Quiz 13: Accounting Information Systems and Internal Controls

Business

Balanced Scorecard provides a tool that can describe the contribution of information technology to the strategy of the company. It is a strategic planning or management system that is used by business and industry, government to align business process to vision and strategy of organization. It is a performance measurement framework that allows the managers to measure the performance of the enterprise from multiple perspective such as learning and growth perspective, process perspective, financial perspective and customer perspective that follow from mission, strategy and objective of the enterprise. The objective of using balance scorecard is to achieve shareholder value based on strategy of the enterprise. Learning and growth perspective: Balanced scorecard perspective that describes the objective of the organization and corresponding measure related to improvement in tangible and intangible infrastructure. Such as employee training or system development and link those changes to process perspective. Process perspective: Balanced scorecard perspective that describes the internal process-related objectives of the organization and corresponding measure related to improvement in business process performance. Customer perspective: Balanced scorecard perspective that describes the customer related objective of the organization and corresponding measure related to improvement in customer base. Such as retention and acquisition of customer depend upon price of product, quality of the product, relationship with the customers and brand image. Financial perspective: Balanced scorecard perspective that describes the financial objective of the organization and corresponding measure of financial performance. Such as, firm productivity and long term growth, both of which drive shareholders value. As per given case, company W competes on price whereas company S competes on other factors such as price, quality, brand image and customer relationship. Their balanced scorecard objective and corresponding measure would differ across four perspectives as follows. As per learning and growth perspective company W may have objective to improve the product which result in price advantage whereas company S may have objective to improve tangible and intangible infrastructure which help in competing with the other factors. For example, employees training or system development. As per process perspective, company W may have objective to conduct business process effectively to compete with the price whereas company S have objective to operate business process effectively while delivering product and service to customers to compete with the other factors.. As per customer perspective, company W may have objective to induce customer to compete with the price whereas company S have objective of customer satisfaction, quality of product, customer relation to compete with the other factors. For example, price of product to be charged, quality of product, to maintain customer relationship and improve brand image. As per financial perspective, company W may have objective to increase the shareholders value to compete with price whereas company S have objective to increase shareholders value, growth in return on asset, growth in earning per share and sale growth.

Perspective of Balanced Scorecard The balance scorecard provides the system related to the management of all the aspect of company's performance. The balancing of all the financial aspects with non-financial aspects also provides the required specification which helps the employees for the accomplishment of the strategy, mission and vision of the company. The learning and growth perspectives are helpful in achieving the firm's objective mainly in terms of improvement in the tangible and intangible infrastructure. Thus, it comes under the perspective of balanced scorecard. Hence, option a is incorrect. The customer perspective describes about the customer related objectives and corresponding customer dealings by the company. Thus, it comes under the perspective of balanced scorecard. Hence, option b is also incorrect. The business perspective describes about the business potential for achieving the mission with values of the company. Thus, it comes under the perspective of balanced scorecard. Hence, option c is also incorrect. Hence, option d is also incorrect. The option e indicates that all the options (business process, learning and growth, financial, customer) are correct because the balanced scorecard manages all the perspectives mentioned above. Thus, the option img is correct.

Balance scorecard is a performance measurement framework that allows the managers to measure the performance of the enterprise from multiple perspective such as learning and growth perspective, process perspective, financial perspective and customer perspective that follow from mission, strategy and objective of the enterprise. There are four perspectives in the balance scorecard that companies consider and make their objectives on the basis of such perspectives. These perspectives include learning and growth objective, process perspective, customers perspective and financial perspective. There are performance indicators that is measured to evaluate how an objective of different perspectives contributing to achieve the strategic objectives of the organization. Performance indicator for different perspectives in a balanced scorecard is as follow: (a) For learning and growth objective, the performance indicator is to assess the knowledge, skills and value of the employees, employee change readiness and strategic awareness survey . (b) For process perspective, the performance indicator is to assess the process cost, quality, timeliness and outputs. (c) For customers perspective, the performance indicator is to assess the market share of the organization, new customers acquisition rate, satisfaction level of customers. (d) For financial perspective, the performance indicator is to assess the return on asset, equity, sales, earning per share growth rate, sale growth rate and market value added. As measuring too many performance indicators can lead to information overload. Because, it does not provide a unified and clear view with clear recommendation, also it fails to reflect the needs of stakeholders.