Computer accounting is an important part of any business, and the fact that a company accountant generally holds a senior position is indicative of just how important a part it is. However, much of the accountant's traditional work is now being looked after by computers, and an ever-increasing array of programs and applications that automate a business's financial procedures. If you are seeking a computer accounting system for your business you have two basic systems to choose from: a module based system and an comprehensive accountancy system. It's important that you consider each of these if you are seeking an accountancy solution, so that you are able to make the correct considered decision based upon which is the more appropriate for you. Comprehensive accounting systems are currently being offered, and integrated accountancy systems are available for accounts payable and accounts receivable in the event that these suit your needs; practically any Enterprise Resource Planning (ERP) application with integrated accounting will include these features, although an exception to this would be a cash-based business. You can purchase integrated accounting software in a fully comprehensive package, or in modules that you can plug together to design the system that you need. Here is a comparison of both types of accountancy system. Comprehensive Accounting Systems Positives: 1. A single accounting software system is easier and quicker to install. You have the whole package delivered at once rather than adding modules at various times as required. 2. A number of comprehensive computer accountancy packages are created specifically for small to medium businesses that yours is liable to be. The vast majority of UK and even world businesses are in the small to medium range, with emphasis on the small. Such comprehensive integrated software packages offer a greater depth of functionality than an individual module, frequently with alternative versions to offer a broad range of accountancy functions to meet the needs of a variety of business types. Negatives 1. The major problem of a complete comprehensive accountancy package is that it is not designed only for a small or medium sized business. Thus, some of the accountancy options will not be required and some of the functions offered will never be used. This suggests that you are not making the best use of the money you spend on such a package. It will also take longer to load than necessary since you are loading functions you will never use, and they will also take up more of your valuable memory than necessary. If you opt for an comprehensive package, you will have to accept that you will not be using all that you pay for. 2. A separate software license will be needed for each of the users in your organization, so if you have two computers needing to use the system, such as one for accounts receivable, and another for accounts payable, you will have to pay for a license for each. Module Based Systems There are several module-based accountancy software packages on the market today, and they are ideal for the smaller business. Whether or not they are best for a medium sized business depends upon the size of the business Positives 1. In a module based computer accounting system you purchase only the applications or functions that you need, and the relative cost between this and that above will depend upon how many modules you need to effectively run your business. Do need only one or do you need them all? The situation for you will likely lie between the two, and exactly where that balance is will determine whether you are more economical with this or with just going for the comprehensive accounting system from the start. 2. Data can be transferred from one module to another, since the modules are designed to integrate with each other. If you add a module later to expand your functionality as your business grows, make sure that they are compatible. Negatives 1. You could end up paying more in the long run than if you opted for an comprehensive system from the outset. If you are successful, your business will eventually need so many modules that you will eventually spend more. 2. You will not be able to mix data accounting systems. Your next module will have to be from the same system as your first, at least with respect to file formats. Therefore, prior to purchasing a module, make sure that the other modules in the system are compatible with each other. Also make sure that available modules will meet your future needs, or you may end up scrapping your accountancy software and starting again with a comprehensive system. There is more to purchasing a computer accounting package than simply choosing one type of system or another. It is important to determine if a comprehensive accounting package suits your needs better than a module accounting system, particularly when you take your future expansion into consideration.

Name Of The Article: An Overview Of Indian Tea Industry With Special Reference To Its Cost Accounting System, Limitations And Suggestions For Betterment. Author: Mr. AVIK RANJAN ROY RESEARCH SCHOLAR,Persuing Mphil UNIVERSITY OF BURDWAN Address:-Aparajita Apartment (opp. Laxmi Oil Mill) Flat No. 6(3rd Floor) 63A/1,Basudevpur Road,Post Office:Sarsuna,Area:Behala.Kol:61. Tel No. (033)-24065139,Mobile/Cell Number:-9903294709/9836285322. Guiding Prof:Dr. Debasish Sur,Prof. Of Commerce,University Of Burdwan,Golapbagh,Burdwan:713104,West Bengal. Objective behind writing this Article: From a humble start ,India is now the largest producer,exporter and consumer of tea. Indeed tea is perhaps the only commodity in respect of which India leads in productivity and technical innovation – while maintaining a high level of quality. The spectacular growth over the years – inspite of long periods of unsatisfactory price levels-has been due to the rapidly increasing productivity ,and, to a lesser extent ,the increasing area under tea.The production increased from 354 million kgs in 1961 to 655 million kgs during 1984- an impressive growth of 85%. During this period the area under tea had increased from 331,229 hectares to about 378,000-an increase of 14%. The increase in production was, therefore,due significantly to the improvement of yield per hectare of 62% -from 1070 kg/hectare, in 1960 to 1732 kg/hectare,in 1984. Tea is one of India,s oldest organisaed industries ,with gardens located in remote and largely backward areas of the country. The industry provides employment directly to nearly a million people and indirectly to a large number in ancillary and service industries. Production of tea as a single item accounts for almost 1% of the G.N.P. of the country,exports of tea accounts for almost 7% of the country,s total foreign exchange earnings. In 1980 the tea industry exports earned an estimated Rs.745/- crores. On the other hand ,imports are practically non-existent.Tea contributed very substantially to the central and state exchequers. The distinctive features of the tea industry underscores the requirement of an appropriate management accounting system ,which would almost certainly differ from the text-book type systems. In this study ,the following area would be studied . A suggested cost accounting system and associated issues,an overview of management accounting,historical background relating to the tea industry. The study is both descriptive as well as prescrictive. That is, existing systems relating to the above ares are studied ,shortcomings and advantages noted,and then improved systems recommended.It may be mentioned that a comparison of the proposed areas of study with the definition of management later will indicate That only a sample of management accounting issues is studied here. This is due to constraints of data and time. In this respect the present study can be considered as a starting point for further studies in future. The present study aims to cover some Management Accounting ares of the tea industry with special reference to professionally managed tea companies. By professionally managed companies it is meant ,those companies which are managed by executives with adequate qualifications and experience necessary to discharge their duties effectively. In addition,the day to day management of such companies would be expected to be much less influenced by the shareholders/owners in comparison to,for example ,a family managed company. As a result the ,the study will mainly deal with companies which are homogenous with respect to management style and environment. An Introduction To The Tea Industry: 1)Historical Background: In 1776,Sir Joseph Banks ,the great English Botanist,was asked to prepare a series of notes on cultivation of new crops in India for the East India Company. Among them Sir Joseph recommended the cultivation of tea in India. A few decades later came the momentous event of the discovery of tea shrubs in Assam. Although by no means unanimous,most authorities are inclinded to give the honour of discovery to C.A. Bruce. In February,1834,Lord Bentick established a Tea committee to explore the possibilities of the cultivation of tea. In December that year,.the committee reported that the tea shrub was beyond all doubt indigenousin upper Assam and said that it had no hesitation in saying “this discovery ,to be by far the most important and valuable that has ever been made on matters connected with the agricultural or commercial resources of this empire. To facilitate the production and manufacture of tea ,the Bengal Tea Association was set up in early 1839. Within a few weeks Assam Tea Company also came into existence. But soon the two bodies were amalgamated as the Assam Company Limited-the earliest limited company in tea Industry. It is interesting to note that Assam company started as a rupee company,and it was not until 1865,that it was incorporated in the United Kingdom. In 1840,the area under tea was 1068 hectares and production was 4627 Kgs. Shortly the cultivation of tea began to spread fro the Brhamputra valley in Assam to other parts of India. Tea was introduced in Darjeeliing district in 1850. Tea cultivation began in Cachar in 1856 and in Dooars the first garden was opened in 1862. Around this time the tea industry in South India made its beginning. Tea is grown in Assam, West Bengal,Tamil Nadu ,Kerala,Karnataka,Tripura,Himachal Pradesh Uttar Pradesh and Bihar. However production in substantial quantities is limited to the first five states. There are important differences between tea grown in north India and those grown in south India. In north India ,production is seasonal –there being no production in winter and usually only one type of crop(tea) is grown. In south India production usually takes place throughout the year. Estates usually have a diversified output which includes tea,coffee,cardamom,rubber.Another distinguishing point is that estates tend to be much smaller. Though only 25% of the tea output is produced in south India,it has most of the estates. As a result,many estates are too small to support a factory and have to depend on “ bought leaf” factories(which are peculiar to south India) to process their grown leaf output. A Description Of Tea Industry: The industry combines both agriculture and industry.This aspect sets it apart from the traditional concept of industry or agriculture. Unlike tea industry,most agro-industries like sugar,jute,tobacco,confine themselves,to the manufacturing operations,leaving the growing of the basic agricultural input to farmers. The vertical integration in the industry however stops short as production. Most producing companies do not think beyond sending their tea to the auction centres. This trend has been encouraged by the Rural Employment Cess In West Bengal which penalizes private sales beyond 30%. Thus the function of reaching the ultimate consumer is performed by the tea trade (as distinct from the tea industry). This lack of market orientation is largely responsible for tea being a commodity rather than a product. The large variety of tea produced does not lead itself easily to the formation for a futures market. Some experts consider this to be the main reason behind the relative lack of grow of tea as an international commodity. Tea is the highed taxed industry in India. The average rate of taxation is nearly 70% as compared to the standard corporate tax rate of 57%. This high tax rate is because only 40% of the tea company,s profit attract corporate income tax,the rest is taxed as agricultural income and the applicable tax rate is as high as 75%. Agricultural income tax ,unlike corporate income tax is leived by the state government. Besides,the industry suffers from various other levies such as excise duties and cess,entry tax,sales tax,land revenue etc.Tea is the only low technology industry which was allowed by Foreign Exchange Regulation Act,1969,(FERA) to hold upto 74% non-residential shareholding without any export oblibations. The only stipulation (other than 26 % dilution ) was to “Indianise” – I.e, gradually induct Indians to manage the company. Another distinctive feature is the high level of uncertainty that the industry faces. While the level of uncertainty with rrespect to iits agricultural operations – with its greater dependence on the environment- is predictably high, the efficiency of its manufacturing operations is also infgluenced by the weather. The price of made tea is volatile and difficult to predict. Tea prices depends on many factors including international supply and demand. Some Important Features: It is interesting to note that yield of made tttea per hectare(YPH) is responsible to location,size and ownership.It is interesting to note that the ownership/control of a large number of estates has changed over the years. The independence of India led to disinvestment in India by a few British ttea garden owing interest. The abolition of managing agency and the enactment of FERA (Foreign Exchange Regulation Act,1969)led to the significant regrouping of tea companies. Around 1977,there was tea price boom ,there was considerable international interest in tea. Gordon Fox ,a British based business magnate,through a series of intricate intercorporate holdings, managed to gain control of around 10% of the world tea output , including as large number of ttea estates in India. Organisation Structure: A tea estate consists of a garden(plantation of tea bushes) and usually a factory and other necessary facilities. Figure below depicts the organisation chart of a typically multi-estate tea company. A COST ACCOUNTING SYSTEM FOR THE TEA INDUSTRY: Scope Of Cost Accounting: A cost accounting system may be defined as a systematic method of accumulation of costs with respect to cost objectives.( See Horngren). The principal cost objective of most companies is the output /product of the company. In other words, cost data is accumulated in a manner such that the parameter,”cost per unit of production” is meaningfully computed. This product costing approach is essential for inventory valuation and income determination. The parameter,”cost per unit of production”,which is an output of the system,is useful information for control. Though it must be mentioned that unit costs alone may be misleading as they are dependant on the activity level attained which obscure the cost behaviour pattern. An Analysis Of Current Data: The Tea-industry in north-east India do not have any manufacturing activity for about twq months,usually covering January and February. As if to compensate in the three-month period,December to February substantial expenses on account of field expenses (as well as other agricultural operations) termed as “cold weather works”,are however incurred. In the other months-,i.e, during the manufacturing season,there is hardly any correlation between agricultural activity and output. It is undeniable that agricultural activity significantly determines ooutput.However it is extremely difficult to co-relate accurately the current year,s agricultural activity with the current year,s crop. As the fertilizer response function ,or the exact benefit from irrigation ,pruning cycle also ,etc,is not known precisely,it is difficult to classify these costs in terms of cost behaviour. This is especially true when considering time periods of less than a year(i.e, in the short term). These conditions are not unexpected in agricultural operations ,where the environment plays a key role, and where the complex interactions of causal variables is difficult to assess. Thus there is a measure of swubjectivity in planning of these expenses. These can be justifiably be considered as managed(or discretionary) costs as opposed to “engineered” costs. From a management accounting perspective,it seems reasonable to assume that such operations benefit the entire year,s output (or even later periods) rather than the output of the period when such expenses were incurred. Thus field expenses and other agricultural expenses,and by the same logic,administrative expenses incurred in the non-manufacturing period ,must be matched with the years ooutput in a rational manner. The tea estate accounts(Table 1) suggest s that emphasis is ot on product costing. It is to be mentioned that no separate cost accounts are maintained and one has to refer to the monthly acconts to get an indication of the cost of production. Unfortunately,due to cahs basis of accounting ,being in vogue,and lack of an attemmmpt to match agricultural and administrative expenses with output,it is not possible to esmiate the product cost from the monthly accounts accurately. In view of the special circumstances discussed above “cost of production” should be defined as manufacturing expenses plus a fair share of agricultural and administrative expenses for the output produced. It should be clarified that though all accounting systems enable the calculation of the ocst fo production for the annual production (as ,over a ,full year,the problem of matching does not arise),unless output and expenses are properly matched,calculation of cost of production for interim periods is not possible. Thus the Table 1 gives production costs incurred during the month rather than the cost of production. Another deature that characterises the accounting system of many tea companies ,is the use of cash basis of accounting . For example in Table 1 manufacturiing expenses are reported for January & February –where there is no manufacturing. Though the amount involved in this case is comparatively small –they do lead to distortion of results by reducing manufacturing expenses in the manufacturing season. Table 2 indicates that in terms of “cost incurred per kg”(based on thew monthly accounts)there are wide differences. One can justify hypothesis that there are significant differences in monthly cost of production as compared to the annual average cost of production. There is much less variation in “cumulative cost incurred” per Kg,see table 3. Like the parameter “cost incurred per Kg” it is useful in monitoring production costs incurred rather than the cost of production. “Cumul;ative cost per Kg” approximates the annual average cost of production (production cost incurred during the year+output cost incurred during the year) only near the year-end.(See Table : 3). NEED FOR A COST ACCOUNTING SYSTEM: Before embarking on a detailed exposition of a suggested cost accounting system,it would be useful to briefly enumerate the possible benefits and costs of such a system. Inventory valuation(of made tea )is not done on a satisfactory basis. Where cost is the method of valuation it implies “average annual cost” A proper method of product costing will ensure that stock of made tea is valued on the basis of cost of production during the period of its manufacture(which may be significantly different from annual average cost). At present the interim profit and loss accounts and balance sheets based on monthly accounts are also likely to be unsatisfactory because of the problems referred to earlier. A product costing approach is essential for interim financial statements to be meaningful. Used catiously,the parameter “cost per Kg”-calculated in a rational manner –would be useful for planning and control. At present what is termed as “cost per Kg” is misleading. The Basic Approach: The basic costing method would be in the nature of operation costing (as opposed to specific order costing). Operation costing is defined as “that category of basic costing method where standardised goods or services result from a sequence of repetitive and more or less continuous operations or processes to which costs are charged before being averaged over the units produced during the period.(Institute Of Cost & Management Accounting). Even though the output of the industry is not standardised ,and the production pattern is seasonal ,the basic concepts of operation costing are still appropriate. Controversy regarding the relative merits of absorption costing and marginal costing still lingere(See Horngren). As regards the tea industry the following points emerge:- A marginal costing system would be difficult to construct as the cost behaviour pattern is difficult to assess-particularly with respect to agricultural expenses. The popularly held rule of thumb of 60%fixed cost and 40% variable cost has no scientific basis.However , as widely accepted ,a marginal costing approach is vital to effective decision-making. On the other hand ,absorption costing can lead to wrong decisions unless carefully used. And the treatment of agricultural expenses as “indirect”(see below) is inevitable under such a system. Further there can be no “true” method of absorption such expenses. The main advantages of absorption costing ,besides inventory valuation ,are as follows:- a)The difficult problem of estimating cost behaviour pattern is avoided. b)The parameter “cost per Kg” is something which the modern day planter is familiar with ,and would avoid the initial confusion if marginal costing was introduced –even if this was possible. One feels that it is an absorption costing system which would be the only practical proposition. System Details: The view taken here is that only the following broad items of expenses can be treated as “direct”. 1)Plucking Cost 2)Transport of green leaf. 3)Manufacturing: Withering Rolliing/CTC Fermenting Drying. 4)Sorting 5)Packing 8)Other Expenses(which can be considered as “Direct”). Such costs(which constitute manufacturing expenses –excluding excise and cess ,and a part of transport expenses ,as per the classification of a tea company)can be unquestionably matched with output (of made tea)-in the long term as well as in the short term.Therefore such costs may be termed as “direct” costs. Agricultural expenses are extremely vital and constitute a large portion of total expenses(See Table:1).However,it would be extremely difficult to match such expenses with output made of tea –especially in the short term. Indeed some expenses may benefit the plantation for periods exceeding one year. Thus from practical consideration such expenses be classified as “indirect” expenses in terms of cost accumulation. Administrative and general expenses(which constitute the remaining revenue expenditure account hreads other than immature cultivation) can obviously be treated as “indirect”. It is assumed here that all costs,whether direst or indirect,are product costs and therefore inventories. However,there may be some doubt regarding executive salaries,salaries and benefits of general staff,repairs and maintenance of general items,such as residential buildings,etc. Theoritically, such expenses can be justifiabialy be considered as periods expenses(rather than product expenses). However,for the ensuing discussion,such costs are also considered as product costs. An essential prerequisite of a proper costing systemis that cost should be based on all revenue expenditure items and should exclude capital expenditure. The problem of capitalisation policy in the tea industry is an important issue. For the purpose of our discussion ,cost of production will exclude expenditure on young tea.This is done for two reasons:- i)These expenses may be considered fully or partially capital. ii) The inclusion of these expenses would tend to distort cost data-in the same sense that an estate with more new plantations would tend to have a higher cost of production of made tea. Finally, the question of absorption of indirect expenses. The procedure adopted here would be to absorb those expenses on the basis of output of made tea. There are two methods by which this can be done. First,by using “budgeted absorption rates”. In this method,absorption rates would be calculated as (budgeted total indirect cost)+(budgeted annual output of made tea) and applied irrespective of whether actual output of made tea and costs are different from budget. Secondly,by using revised absorption rates”. Here the absorption rates would be calculated as,”actual indirect costs till date +amount expected to be incurred till date+balance output of made tea expected till the end of the year).Both methods would employ different absorption rates for each group of indirect costs. The second method would enable a more realistic assessment of cost of production of made tea. It may however be necessary to revise the indirect cost absorbed in previous periods. In such cases,the net changes can be treated as forecasting errors. The second method has clearly advantages,epecially since the calculation of the revised absorption rates can be dovetailed with the management control process. Management control at the estate level would imply monitoring direct costs on a current basis and indirect costs and output of made tea on a “cumulative till date plus expected till end of the year” basis. The suggested cost accounting system may be depicted by the figure 4; TABLE :1 EXPENSES JULY AUGTUST SEPT. OCTOBER NOVEMBER DECEMBER FIELD EXPENSES (MATURE TEA) 61107.57 20129.42 4895.70 1640.73 39551.17 21257.71 MANUFACTURING EXPENSES 189163.49 207479.71 305824.87 205005.71 441224.75 212871.21 NURSERIES & SEED BARRIES 8332.02 12609.05 4458.68 5678.39 15128.03 7837.47 STAFF SALARIES 57825.58 78505.94 440616.47 68682.98 76575.38 87524.41 STAFF & LABOUR WELFARE 45110.02 37067.02 45677..92 28226.14 31760.48 34596.21 MEDICAL SERVICES 15429.72 13251.51 20253..36 11405.72 13502.24 13001.87 TRANSPORT 7032.28 8489.81 13156.71 8403.38 7068.50 5979.79 OTHER EXPENSES 9587.25 111835.71 9080.51 5926.30 19038.80 30285.84 REPAIRS & MAINTENANCE 14632.53 15741.17 14031..09 16427.42 28350.24 24973.64 TOTAL EXPENSES(MATURE TEA) 408220.46 405109.52 857995.31 351396.78 672199.59 438828.15 YOUNG TEA(R & R) 9874.67 15229.29 20554.34 9747.51 8220.50 5123.14 UPKEEP OF YOUNG TEA 8089.63 21041.15 4504.50 7878.41 6284.22 6033.27 TOTAL REVENNUE EXPENSES OUTPUT 426184.76 57651 441379.96 77803 883074.29 80410 369022.70 83903 686704.31 47853 449484.56 16034 TABLE :2 EXPENSES JULY AUGTUST SEPT. OCTOBER NOVEMBER DECEMBER FIELD EXPENSES (MATURE TEA) 1.06 .26 .06 .02 .83 1.33 MANUFACTURING EXPENSES 3.28 2.67 3.80 2.44 9.22 13.28 NURSERIES & SEED BARRIES .14 .16 .06 .07 .32 .49 STAFF SALARIES 1.00 1.01 5.48 .82 1.60 5.46 STAFF & LABOUR WELFARE .78 .48 .57 .34 .66 2.16 MEDICAL SERVICES .27 .17 .25 .14 .28 .81 TRANSPORT .12 .11 .16 .10 .15 .37 OTHER EXPENSES .17 .15 .11 .07 .40 1.89 REPAIRS & MAINTENANCE .25 .20 .17 .20 .59 1.56 TOTAL EXPENSES(MATURE TEA) 7.08 5.21 10.67 4.19 14.05 27.34 YOUNG TEA(R & R) .17 .20 .26 .12 .17 .32 UPKEEP OF YOUNG TEA .14 .27 .06 .09 .13 .38 TOTAL REVENNUE EXPENSES(Per Kg Of Made Tea). 7.39 5.67 10.98 4.40 14.35 27.97 Note: Monthly cost per kg is calculated as “cost incurred during the month+output of made tea during the month”. Table 3: Cumulative cost Incurred Per Kg(Rs./Kg). EXPENSES JULY AUGTUST SEPT. OCTOBER NOVEMBER DECEMBER FIELD EXPENSES (MATURE TEA) 1.06 .60 .40 .29 .37 .41 MANUFACTURING EXPENSES 3.28 2.93 3.25 3.03 3.88 4.29 NURSERIES & SEED BARRIES .14 .15 .12 .10 .13 .15 STAFF SALARIES 1.00 1.01 2.67 2.15 2.08 2.23 STAFF & LABOUR WELFARE .78 .61 .59 .52 .54 .61 MEDICAL SERVICES .27 .21 .23 .20 .21 .24 TRANSPORT .12 .11 .13 .12 .13 .14 OTHER EXPENSES .17 .16 .14 .12 .16 .24 REPAIRS & MAINTENANCE .25 .22 .21 .20 .26 .31 TOTAL EXPENSES(MATURE TEA) 7.08 6.00 7.74 6.75 7.75 8.62 YOUNG TEA(R & R) .17 .19 .21 .18 .18 .19 UPKEEP OF YOUNG TEA .14 .22 .16 .14 .14 .15 Note: Cumulative cost per Kg is calculated as “cumulative cost incurred till date+cumulative output of made tea” FIGURE 4: A COST ACCOUNTING SYSTEM DIRECT COST FOR THE MONTH INDIRECT COST ABSORBED DURING THE MONTH Summary or conclusion: At present the accounting system of the companies studied enable the calculation of the cost of production for the annual output of made tea (as ,over a full year,the problem of matching expenses with output of made tea does not araise). Unless output of made tea and expenses are properly matched calculation of cost of production for5 interim periods is not possible. As a result ,the monthly accounts give production costs incurred during the month rather than the cost of production. References: 1) website of Darjeeling: www.darjeeling.org/teaestate 2) Awasthi,R.C. ,Economics of Tea industry with special reference to Assam,United Publishers,Gauhati,1975. 3) Barron, C, “Testing time for Tea”, Management Today,July,1978. 4) Chatterjee ,H., “Standard Marginal Costing in tea plantation”,The Management Aoountant,Vol:16,No.6,June:1981 5) Anthony, R.N, &Reece,Management Accounting: Text And Cases,Taraporovala,Bombay,1976. 6) Horngren C.T. ,Op. cit., p.295 7) ICMA,”Terminology Of Management and Financial & Financial Accountancy),ICMA,London,1974.

Name Of The Article:-Forensic Accounting: A New Paradigm For Niche Consulting. Author: Mr. Avik Ranjan Roy SLET Qualified,(Persuing M.PHIL) UNIVERSITY OF BURDWAN Address:-Aparajita Apartment (opp. Laxmi Oil Mill) Flat No. 6(3rd Floor) 63A/1,Basudevpur Road,Post Office:Sarsuna,Area:Behala.Kol:61. Tel No. (033)-24065139,Mobile/Cell Number:-9903294709/9836285322. Guiding Prof:Dr.UttamKr.Dutta,Prof..Of Commerce,University Of Burdwan,Golapbagh,Burdwan:713104,West Bengal. Name Of The Article:-Forensic Accounting: A New Paradigm For Niche Consulting. Author: Mr. Avik Ranjan Roy SLET Qualified,(Persuing M.PHIL) UNIVERSITY OF BURDWAN Address:-Aparajita Apartment (opp. Laxmi Oil Mill) Flat No. 6(3rd Floor) 63A/1,Basudevpur Road,Post Office:Sarsuna,Area:Behala.Kol:61. Tel No. (033)-24065139,Mobile/Cell Number:-9903294709/9836285322. Guiding Prof:Dr.UttamKr.Dutta,Prof..Of Commerce,University Of Burdwan,Golapbagh,Burdwan:713104,West Bengal. OBJECTIVES OF WRITING THIS ARTICLE:- Forensic accounting has come into limelight due to rapid increase in financial frauds and white-collar crimes.But it is largely untrodden area in India.The integration of accounting,auditing and investigative skills creates the speciality know as Forensic Accounting.The opportunities for the Forensic Accountants are growing fast ;they are being engaged in public practice and are being employed by insurance companies ,banks,police forces,government agencies etc.This article seeks to examine the meaning and nature ,activities and services rendered ,core knowledge and personal skills required for forensic accounting as a specialized field in accountancy profession.Indeed there is a future in forensic accounting as a separate niche consulting. Name Of The Article:Forensic Accounting: A New Paradigm For Niche Consulting. Author: Mr. Avik Ranjan Roy SLET Qualified,(Persuing M.PHIL) UNIVERSITY OF BURDWAN Address:-Aparajita Apartment (opp. Laxmi Oil Mill) Flat No. 6(3rd Floor) 63A/1,Basudevpur Road,Post Office:Sarsuna,Area:Behala.Kol:61. Tel No. (033)-24065139,Mobile/Cell Number:-9903294709/9836285322. Guiding Prof:Dr.UttamKr.Dutta,Prof..Of Commerce,University Of Burdwan,Golapbagh,Burdwan:713104,West Bengal. Forensic Accounting: A New Paradigm For Niche Consulting: Abstract Relating To the Article: The lack of respect and belief in India’s law enforcement agencies and the rate at which white-collar crimes have increased has prompted the development of Forensic Accounting in India. The fraud detecting agencies seems to lack time and devotion needed for detecting and prevention of errors and fraud. According to a large global accounting firm, the market is sufficiently big enough to maintain an unit devoted entirely towards “forensic accounting”. Many large as well as small accounting firms as well as the tiny firms have inculcated or rather developed separate forensic accounting departments. We were of the belief that detection and prevention of frauds or white-collar crimes is part of conventional accounting function. It was thought that the frauds, both internal as well as external has be to detected by the auditors through their periodic audit. Now it is crystal clear that auditors can only check for the compliance of a company’s books to generally accepted accounting principles, auditing standards and company policies. Hence the need was felt to detect the frauds in companies that are suspected to be engaged in fraudulent transactions. This field of accounting is known as “forensic accounting”. The litmus test of investigation,first introduced by the ever great Sherlock-Homes(considered by many as the father of Forensic Accounting)is perhaps the first ever application of forensic accounting . Though ,the contribution of the other few great historians to the field of forensic accounting cannot be overlooked. They used various tricks to investigate various crimes. Forensic accounting is a specialized a area of accounting practice that describes engagements which result from actual or anticipated disputes or litigation. The word “forensic” means “suitable for use in court”. The forensic accountants have to keep in mind this statement while they have to work or chalk out their programme. The forensic accounting work is tailor made according to the situation and need. The gathering of information and evidences is done according to the need and situation. We can say, it is customized according to the situation. The forensic-accountants give expert evidence at the ultimate trial. All the modern medium-sized as well as the large-sized accounting firms have specialized forensic accounting departments. Within these firms there may be specialized forensic accounting departments. Within these groups their may be further sub-specializations. Various sub-specializations include insurance claims , personal injury claims, fraud detection, construction or royalty audits. Nearly 40 percent of the top 100 US accounting firms are expanding their forensic and fraud services, according to Accounting Today. Now if we consider this data as significant then we can say that the total contribution of forensic accounting to the total revenue of the C.A. firms would be highly significant in the years to come. Under rising instances of frauds and litigation and flourishing businesses these services are considered to be very significant as they are rendered at a very competitive price. The forensic accountants utilize the various information relating the business, utilizes financial reporting systems, various accounting and auditing standards and procedures ,investigative techniques and litigation processes and procedure to perform their work. By acting as advisors to audit committees and assisting in investment analyst research, they are playing more “proactive” risk reduction roles .This is possible by designing and performing extended procedures as part of the statutory audit. The objectives of forensic accounting include measurement of losses caused by an auditor due to his negligence ,to look into the matter whether their has been any embezzlement of cash ,the amount, necessity of criminal proceedings ,computation of asset values in a divorced proceeding. The primary approach technique of forensic accounting is explanatory analysis(cause and effect)of the phenomena-including the discovery of deception(if any),and its effects –introduced into an accounting system field. The primary methodology employed by the forensic accountants is the verification of the objective. They are trained to deal with real world business and do have the sufficient expertise to look beyond(behind) the numbers. The scope of the forensic accountants are growing at a rapid pace. The increase in their work opportunities have been accelerated due to the fall of the Enron corporation and the collapse of the American Twin Towers. This has led to increase in the demand for American forensic accountants. So far India is concerned, formation of Serious Fraud Investigation Office(SIFO) is a landmark creation so far as forensic accountants are concerned. Failure of regulators to track security scams, increasing cyber crimes ,chain of cooperative banks bursting –all point to the ever increasing need for forensic accountants. Our understanding of the need for forensic accountants is immaterial here. In India due to the growing number of frauds the need for forensic accountants is ever increasing. The regulatory and administrative agencies will put pressure for greater demand of forensic practices. This has been initiated due to the changing nature of Indian and International accounting .Auditing and assurance standards also confirm this. A change in the curriculum can be initiated if the written exams and practical industrial training are boosted to show the “new knowledge base and skill-set” required By the professional accountants in the new era. It is therefore recommended that the “forensic accounting and auditing” be introduced as a paper in the various professional examinations conducted by the various accounting bodies in India. Unfortunately forensic accounting is largely an unexplored area as far as India is concerned. The chartered Accountants(CAs) deal with such cases in an irregular fashion. In the western counter-part(countries), the Lawyers,police,insurance companies,government and regulatory bodies ,banks,courts and business communities are increasingly utilizing the services of the forensic accountants.The accountants and the auditors must have the skills and expertise to venture into the emerging field of forensic accounting. What Is Forensic Accounting? The growing needs of corporations has changed the definition of forensic accounting. As per Bologna and Indquist ,”the application of financial skills and an investigative mentality to unresolved issues,conducted within the context of rules of evidence.It is a new emerging field that encompasses financial expertise, fraud knowledge,and a sound knowledge and understanding of business reality and the working of the legal sytem.”It means that the forensic accounting should be skilled not only in financial accounting but also internal control systems,the legal matters ,other institutional requirements ,investigative blend of mind and interpersonal skills. According to AICPA: “Forensic accounting is the application of accounting principles, theories, and discipline to facts or hypotheses at issues in a legal dispute and encompasses every branch of accounting knowledge:’ Similarly, forensic accounting is defined by Horty as: “The science that deals with the relation and application of finance, accounting, tax and auditing knowledge to analyze, investigate, inquire, test and examine matters in civil law, criminal law and jurisprudence in an attempt to obtain the truth from which to render an expert opinion.” In simple words, forensic accounting includes the use of accounting, auditing as well as investigative skills to assist in legal matters.It comprises of two major components:litigation services ,that recognizes the role of an accountant as an expert consultant and investigative services,that uses a forensic accountant,s skills and may require possible court-room testimony. Investigation of theft and defalcation of corporate and individual assets are part of legal matters.They use their education as well as experience to discuss the facts,patterns of the theft or misappropriation.Business accounting systems are reviewed by the forensic accountants.They suggest ways and means to solve and improve the internal control and internal accounting system.This is adopted to prevent theft and fraud. Because of their expert knowledge and educational background and experience their(forensic accountants) work is elevated to a new height. Forensic accountants do not contest in cases.They act as fact finding devices,try trt to seek the real truth from the hidden facts.They conduct their work in an unbiased and objective manner.They need legal knowledge,expertise,training and experience to perform their work in an effective and real manner.Extensive knowledge in the field of commerce,legal,accounting as well an investigative blend of mind is needed to perform the work in a proper fashion .Expertise in litigation support and testimony in courts of law are also prerequisites of the forensic accountants.This is due to the fact that their work would many times be used in a court of law.The valuation of damages due to criminal and civil wrong-doings need to be done with perfection and for that reason knowledge of business valuation theory is the most essential. What exactly do the Forensic Accountants perform? Answer:They are trained to deal with real life business situations and are trained to look beyond the numbers. Analysis, interpretation and summarization of complex financial and business related issues are prominent characteristics of this accounting/auditing profession. Familiarity with legal concepts and procedures is a must.Insurance companies,public practice,banks,police forces and government agencies are major employers of forensic accountants. The various field of work encompassing the arena of a forensic accountant can be stated in points format as follows: 1)Financial evidence investigation and analysis. 2)Development of computerized software to help in the analysis and presentation of financial evidence. 3)Sharing their findings in the form of reports, slide shows or exhibits and documents collected. 4)To support trial evidence they prepare visual slides, assist in legal proceedings ,including testifying in courts as an expert witness . If we want to say or rather point out the role performed by the forensic accountants in a nutshell, we can say as follows: Measurement or to quantify the impact of lost earnings. Such as construction delays, stolen trade secrets, insurance disputes, damage/loss estimates, malpractice claims, employee theft, loss of profit, financial solvency reports, disturbance damages, loss of goodwill, compensation losses suffered in expropriation determination, assessment of the potential business compensation costs and providing consultation on business defalcation minimization. Lease default damages,breach of contract,business interruptions,breaches of shareholders and partnership agreements ,reconstruction of accounting records, Investigation of misappropriation,assistance in establishing ownership and division of assets,commercial damages,professional negligence cases ,partnership disputes,expert evidence,fair value or fair market value and personal injury damages are included in commercial damages. Tax advocacy, compliance and review of financial statements, tax reporting and tax planning in such areas as income as estate matters are included in tax matters. Analysis, interpretation, summarization, presentation of complex financial and issues relating to the business for investigation is the role of a forensic accountant. They carry out investigative accounting and provide litigation support. The services rendered by the forensic accountants are in great demand in the following areas: 1) Fraud detection where employees commit Fraud: Where the employee indulges in fraudulent activities: Where the employees are caught to have committed fraud the forensic accountant tries to locate any assets created by them out of the funds defalcated, then try interrogate them and try to find out the hidden truth. 2)Criminal Investigation: Matters relating to financial implications the services of the forensic accountants are availed of. The report of the accountants are considered in preparing and presentation as evidence. 3) Outgoing Partner’s settlement: If the outgoing partner is not happy about his settlement he can employ a forensic accountant who will correctly assess his dues(assets) as well as his liabilities correctly. 4)Cases relating to professional negligence: Professional negligence cases are taken up by the forensic accountants. Non-conformation to Generally Accepted Accounting Standards(GAAS) or non compliance to auditing practices or ethical codes of any profession they are needed to measure the loss due to such professional negligence or shortage in services. 5) Arbitration service: Forensic accountants render arbitration and mediation services for the business community, since they undergo special training in the area of alternative dispute resolution. 6) Facilitating settlement regarding motor vehicle accident: As the forensic accountant is well acquainted with intricacies of laws relating to motor vehicles, and other relevant laws in force, his services become indispensable in measuring economic loss when a vehicle meets with an accident. 7) Settlement of insurance claims: Insurance companies engage forensic accountants to have an accurate assessment of claims to be settled. Similarly, policyholders seek the help of a forensic accountant when they need to challenge the claim settlement as worked out by the insurance companies. A forensic accountant handles the claims relating to consequential loss policy, property loss due to various risks, fidelity insurance and other types of insurance claims. 8)Dispute settlement: Business firms engage forensic accountants to handle contract disputes, construction claims, product liability claims, infringement of patent and trade marks cases, liability arising from breach of contracts and so on. 9)Matrimonial dispute cases: Forensic accountants entertain cases pertaining to matrimonial disputes wherein their role is merely confined to tracing, locating and evaluating any form of asset involved. Core Knowledge Of Forensic Accountants: A forensic accountant is expected to be a specialist in accounting and financial systems. Yet, as companies continue to grow in size and complexity, uncovering fraud requires a forensic accountant to become proficient in an ever- increasing number of professional skills and competencies. Here are some of the broad areas of useful expertise for a forensic accountant: • An in-depth knowledge of financial statements and the ability to critically analyse them. These skills help forensic accountants to uncover abnormal patterns in accounting information and recognise their source. • A thorough understanding of fraud schemes, including but not limited to asset misappropriations, money laundering, bribery, and corruption. • The ability to comprehend the internal control systems of corporations, and to set up a control system that assesses risks, achieves management objectives, informs employees of their control responsibilities, and monitors the quality of the programme so that corrections and changes can be made. • Proficiency in computer and knowledge of network systems. These skills help forensic accountants to conduct investigations in the area of e-banking and computerised accounting systems. • Knowledge of psychology in order to understand the impulses behind criminal behaviour and to set up fraud prevention programmes that motivate and encourage employees. • Interpersonal and communication skills, which aid in disseminating information about the company’s ethical policies and help forensic accountants to conduct interviews and obtain crucially needed information. • Thorough knowledge of company.s governance policies and the laws that regulate these policies. • Command of criminal and civil law, as well as, of the legal system and court procedures. Personal Skills Required: So what does it take to become a forensic accountant? In addition to the specialised knowledge about the techniques of finding out the frauds, one needs patience and an analytical mindset. One has to look beyond the numbers and grasp the substance of the situation. There is a need for the same basic accounting skills that it takes to become a good auditor plus the ability to pay attention to the smallest detail, analyse data thoroughly, think creatively, possess common business sense, be proficient with a computer, and have excellent communication skills. A ”sixth”sense that can be used to reconstruct details of past accounting transactions is also beneficial. A photographic memory helps when trying to visualise and reconstruct these past events. The forensic accountant also needs the ability to maintain his composure when detailing these events on the witness stand. Finally, a forensic accountant should be insensitive to personal attacks on his professional credibility. A fraud accountant (as forensic accountants are sometimes called) should also observe and listen carefully. By this, you can improve your ability to detect lies whether they involve fraud or not. This is so because”not all liars are fraudsters, but all fraudsters are liars”(Wells). According to a forensic accounting expert, “the traits of a forensic accountant could be compared to a well-baked pizza. The base of forensic accounting is accounting knowledge. Size and the extent of baking decide the quality of the pizza. A middle layer is a dispersed knowledge of auditing, internal controls, risk assessment and fraud detection. It is like the spread of the cheese in pizza. The toppings of this pizza area basic understanding of the legal environment. The legal environment is essential in order to support the litigations. The cherry on the toppings of the pizza is a strong set of communication skills, both written and oral. It is just the beautification part. Perfect combination of the pizza base, cheese spread and good toppings makes the pizza delicious and the of company’s the laws that Forensic Auditor perfects. It is a combination that will be in demand for as long as human nature exists.” In addition to these personal characteristics, accountants must meet several additional requirements to become successful forensic accountants, say a Certification, acknowledging his competence. One can learn forensic accounting by obtaining a diploma given by Association of Certified Fraud Examiners (ACFE) in the US. Indian chapter of ACFE offers the course based on the white-collared crimes prevalent in US, based on their laws. However, there is no formal body that provides formal education of the frauds in India. Besides the formal certificate, one can deepen one’s knowledge and sharpen one’s skills in forensic accounting by undergoing training under an experienced forensic accountant, participating in various international conferences, reading relevant journals, books and other literature on forensic accounting. To combat the frauds effectively one needs the active support of government at every stage. There are three-four such agencies in India, which are dedicated to the mission of combating frauds. Serious Fraud Office looks into violations of Income Tax, FEMA, RBI Act, etc.; CBI (Economic Office Wing) deals with big financial frauds; Central Vigilance Commission deals with corruption. These are the major government agencies that combat frauds of different types. Unfortunately, there is no specialised education provided by any of the Universities in the country. Recently, TCS has also come out with software to combat money laundering and Subex Systems have designed software to combat the telecom frauds. Thus, combating the frauds with software has started picking up in India, with few big companies like ACL and IDEA, joining the race. The Need For Niche Consulting: The CPA Vision Statement states: “The CPAs are trusted professionals who enable people and organisations to shape their future. Combining insight with integrity, CPAs deliver value by: (a) communicating the total picture with clarity and objectivity, (b) translating corn plex information into critical knowledge, (c) anticipating and creating opportunities, and (d) developing pathways that transform vision into reality1 It reflects the trend towards providing a broader range of assurance services. However, recent corporate accounting scandals and the resultant outcry for transparency and honesty in reporting have given rise to two disparate yet logical outcomes. First, forensic accounting skills have become crucial in untangling the complicated accounting manoeuvres that have obfuscated financial statements. Second, public demand for change and subsequent regulatory action has transformed corporate governance. Increasingly, company officers and directors are underethical and legal scrutiny. Both trends have the common goal of responsibly addressing investors’concerns about the financial reporting system. Indeed, there is a future in forensic accounting as a separate”niche” consulting area in India. The need to specialise, otherwise known as Niche Consulting, is imperative to practising accoun tants because the fast-paced developments in business thereby demand specialised knowledge and skills. While a majority of CAs have excellent analytical skills, they need to acknowledge that ‘forensic’ services require ‘specialised’ training as well as real-life ‘practical’ corporate experience. There is a need for specialised information, not just audit and tax service. What clients seem to want are people with unique sets of skills and experiences. With the maturing of the audit busi ness, and the rapid development of technology that makes existing services low cost and cheap, it appears that it is the right time now to acquire those unique skills. To help practitioners move into ‘niche’ consulting, some professional organisations in the US have concluded that: “Future success for the profession depends, in part, on how the public perceives the ability of CPAs. New efforts in consulting, specialisation and understanding global business practices and strategies are considered crucial. We go out into the niche market, examining our strengths first. We go where the action is, only then we know we can adequately service our clients and make money doing it.” One area where ‘niche’ consulting is becoming the global trend is in “Forensic Accounting and Auditing’ But the major question facing the Indian accountancy profession is: Are we ready to plunge to where the challenging action is? Forensic Accounting In India: It is in an infancy state in India.It is still an untrodden area in India.But due to ever increasing cases of bank & cyber-fruads its growing importance cannot be denied. One immediate landmark creation is “Forensic Research Foundation”.They provide support for investigation of fraud.They publish one bi-monthly journal named as “White Crimes”.It relates to forensic and economic crimes.Another international organization named as KPNG has set up investigation detection centre in India.. Networks Limited ,a Delhi based organization,working in the similar field,they are also trying to innovate ways and means to detect financial irregularities and crimes in India.Serious Investigation Fraud Offices(SIFO),has been established in India for the same reason,i.e. detection and prevention of economic irregularities and crimes. The need for such bodies and the importance of Forensic Accountants have been highlighted by L.N.Roy Committee.Lenin Parekh Committee has also expressed the view that one “fraud detection committee”need to be established. The main aim of such boards should be to prevent the interest of the stakeholders. Conclusion: Forensic accounting in India has come to limelight only recently due to rapid increase in white-collar crimes and the belief that our law enforcement agencies do not have sufficient expertise or the time needed to uncover frauds. A large global accounting firm believes the market is sufficiently large to support an independent unit devoted strictly to ‘forensic’ accounting. All of the larger accounting firms, as well as, many medium-sized and boutique firms have recently created forensic accounting departments. Forensic accounting, in fact, integrates accounting, auditing, and investigative skills to conduct an examination into a company’s financial statements. Broad-based knowledge (within the themes listed above) is crucial to the success of entry-level forensic accountants. Because forensic accounting is relatively a new area of study, a series of working definitions and sharing of corporate experiences should be undertaken and encouraged to ensure a common understanding. Indeed, there is great future in forensic accounting as a separate”niche” consulting. While the forensic accounting and auditing practice had commenced in the US as early as ‘1995, the seed of this specialisation has yet to take off in India. Forensic accountants are only dealing with financial implications of the cases entrusted to them and not engaging in auditing exercise. On account of global competition, the accounting profession must convince the marketplace that it has the “best-equipped” professionals to perform such services. Forensic accountants are also increasingly playing more ‘proactive’ risk reduction roles by designing and performing extended procedures as part of the statutory audit, acting as advisors to audit committees, and assisting in investment analyst research. While majority of CAs have excellent analytical skills, they need to acknowledge that ‘forensic’ services require ‘specialised’ training as well as real-life ‘practical’ corporate experience. ………………………………<>……………………………. References:- 1)Journal Of Forensic Accounting:Editor-In Chief:Crumbley D. Larry,Publisher:Inc.Edwards . R.T. 2)Journal Of The Chartered Accountant 2007, Pages:1000-1010.Dr. Madan Bhasin ,The Author is Head,Accounting Department,Mazoon College, Muscat,Sultanate Of Oman. 3)Referential Notes Of Prof. Dutta Kr. Uttam,Reader Deaprtment Of Commerce, Reader,University Of Burdwan. 4)Website access: www.wikipedia.com,accessed on 4th,February,2008.

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Different fields of accounting study and make use of some terms that are not easy to be understood by others. If you happen to be an accounting student or a professional CPA, you know all the different terms that are used in accounting. One and perhaps the most popular term to the average person is profit & loss. So, do you know what this term means? To begin with, you must determine what profit is and what it means. Profit can be net earnings or net income, either one. Businesses can sell services or products. Profits will come from the sales of these services and products. If the cost of running the business is controlled, it can add up to profits. Profits are also called ROI for some and return on investment for others. However, this term is often limited to securities like bonds or stocks. But still, some companies use ROI to mean short or long term business outcomes. AS well the taxable income is another term for profit. The profits & loss of a certain company or individual is determined by the finance professionals through accounting. They can determine what made the profits as well as the losses. Accountants form some sort of business equation in order to justify the profits & losses of a business. In this manner, they can easily tell the net worth of a company. It seems that by simply defining one accounting term, it eventually leads to defining other terms as well. Net worth is another term that is very difficult to understand. It refers to the resulting amounts after deducting the liabilities or debt, long and short term of a company from the assets. Private companies refer to net worth as the owner equity. Why the owner equity? Well, after deducting all the liabilities, what is left basically belongs to the owner. In the case of public companies, the profit of the business is returned as dividends to shareholders. As you can see, before owner or shareholders of a company can take hold of the profits, all liabilities must be deducted first. Every business attempts to get a good and positive figure because that means profit to them; if not, the business has a loss. Societies and economies are built on profit. However, there are many times that businesses incurs losses. Consumer habits and purchasing trends change. Because of this fact, it is impossible to foresee the future of a companys performance at all times. How do you determine if a business is at a loss? This is understandable and even those of us who have no background in accounting know what it means. All liabilities will be taken from the assets and if this results in a negative amount, then the business has a loss. The accountant staff of the company can pursue effective measures to bring the business back to a profitable situation. If the business has efficient and effective accounting pros, the business can improve and move back to the plus column in the near future. However arguing that an accounting staff is needed to ensure the company has success is an invalid argument. With or without them, the success of the business is not guaranteed. So the owner of the business should choose a very good accounting staff. By doing this all the financial transactions and decisions are noted and studied. Only then can the company decide proper routes to take in its quest to return to the profit column.. Therefore profit & loss is just a simple accounting term. Aside from this term, you will also learn about net earnings, net income, net worth, dividends, etc.