Question

The controller of a small private college is complaining about the amount of work she is required to do at the beginning of each month. The president of the university requires the controller to submit a monthly report by the fifth day of the following month. The monthly report contains pages of financial data from operations. The controller was heard saying, "Why does the president need all this information? He probably doesn't read half of the report. He's an old English professor and probably doesn't know the difference between a cost and revenue.
a. What is the probable role of the monthly report?
b. What is the controller's responsibility with respect to a president who doesn't know much accounting?

Answer 1

Answer:

a. The role of the monthly report is most probably to show the board and the president the financial position of the company on a monthly basis. That way the college's financial position can be evaluated and appropriate actions taken if needed. This requirement may have been instituted by the College's statues, a predecessor to the President or the President himself to be able to ensure accountability and transparency in the college.

b. Accountants are supposed to make reasonable efforts to ensure that the intended readers of a financial statement can understand what is being recorded. The Controller therefore needs to make the statement less complex by adding understandable notes to the statements or by preparing it in a format that the President will understand.

If unsure as to where to start, the Controller can interview the President and find out which parts are confusing and start with those.

The President is the intended reader and if he doesn't understand the work, the point of making the statements every month is mute.