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- Volume 8, Issue 1, 2000
Meditari : Research Journal of the School of Accounting Sciences - Volume 8, Issue 1, 2000
Volume 8, Issue 1, 2000
Author C.J. BeukesSource: Meditari : Research Journal of the School of Accounting Sciences 8, pp 1 –14 (2000)More Less
Stakeholders are entitled to be properly informed about their interests in an enterprise, not only in terms of the cost of assets such as land and labour, but also in terms of the value of these assets. The value of land could be influenced by environmental pollution, damages and rehabilitation activities, which should be accounted for in financial and non-financial terms. In contrast to the tendency to calculate and include only the cost of labour, the value of labour should also be determined to include aspects such as knowledge, skills, organising proficiency and customer relations.
Source: Meditari : Research Journal of the School of Accounting Sciences 8, pp 15 –23 (2000)More Less
The content of the annual reports of listed South African mining companies from 1994 to 1999 was analysed to determine how many disclose certain environmental information. This number, expressed as a percentage, was compared with the corresponding percentage disclosure among the Financial Mail Top 100 industrial companies for the same years. A greater number of mining companies, when compared to other large companies, disclose environmental information. This finding is consistent with legitimacy, which is the notion that an organisation will not continue to prosper if its aims and methods are in conflict with that of society. Mining companies have a greater need to legitimise their operations by means of environmental disclosure, because their environmental impact is extensive and obvious.
Source: Meditari : Research Journal of the School of Accounting Sciences 8, pp 25 –45 (2000)More Less
Thinking and research in respect of accounting and finance over the past three decades have been dominated by a methodology that is primarily based on the predictability of accounting data and its relationship to certain phenomena. The magnitude of change in business makes the future unpredictable. Analysts and managers are confronting an entirely new business environment in which traditional approaches are no longer valid. A systems approach provides a new way of looking at financial analysis. The purpose of this study is to focus on the present, on the ability to cope and the capacity to change in a changing environment. The ability to create an own future is being seen as more important than the art of predicting the future. This paper describes an empirically tested dynamic balance model to establish whether entities are able to adapt, survive and prosper.
Author D. GovenderSource: Meditari : Research Journal of the School of Accounting Sciences 8, pp 47 –67 (2000)More Less
The purpose of this paper is to report on the incidence of the choice between full-cost and variable-cost pricing, and to examine the factors that could possibly influence this choice. The findings indicate that whereas 74, 5% of the firms use full cost for pricing their products, only 25, 5% use variable costs. The research provides evidence that supports the size of the company, product type, stage in product lifecycle, materiality of fixed overhead costs and the objectives of the company as significant variables influencing the choice of the cost base for product pricing.
Red flagging as an indicator of financial statement fraud : the perspective of investors and lendersSource: Meditari : Research Journal of the School of Accounting Sciences 8, pp 69 –93 (2000)More Less
There is increasing international concern about the escalation of fraud and, in particular, financial statement fraud. Detecting financial statement fraud and proving such fraud remains an elusive goal. Red flagging is an early warning system that has been used by auditors to determine the probability of financial statement fraud.
The purpose of this research project was to survey investors and lenders in South Africa on their use of red flags and to obtain their opinions on the relative importance of individual red flags. A questionnaire was sent to banks that are registered with the Registrar of Banks (representative of lenders) and to portfolio managers registered with the Financial Services Board (representative of investors).
The research findings indicate that lenders and investors in South Africa appear to be aware of the benefits of red flagging as an early warning system. A structured approach (questionnaires / checklists) in using them is to be lacking at present. Respondents rated all red flags in the questionnaire as being important. No distinction was discernable among the different categories that were based on the nature of red flags.
Source: Meditari : Research Journal of the School of Accounting Sciences 8, pp 95 –110 (2000)More Less
The amendement of the carriculum for the so-called four-year LLB degree that has been presented at universities since 1998 put great pressure on faculties of law at that time, because they had to reflect on the curriculum for the degree over a relatively short period. Legal Accounting was one of the courses that were probably included by most universities as optional subjects in the curriculum and no longer as a compulsory subject as the situation used to be for the BProc degree. However, the admission examination for attorneys still includes an examination paper on Legal Accounting. Therefore an increasing number of students have to sit for this examination without having attended a course in Legal Accounting. In the light of this situation, two research projects were undertaken in 1997 to determine the views of attorneys and prospective attorneys on accounting training for the two groups. As three years have passed and persons with the four-year LLB degree are entering the legal profession, it was decided to repeat the project to determine whether the views of the two groups of respondents had changed since the previous project. In this article, the views of the practising attorneys and prospective attorneys are discussed and compared with the results of the 1997 project.
Source: Meditari : Research Journal of the School of Accounting Sciences 8, pp 111 –125 (2000)More Less
This paper reports on an investigation into the possibility of implementing activity-based costing and activity-based management in the Fuel Purchases Department of Eskom. This Department purchases coal from various mines on behalf of ten power stations. The problem is that power stations are charged by the Fuel Purchases Department in accordance with the quantity of coal that is purchased on their behalf and in not accordance with the quantity of work done. Activity-based costing resolves this problem by using seven cost pools and seven cost drivers to allocate the cost of the Fuel Purchases Department to the power stations. This leads to a more accurate cost allocation and cross-subsidising between power stations is also eliminated. Activity-based costing also provides information on activities in the Department. This clears the way for activity-based management.
Author D. ScheepersSource: Meditari : Research Journal of the School of Accounting Sciences 8, pp 127 –143 (2000)More Less
The progressive importance of the small business sector to the facilitation of economic growth that is necessary for the creation of job opportunities in South Africa, cannot be overemphasised. The role which tax reform plays in the encouragement of the small business sector is of the utmost importance in providing an enabling environment. The purpose of this article is to address the less advantageous treatment of, especially, assessed losses in the corporate form as opposed to the non-corporate form. In the course thereof an alternative tax proposal, based on the working of the S Corporation in the United States of America, is put forward, which could improve neutrality between the various enterprise forms. The tax treatment and functioning of the S Corporation is investigated to determine the applicability and practicality of such a treatment of assessed losses and profits for the corporate form in South Africa. Such an application is necessary because of the assumed influence that the treatment of assessed losses have in the choice of an enterprise form. This choice should, however, be based on economic considerations rather than on tax considerations. A neutral tax system should not influence people to choose one course of action above another mainly or solely because their position is more favourable under one of the options.
Obstacles in establishing and operating a public sector internal auditing function in a developing country : the South African experienceAuthor D.B. Van der SchyfSource: Meditari : Research Journal of the School of Accounting Sciences 8, pp 145 –181 (2000)More Less
The point of exit in this research is that there should be an internal audit department in a national government department in South Africa to render a top-class internal auditing service that is cost-effective and affordable, preferred by clients, continuously complies with the standards of professional practice of internal auditing and best practice and have a positive impact on the national government department's bottom line. The empirical research has highlighted several factors, including the ignorance of key role players and lack of professional proficiency on the part of internal auditors, as factors that impede the establishment and operation of an internal auditing function in the public sector in South Africa. It is recommended, that audit committees in the public sector should launch a joint marketing action, directed at key role players, to promote the potential value of a top-class internal auditing service in the public sector, as well as the factors that impede it.
Author T.W.G. Van de VenterSource: Meditari : Research Journal of the School of Accounting Sciences 8, pp 183 –197 (2000)More Less
As financial asset portfolios have become more complex, it has become more difficult for the management of financial institutions to obtain a useful, yet practical measure of market risk. Since modern portfolios contain more derivative instruments, simple linear measures such as standard deviation and duration are inappropriate. Due to this need a market risk measurement technique called Value-at-Risk (VaR) was developed. VaR can be defined as the predicted maximum potential adverse loss of a single financial asset, or portfolio of assets, over a target horizon, within a given confidence interval.
A backtesting procedure was designed to compare realized trading results of a selection of representative bonds with model generated risk measures in order to evaluate the accuracy of the VaR model. The backtesting procedure used in this study involves the comparison between the number of times the VaR model under-predicted the subsequent day's loss, versus the number of times such an under-prediction is expected.
The empirical results from this study illustrates that VaR underestimated risk during periods of high volatility and overestimated VaR during periods of low volatility, thus rendering it useless as a measure of extreme market movement. The purpose of this study is not to test the validity of VaR, but to illustrate the shortcoming of VaR, in that it measures only market risk. Practitioners should always bear in mind that VaR is a market risk measurement technique and does not warn of extreme market movements.
Empiriese bevindings aangaande die nakoming van korporatiewe beheerriglyne in jaarverslae van sekere genoteerde Suid-Afrikaanse maatskappyeSource: Meditari : Research Journal of the School of Accounting Sciences 8, pp 199 –214 (2000)More Less
The implementation of the principles of corporate governance by South African companies has increased considerably since the release of the King Report in 1994. This report exerted a great influence, especially regarding the disclosure of information on corporate governance in the annual financial statements of companies. Several research projects have been undertaken to determine to what extent companies abide by these principles in their annual financial statements. This article reflects the results of a research project in which the annual financial statements of certain listed South African companies, which were published during 2000, were analysed with regard to the above-mentioned matter. The results of the project are also compared with those of a similar project undertaken in 1999. The matters addressed in this article deal with inter alia directors and directors' remuneration, remuneration committees, audit committees, codes of conduct, adherence to the King Report and employees' involvement.
Organisational problems in respect of the implementation of activity - based costing in South AfricaSource: Meditari : Research Journal of the School of Accounting Sciences 8, pp 215 –227 (2000)More Less
In this study the extent and nature of organisational problems that are encountered in South Africa in respect of the implementation of activitybased costing are examined and compared with difficulties experienced by companies in the British Isles, United States of America and Australia. The investigation comprised a literature survey as well as an empirical study of the companies listed in South Africa.
Contrary to the findings of overseas studies, South African companies experience less difficulty in respect of support from senior management and considere the employee resources allocated to the ABC projects to be adequate and satisfactory. ABC objectives are aligned with organisational goals, culture and company strategy. However, whilst implementers are adequately trained, the insufficient training of users and managers is perceived to be a hindrance to success and in the majority of companies other priorities take precedence to the ABC project.
Author H.P. WolmaransSource: Meditari : Research Journal of the School of Accounting Sciences 8, pp 229 –247 (2000)More Less
A number of portfolio strategies have been proposed, based on the dividend yield of a small number of large companies. It has been suggested that, by following any one of these strategies, a return that is superior to that of the market can be obtained. In this paper, these portfolio strategies are tested for investors on the Johannesburg Stock Exchange. However, not only are strategies based on dividend yield scrutinized, but also comparable strategies based on earnings yield. The average return of various portfolios, selected in accordance with four methods of ranking, are compared. The major finding is that earnings yield is a better ranking method than the dividend yield method.