced government interference in case of austerity measures. Bill has dynamic personality as well as high public figure in the construction industry. This study addresses issues for approaches to compensation. Typical elements of compensation packages of Strong Built Construction Company There are various primary elements of compensation for Executive officers including base salary, annual bonus in cash as well as long-term incentive award. It is mainly denominated in shares in case of company stock. Executive officers of Strong Built Construction Company get benefits as well as perquisites as intended part of competitive compensation packages. It includes health, retirement programs as well as welfare and savings (Scott 2012). Elements of Compensation of Strong Built Construction Company Pay Element Description and Purpose Target Pay Level Base Salary It mainly compensates depending upon day-to-day performance at executive level of responsibility. It is based upon executive skills, accomplishments as well as experience. Base salaries considers under fixed compensation in cash as well as short-term. It indulges approximately at or below median in case of peer group Annual Bonus It indulges in motivate as well as reward as current year results for three years. It aligned efforts in achieving specific measurable results. Bonus considers variable compensation based upon annual performance paid in cash It is combined with base salary as well as target bonus opportunity at or below median group. Employee Benefits It includes protecting against catastrophic expenses as well as loss of income. Health, disability as well as life insurance plans comes under employee benefits There are several features like savings as well as pension programs for preserving or restoring benefits as per IRS rules. Executives mostly participate in form of restoration features by other employees It is combined with value in or above median in case of general industry Long-term incentives It depends upon motivating reward long-term results for three years. It aligns efforts for achieving specified measurable results as well as increased market price of company stock. Long-term incentives considers as variable compensation based upon long-term company performance as paid in stock. It is combined with base salary as well as target bonus opportunity and target long-term incentives at or above median peer group. Post-termination compensation It helps in providing basis for rapid transition as fair to executive as well as temporary income in case of involuntary termination It is combined with value in or above median in case of general industry Perquisites It initiates assisting ways for attracting as well as retaining executives as talent in form of practical value for particular company It is combined with value in or above median in case of general industry Key assumptions of traditional agency theory and approaches to compensation of Strong Built Construction Company Agency Theory is a popular concept in economics, finance as well as law literatures. It mainly focuses on divergent interests as well as goals of stakeholders in an organization (Scott 2011). It reveals ways in case of employee compensation in alignment with interest as well as goals at the same time. Ownership as well as management separates from Modern Corporation by the same person. Most of the stockholders remove from day-to-day operations known as agency costs. These costs arise mainly from the interest of principals as well as owners as agents and managers. Agency costs mainly include management spending money especially on prerequisites like superfluous corporate jets. Agency theory considers as value in analysis as well as design by non-managers compensation (Schroeder, Clark and Cathey 2011). Divergence of interests exists between manages as well as employees at the same time. Difference between extrinsic and intrinsic motivation in Strong Built Construction Company Intrinsic Motivation Extrinsic Motivation The literal meaning of intrinsic is internal or inside of oneself The literal meaning of extrinsic is external or outside of oneself Person who are intrinsically motivated, they enjoy activity as well as skill satisfaction in developmental for satisfaction of learning. It strides inwardly activities for competent activities (Riahi-Belkaoui 2012). Extrinsic Motivation is used frequently in and within society throughout lifetime. There is no particular inducement in case of intrinsic motivation as key behaviour in final outcome It depends upon the motivating factors in achieving as well as learning in regard with outcome It is important to consider the fact that argument lies in the difference between intrinsic as well as extrinsic motivation. Intrinsic motivation derives from self-concept, internal need as well as core beliefs and development in opposed to extrinsic motivators at the same time (Previts, Walton and Wolnizer 2011). Motives requires in additive in effective like motivating oneself in engaging towards behaviour. It continues as well as persists in a particular behaviour. Employees attitude to risk influence as their desired compensation package in Strong Built Construction Company Most of the organization continuously faces mounting competitive pressures as well as seeking ways for better quality assurance. Goals of organization are checking on sales volume, profits as well as innovation and quality for future employment growth. It takes substantial cuts for employment considerations (Libby, Libby and Short 2011). It accomplishes fewer employees calls in case of effective management of human resources. As far as employee compensation system, it focuses on managing human resources in better way. Employee compensation is one of the factors that play important role for employees as well as employers. Employees widely depend upon wages as well as salaries in the most appropriate way (Leung 2011). It provides large share in case of income as well as benefits in case of income and health security for the same. From the viewpoint of employers, compensation greatly influences cost of rendering business as well as ability in selling at competitive prices in product mar kets. Compensation decisions depend upon employee ability in competing for employees in the labour market. It depends upon the attitudes as well as behaviours by the employer (Kester 2012). Time period when employees receives financial benefit in Strong Built Construction Company Strong Built Construction Company engages in receiving financial benefits for employees working in the particular company. Employee benefits known as fringe benefits considers as indirect form of compensation (Horngren 2013). It provides healthy relationship between employers as well as employees. It requires competing with quality employees in global marketplace as well as rendering fair benefit packages on specified time. Employees receive compensation from Strong Built Construction Company in return of work performed on monthly basis. Compensation relates with all form of financial returns as well as tangible services and benefits as part of employment relationship in an overall manner (Hendriksen and Van Breda 2012). Financial returns depend widely on the base salary as well as short and long-term incentives. Strong Built Construction Company compensation practices have far-reaching effects especially on its competitive advantage. It requires developing competitive advantage in e ngaging in strategic plans as well as actions in desired form. Labour costs affects on competitive advantage in representing large portion of Strong Built Construction Company operation budget in the near future (Glautier, Morris and Underdown 2011). Role in fairness considerations in determining compensation Strong Built Construction Company should determine fair compensation packages for employees working in the particular business organization. This particular construction company perceives fairness of employee rewards for future analysis purpose (Freeman 2011). Idea of fairness determines for making extra effort in reaching towards organizational goals as well as objectives at the same time. It is important for Strong Built Construction Company in ensuring that their employees rewards rooted in case of principles of fairness. According to research, employees perception regarding fairness as well as equitable treatment drives towards core driver of retention. It directly relates with engagement as well as performance of employees in the particular construction company (Dyckman, Magee and Pfeiffer 2011). It requires creating climate of distrust as well as hostility. It erodes performance as well as employee commitment towards Strong Built Construction Company. It reduces willingness of employees in helping each other in need if unfair reorganization takes place in any form. It gives rise to increased unionizing activities as well as voluntary turnover and absenteeism. Employees working under Strong Built Construction Company should be given career development opportunities as well as healthy work atmosphere. Employees are liable in getting fair compensation plan as well as direction of organization. It should mitigate managers as well as supervisory conflicts in all possible forms (Duska, Duska and Ragatz 2011). Executive compensation committee in providing benefits in determining compensation Strong Built Construction Company establishes Executive Compensation Committee in determination of compensation. This particular committee is responsible in establishing as well as recommending to Board in compensation for Strong Built Construction Company (Devi and Hooper 2011). The main philosophy facts rely upon pay for performance. Committee needs to make compensation decisions on ad-hoc basis. Committee overarching compensation philosophy enables in assessing suitability as compensation program components in certain way. It ensures compensation for implementation for determination potential pay. Senior Executives requires paying at risk in comparison with lower level Executives at the same time. One of the important considerations includes incentives at short-term basis as well as longer-term in nature wise (Deegan and Unerman 2011). Structure of executive compensation in achieving best outcomes Strong Built Construction Company pays executive compensation and considers as complex as well as contentious subject. Hugh level of CEO involves in pay-setting process as well as related outcomes at the same time. It includes both managerial power as well as competitive market forces in an overall manner (Deegan and Unerman 2012). It explores on various characteristics in comparison with real-world compensation contracts in way of optimal contracting. It demonstrates compensation features based upon optimal contracting in the most appropriate way. Conclusion and Recommendations At the end of this part, it is concluded that Strong Built Construction Company requires checking on profit before taxes as presented in the financial statements. This report clearly points out elements of compensation packages used by Strong Built Construction Company in carrying out the business activities in desired form. It explains traditional agency theory in accordance to approaches to compensation as far as possible. This particular brings out real financial issues faced by Strong Built Construction Company for future analysis purpose. It explains differences between extrinsic as well as intrinsic motivation for the same. Conclusion At the end of the report, it is concluded that public appears ignorant in case of statute books as well as other document information. It is recommended in educating public on matters relating to duties as well as responsibilities of an auditor in improving the understanding of audit work. 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