Key Points of the Article

In today’s time, the firm chooses decentralization over centralization of authority. The main purpose of this article is to analyze the decision taken by a single person and by various peoples having different level of accuracy. So, decision by various peoples is much way better than the decision taken by a single person. In the given article, the work is divided among both the superiors and subordinates. Both, the superiors and subordinates are responsible for the work on their part. In the given article, the authority may transfer to subordinates with the superiors. Both are liable for their responsibilities. The superior has well defined knowledge and skills regarding their work in their field that reduces the chances of wasting resources and in lacking of accurate work and better decisions are to be taken. The subordinates are bound with the limits of the superior, so they can perform as per the given authorities and are not liable for everything. Hence, in the lack of work the superiors are answerable to the higher authority. The superiors are having knowledge of subordinates skills and potential, but sometimes they misuse the knowledge and demotivate the subordinates as, all the subordinates are not much skilled to do things in a best way. This may lead to demotivation for the subordinates who are more experienced and do work with high level of accuracy. The mindset is this, that the superiors can do work perfectly rather than the subordinates even when the subordinates makes truthful budgeting report and the superior may overstate and understate the report to achieve the goals (Brink, Coats, & Rankin, 2017).

There are several key points of the article. The cost system is defined that contains the cost ranges. This article has reflected that the cost range provided to both the superiors and subordinates is always public information (Brink, Coats, & Rankin, 2018). The superiors are having all the information regarding the working environment and skills of the subordinates so, they misuse the information towards their beneficiary and the report made by the subordinates is misrepresented towards the goals. Superiors may overstate or understate the truthful report made by the subordinates. In the demonstration through cost system, it is identified that the superior may misrepresent the accurate cost system report according to their requirement that may increase their profit. In the situation of final budget authority, if the subordinates are having the authority the superior may mish old their loyalty and exploits subordinates for being honest. And in case, if the superiors are having the final budget authority they misrepresent the cost system according to their goals achievements. This article mainly communicates about the firm cost system. In this the cost accuracy is been identified in the company by the superior and the subordinate for that they both get the report the report that the subordinate get from the superior are private report and which they get directly are called public report. The superior overstate and understate the report according to their requirement as they have the authority to misrepresent the  cost system, but this is not done when they have the final authority as chances of been caught are very high (Fiolleau, Libby, & Thorne, 2017). The superior on the top are the people who are very skilled and qualified in the field in which they are appointed so chances of waste of human resources are lack and better decision are taken by them (Blay, Gooden, Mellon,  & Stevens, E. (2018).

The Firm’s Cost System

The research method used in this article e is secondary sources which include documents, journal articles view and scholar’s data which have been used to gather the imperative information. This helped in collecting the qualitative and quantitative information from the clients. In addition to this, corporate reports of multinational companies have also been used to gather the imperative data on the given topic of this subject (Brink, Coats, & Rankin, 2017).

The main problem the company face is the appointment of subordinate as they are the people who are on their training process so  they may not be so skilled in their field, but this is not the case of all the subordinate as some of them are very good in their field but the image of the subordinates are in this from only that they are  on their training and the work that will be performed by them is not good, and this lead them to loss their confident and chances of fraud to be committed by them also increase as compare to be done earlier. The subordinate are always seen in such a way that they will always present the report that is filled with material misstatement as the rewards which they are getting in the form of salary is very low so people think that they will be involve in all the activity that are related to fraud with the outsiders by providing wrong report in the company or by leaking all the data of the company. This article mainly communicates about the firm cost system. In this the cost accuracy is been identified in the company by the superior and the subordinate for that they both get the report the report that the subordinate get from the superior are private report and which they get directly are called public report (Brink, et al.  2017).  

This article reveals that the superior overstate and understate the report according to their requirement as they have the authority to misrepresent the  cost system, but this is not done when they have the final authority as chances of been caught are very high. The subordinate are always seen in such a way that they will always present the report that is filled with material misstatement as the rewards which they are getting in the form of salary is very low so people think that they will be involve in all the activity that are related to fraud with the outsiders by providing wrong report in the company or by leaking all the data of the company. In this report, the main focus is on the testing the hypothesis of both the superiors and the subordinates. In this various tasks are perform as a testing under hypothesis that represent the errors, behavior and participation level of both the subordinates and the superiors. Analysis of the article is done by giving final budget authority to both superiors and subordinates for finding out the accuracy of both of them with the help of ANOVA (Peters, 2014).

Research Methodology

The main strength of this article is use of the ample information and analysis made by using the Anova method.   It defines that the superiors may misrepresent the report in many forms by not only misrepresent the private information but also by exploiting subordinates and overstate or understate their report that leads to profitable for the firm. As the subordinates are having the final budget authority superior are earning less as compare to the final budget authority in the hands of them and in this also the earning is more in non-verifiable information rather than public information. These all data shown in article are quantitative.  Therefore, this article only showcases the quantitative data and made less focus on the qualitative data (Brink, Coats, & Rankin, 2017). 

In this part of the report, they focus on testing the idea that is given by the subordinate and the superiors in the company. Apart from the testing there are various tasks that are also performed in the company as idea may content many error and frauds (Carvalho, et al. 2017). The final budget authority is given to the superior and the subordinate in the company and after that it is been examine that the budget set up by the is up to the accuracy or not, these budget can be misrepresent by the superior in the company by leaking all the information to the public who are working outside the company. The lack of supporting data on the budget and no use of the financial analysis tool are the biggest weakness of this article.  If the final budget is set up by the subordinate without using the proper financial analysis tools then it may result in the misleading of the forecasted data.  The less focus of the article on the finanical performance of companies and non-effective use of stratified sample survey may result to misleading of the financial data forecasted in this article. 

By understanding the report, we can find drawback on the clarity of the concepts. It shows that the work of the subordinate in the company is not given as much important as it should be given, all the decision and the authorities are given at the top level so the people at the bottom level find themselves understand the selves and bound by many of the limitation like fear of losing the job if they interrupt in the working of the superior and the superior may also decrease their rewards in the company (Brink, Coats & Rankin, 2017). This statement is not supported by the references and associate concepts.  The goals for the company will be taken as their own goals, then only the company can grow up the level where they should.  The superior should motivate their subordinate in the company as they are the people with highest capacity and energy (Wetzelaer, et al. 2017).

Conclusion

The main focus of the article is on the budget report how superior misleads the subordinates and changes the representation of budget report in the favor of the firm to increase the profits. This shows that how the subordinates makes budget report by using the private information and superior misrepresent in by overstating and understating it according to the situation by playing on the honesty of the subordinates. This leads to the increased profitability by malpractice. In this, many tests are done to verify the accuracy of the superior and subordinates report by judging their behavior, errors and participation that shows how they both react when the final budget authority falls on their part. After analyzing the article, the results shows that the superior overstate the cost system when found low cost ranges and understate the cost system accuracy when find high cost ranges. hence, it is analyzed that the superior not only misrepresent the report by statically means like misrepresent the private information send to them but also misrepresent the cost system in budget report made by subordinates by overstating or understating them through the exploitation of employees.

References

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Brink, A. Coats, J. & Rankin, F. (2017). Deceptive superiors and budgetary reporting: An experimental investigation. Journal of Management Accounting Research. 29 (3): 79-91

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Carvalho, N., Jit, M., Cox, S., Yoong, J., & Hutubessy, R. C. (2017). Capturing budget impact considerations within economic evaluations: a systematic review of economic evaluations of rotavirus vaccine in Low-and Middle-Income Countries and a proposed assessment framework. Pharmacoeconomics, 4, (2) 1-12.

Fiolleau, K., Libby, T., & Thorne, L. (2017). Dysfunctional behavior in organizations: insights from the management control literature. Auditing: A Journal of Practice and Theory.41, 89-105

Peters, B. G. (2014). The politics of the budgetary process. In The Politics of Bureaucracy (pp. 243-274). Routledge.

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