Accounting for Non-Accounting Students 9th edition by John R. Dyson solution manual
Accounting and the business world
Tutorial questions
1.1
1. This is a common perception. Accountants are an easy target, just as the computer is often
blamed for almost anything that goes wrong in an organisation.
2. Accounting is a service industry concerned with the supply of information.
3. Accountants themselves do not necessarily take decisions – that is for management.
4. Managers take decisions on a whole range of issues, not all of them related to accounting or
financial issues. If initiative and enterprise are stifled, that is because managers allow it to
happen. Blaming accountants, therefore, is just an excuse made by incompetent managers.
1.2
1. The public perception is that it is the responsibility of auditors to detect fraud, but this is
normally incidental to their main task of considering whether the accounts represent a true
and fair view. This common misconception is sometimes known as ‘the expectations gap’.
2. There is no reason why auditors should not be required to undertake this task, but it would
be very difficult. By its nature, fraud is normally hard to detect, and it is possible that
auditors would be faced with much more litigation. So they would have to take out higher
levels of insurance cover, thereby increasing the cost of an audit.
1.3
The statement made by this student that ‘I cannot understand why accountants have such a high
status and why they have so much influence’ is a common assertion. It may be true of
accountants in general but it may not be necessarily true of individual accountants. However,
assuming that there is some validity in the assertion, a number of reasons may be posited.
1. Accountants are thought to be ‘good’ at mathematics. Since many people have convinced
themselves that they are ‘hopeless at maths’, the expertise that accountants are perceived to
possess creates admiration and respect.
2. The discipline of accounting is often treated as being synonymous with expertise in
taxation. Like mathematics, taxation is a mystery to many people and so, once again, an
assumed expert in the subject attracts some admiration.
3. It is recognised that business (and personal life) is tightly constrained by adequate and
available resources. So experts who can assess the profitability of business enterprises tend
Crawford et al., Accounting for Non-Accounting Students, 9 th edition, Instructor’s Manual
11
© Pearson Education Limited 2017
to be regarded as valuable members of a project team and of the general community.
However, even accountants would accept that they provide a service and are not in the same
position as those individuals who make or invent things.
4. There is a belief (which is probably true) that the education and training of an accountant is
long and hard and that entrants to the profession have to be of a very high calibre.
5. Although not regarded as being particularly charismatic, accountants are thought to be
dependable, reliable and absolutely trustworthy. Unfortunately, a number of financial
scandals in recent years have probably damaged that image.
1.7
(a) To keep a record of the company’s day-to-day progress.
(b) To prepare the company’s annual financial statements.
(c) To supply information to the management for decision making and control.
(d) To operate a system of internal auditing.
(e) To minimise the company’s tax liabilities.
1.9
It is required by law. External auditors report to the shareholders on whether the accounts
represent a true and fair view (the discovery of fraud is only incidental to this purpose). Note
that small limited companies no longer need to have an audit.
1.10
According to HMRC, “Tax avoidance involves bending the rules of the tax system to gain a tax
advantage that Parliament never intended. It often involves contrived, artificial transactions that
serve little or no purpose other than to produce this advantage. It involves operating within the
letter, but not the spirit, of the law”.
The objective of tax avoidance schemes is therefore to reduce tax liability whilst remaining
within the tax regulations. However, the hallmark of a tax avoidance scheme is that it often
involves artificial and highly contrived steps which keep the scheme (just) within the law.
HMRC identify schemes that they are investigating by regularly publishing schemes they have
identified on their “spotlight” webpages, https://www.gov.uk/government/collections/tax-
avoidance-schemes-currently-in-the-spotlight.
HMRC seek to close down such schemes through legislation changes and caution “most tax
avoidance schemes simply do not work, and those who engage in them can find they pay more
Tutorial questions
1.1
1. This is a common perception. Accountants are an easy target, just as the computer is often
blamed for almost anything that goes wrong in an organisation.
2. Accounting is a service industry concerned with the supply of information.
3. Accountants themselves do not necessarily take decisions – that is for management.
4. Managers take decisions on a whole range of issues, not all of them related to accounting or
financial issues. If initiative and enterprise are stifled, that is because managers allow it to
happen. Blaming accountants, therefore, is just an excuse made by incompetent managers.
1.2
1. The public perception is that it is the responsibility of auditors to detect fraud, but this is
normally incidental to their main task of considering whether the accounts represent a true
and fair view. This common misconception is sometimes known as ‘the expectations gap’.
2. There is no reason why auditors should not be required to undertake this task, but it would
be very difficult. By its nature, fraud is normally hard to detect, and it is possible that
auditors would be faced with much more litigation. So they would have to take out higher
levels of insurance cover, thereby increasing the cost of an audit.
1.3
The statement made by this student that ‘I cannot understand why accountants have such a high
status and why they have so much influence’ is a common assertion. It may be true of
accountants in general but it may not be necessarily true of individual accountants. However,
assuming that there is some validity in the assertion, a number of reasons may be posited.
1. Accountants are thought to be ‘good’ at mathematics. Since many people have convinced
themselves that they are ‘hopeless at maths’, the expertise that accountants are perceived to
possess creates admiration and respect.
2. The discipline of accounting is often treated as being synonymous with expertise in
taxation. Like mathematics, taxation is a mystery to many people and so, once again, an
assumed expert in the subject attracts some admiration.
3. It is recognised that business (and personal life) is tightly constrained by adequate and
available resources. So experts who can assess the profitability of business enterprises tend
Crawford et al., Accounting for Non-Accounting Students, 9 th edition, Instructor’s Manual
11
© Pearson Education Limited 2017
to be regarded as valuable members of a project team and of the general community.
However, even accountants would accept that they provide a service and are not in the same
position as those individuals who make or invent things.
4. There is a belief (which is probably true) that the education and training of an accountant is
long and hard and that entrants to the profession have to be of a very high calibre.
5. Although not regarded as being particularly charismatic, accountants are thought to be
dependable, reliable and absolutely trustworthy. Unfortunately, a number of financial
scandals in recent years have probably damaged that image.
1.7
(a) To keep a record of the company’s day-to-day progress.
(b) To prepare the company’s annual financial statements.
(c) To supply information to the management for decision making and control.
(d) To operate a system of internal auditing.
(e) To minimise the company’s tax liabilities.
1.9
It is required by law. External auditors report to the shareholders on whether the accounts
represent a true and fair view (the discovery of fraud is only incidental to this purpose). Note
that small limited companies no longer need to have an audit.
1.10
According to HMRC, “Tax avoidance involves bending the rules of the tax system to gain a tax
advantage that Parliament never intended. It often involves contrived, artificial transactions that
serve little or no purpose other than to produce this advantage. It involves operating within the
letter, but not the spirit, of the law”.
The objective of tax avoidance schemes is therefore to reduce tax liability whilst remaining
within the tax regulations. However, the hallmark of a tax avoidance scheme is that it often
involves artificial and highly contrived steps which keep the scheme (just) within the law.
HMRC identify schemes that they are investigating by regularly publishing schemes they have
identified on their “spotlight” webpages, https://www.gov.uk/government/collections/tax-
avoidance-schemes-currently-in-the-spotlight.
HMRC seek to close down such schemes through legislation changes and caution “most tax
avoidance schemes simply do not work, and those who engage in them can find they pay more