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Section A Leadership - This is my own lecturer notes that I had summarise
Association of Chartered Certified Accountants - ACCA (PAC150)
INTEC Education College
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Section A Leadership
process in which an individual influence other, should have both power and authority (right to influence)
power can arise from rational-legal, charismatic (great charm or personality) or reward power
Intrapreneurship Entrepreneurship
Employee of organization who is authorized to undertake the innovations
Establishes new business with an innovative idea
Restorative Intuitive Resources provided by company Uses his own resources Fund needed provided by company Raises capital himself Company bears all the risks Bears risks and uncertainties Cannot take independent decisions Independent to take decisions
Openness – removing information asymmetry by disclosing information timely to shareholders (due to separation of ownership and control)
- accept criticism from parties who are playing the monitoring role (shareholders, NED and auditors)
Honesty/Integrity -does not reward themselves with excessive remuneration
-does not involve in earning management (window dressing)
Transparency -disclose information above the requirement
Independence/Objectivity -personal, family, financial interest, express opinions in the best interest of the company, should avoid biasness, conflict of interest and undue influence
Accountability -held responsible for the outcome of their decision
Responsibility -may discharge to other people but still held accountable
Fairness -treat all shareholders the same whether minority or majority
Reputation -reputational risks regarding the company or product or services, safeguarding interest of shareholders
Style of leadership
Great Man theory -intrinsic, born not made, appropriate situation, product of their times and their actions the results of social conditions
Traits theory -leaders are either born or are made with certain qualities, enthusiasm, self-confidence
Styles theory -many of the traits or style can be taught
Blake and Mouton Managerial Grid (concern for task and people)
X = concern for tasks
Y = concern for people
Impoverished (1,1)
minimal concern for people and production
preserving their employment or position
Country Club (1,9)
- ensure that the needs and desires of his employees are met
-assume staff will yield maximum results if they are self-motivated
- productivity may suffer from the lack of attention on tasks
Middle Road (5,5)
- balance out the needs of staff with those of the organization, while not adequately achieving either
The Task (9,1)
- focus all of their attention to production-related matters and very little towards the needs of their employees
-assume that efficiency gains can only be achieved through rigid disciplines
-dictatorial style inspired by McGregor X Theory
The Team (9,9)
- committed, trust, respect the employees and believe employees empowerment are essential for maximum employee satisfaction and most efficient productivity are achieved
-leadership style inspired by McGregor Y Theory
Likert’s Model on Leadership style
Exploitative-Autocratic
-has no confidence or trust in subordinates, resulting their ideas and opinions are not sought in making decisions
Charles & Handy Best fit model
-there is no right style of leadership, but leadership will be most effective when requirements of the leader, the subordinates and the task fit together
-measured on a scale that runs from tight to flexible
Tight Flexible
Leader Strict, authoritarian, supervise
closely
Participative, trusting, have confidence in employees
Subordinat
es
Prefer to be told what to do, dislikes risks and change
Want to think for themselves and contribute to decision making, want a challenging variety of tasks
Task Simple, repetitive Complex, unstructured
-All works well when three elements line up, when there is mismatch, things will go wrong
Transactional leadership -focuses on the short term, rely on legal power,
concentrate on doing things right, useful to deal with day to day operation
Transformational leadership -focuses on a long-term vision to change the
company radically, motivate their staff through trust and empowerment, concentrate on doing right things
Leadership style
Laissez-Faire -hands-off approach, empowerment, provide little or no direction and gives staff freedom to make decision, effective for high skilled, experienced staff
Participative -encourage staff to be a part of the decision-making, high skilled or experienced staff, should not be used when company cannot afford mistakes
Autocratic -retains as much power and decision-making authority as possible, does not consult staff, staff expected to obey orders
Bureaucratic -manages ‘by the book’, job done according to procedure or policy, effective for routine tasks, tasks that require handling cash
Organizational culture
-collective behaviour, beliefs, values and vision of the employees that are attached to their actions, culture need to be integrated with strategy for its successful implementation
Factors that influence culture
Founders/leaders -affects the policies, procedures and rules set for employees
Nature of business / clients and external parties / management style
Charles Handy
Power culture -family business, power orientated and politically minded, against CG practices of spreading power and reducing risks
Role culture -strong functional or specialised areas, high degree of formalisation and standardisation, difficult to adapt to changes, successful in a stable environment, offers employees security and the opportunity to specialise expertise
Task culture -emphasize on getting the job done, bring together appropriate resources and the right people for the completion of a particular project, depends on teamwork to produce results, flexible when speed of reaction is critical, can change to role or power culture
Person culture -country club, individual is the focal point, further own interest without overriding organisation’s culture
Cultural web
Symbols -visual representations, logos, dress codes, award
Stories -past events, important to consider what is important in the organization, matters the employees/public are talking about
Rituals and routines -daily behaviour and actions of people
Organizational culture -organizational chart, department, the unwritten lines of power and influence, do structure encourage teamwork or competition
Control systems -financial, quality, reward systems, the way the employees are being measured, if adopt bonus scheme based on sales volume, difficult to promote teamwork and emphasis on quality rather than quantity
Power structures -who is in power, how power is distributed, organization structure
Organization assumption -organization exists to fulfil charitable objectives, values, basic assumption
Professional competence and due care -maintain professional knowledge and skill at the level that a client or employer requires, attending continuing professional programme and gathering sufficient appropriate information before expressing opinion on financial statements
Integrity -straightforward, honest in all business dealings, should not be associated with reports, returns, communications that are materially false, furnished recklessly, omits or obscure information that should be included, if found out that there is such information, should alert the user in the form of qualification
Confidentiality -should not disclose information acquired as a result of professional and business relationship to third parties without proper and specific authority (consent of client and employer), unless there is a legal or professional right or duty to disclose
-subpoena is served on the firm in which a non-disclosure will be seen as obstruction to justice
-banking, finance, insurance industry where existing law imposed on the auditors to make reporting to the authority of any known or suspected malpractice
Independence -mindset/appearance (seen to be independent)
Threats to independence (FASSI)
Familiarity -immediate or close family member, too sympathetic, involved senior personnel in client company and the firm respectively which can exert direct and significant influence over the subject matter of engagement, former partner being the director of client company, long associated of senior member (no rotation), accepting gifts (should consider nature, value and intention)
Advocacy -promote client position to the point that objectivity is compromised, promoter of shares or acting as an advocate on behalf of client in litigation
Self-interest -direct (large shareholding that controls the client) or material indirect (does not constitute control but considered as high) financial interest, loan from the client (indebted), dependence on total fees, contingent fees (subject to result or performance of the company)
Self-review -only exist when outcome of the non-audit services in recording in financial statements and subject to audit, member of audit team is from accounting department of the client (should have cooling period)
Intimidation -when client put audit service out to tender in which a low fee will increase the chances of being appointed, threat of replacement, pressure to reduce fees
Safeguard (REI)
Identify threats to independence (FASSI)
Evaluate the significance of the threat
Respond to threats by applying safeguards (laws and regulations from firm or client) to reduce or eliminate them
Safeguards within the client
-should have employees competent to make managerial decision (avoid auditor having to make on behalf of client and overcome self-review threat
- corporate governance structure, audit committee provide information and communicate with external auditors
Safeguards within the firm
- policies and procedures to implement and monitor quality control of assurance engagements
-policy that require declaration of audit staff of their interest in client
-should defined the maximum total fees that can be received by client before fee dependence step in
different partners and teams with separate reporting lines to clients in the same industry (Chinese wall), prevent access of information
timely communication of policies and procedures including appropriate training and education
whistle-blowing within the firm itself
hot review undertaken by independent partner not involving in the audit before releasing the audit report
rotation of senior personnel (maximum 5 years)
involving another firm to perform or re-perform part of the assurance engagement (network firm)
Section A Leadership - This is my own lecturer notes that I had summarise
Course: Association of Chartered Certified Accountants - ACCA (PAC150)
University: INTEC Education College
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