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Wilfrid Laurier University
Connell Mc Cluskey

Problem SolutionsWeek 1114One principal advantage of separating the financial reporting from the management accounting department is that employees who are dedicated to their particular tasks develop expertise in these tasks The financial reporting accountants can concentrate on the financial accounting and tax standards that must be used to stay in compliance with the countrys accounting and tax regulations They can also serve as liaisons with the external auditors The financial reporting department can be responsible for the companys basic transaction and general ledger systems ensuring that these systems reliably capture data and have adequate internal controlsThe management accounting department can work closely with the functional areas for example manufacturing marketing and engineering that use management accounting information This will ensure that the reports are timely and relevant for these internal users If users wish to use specific accounting conventions interest on capital employed asset valuation and depreciation using current not historical values the management accountants can incorporate these conventions in their reports Also weekly and monthly operating summaries for internal information and performance measurement may not have to abide by financial accounting requirements for example on inventory valuation procedures The management accountants can include nonfinancial operating information in the reports they prepare for employees and managers and they can become familiar with how to access information from all the organizations information systems and databases not just the general ledger Also some of the information might be judgmental subjective and based on rough estimates This information might be accurate enough for certain internal uses but not reliable enough for external reporting and external auditing requirementsThe disadvantage of separate accounting departments is that the information prepared for internal use may not be immediately compatible with external reporting requirements Therefore an additional and perhaps costly and timeconsuming reconciliation process may be required to translate from statements prepared for internal use into statements suitable for external reporting Also by having separate departments more total accounting and finance personnel may be required since unused capacity in one department or function cannot be easily or quickly mobilized to perform duties for the other department
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