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The Importance of Reliable Measurements in Accounting Essay example

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Performance measures play an important in all companies and their daily operations. By providing multiple methods of comparison and evaluation, accounting measurements provide a better view of the overall state of a corporation. Not only do investors use certain measures to help decide in which companies to invest, but internal managers use other measures to make sure their company is meeting set standards and that it is not falling behind or losing money. Therefore, it is important that these measures are accurate and not misleading. It is up to auditor and regulators, such as the SEC, to ensure that only reliable measurements are being provided. While customized measurements can more accurately focus on the goals of a specific company or process, more traditional measurements can be used to compare companies or processes. With the rise in popularity of customized or specialized performance measurements, their validity must be compared and contrasted to that of traditional measures of performance.
The importance of creating performance measures stretches from internal managers all the way to external investors. Internal managers can use different performance measures to help determine if a company is running efficiently and if it is meeting standards that were preset. For example, an internal manager of a manufacturing plant can use performance measures to see if enough products are being made to meet demand, if the machines are being utilized for the most profit, and if there is enough employees to efficiently operate the machines. Executive management can use performance measures to determine if their organization is on track to be profitable for the year and, if not, they can use them to determine why not. Investors and anal...


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...a, Anil, et al. "On The Use Of Customized Versus Standardized Performance Measures." Journal Of Management Accounting Research 17.(2005): 7-21. Business Source Premier. Web. 10 Apr. 2014.

CHOI, JONGWOON (WILLIE), GARY W. HECHT, and WILLIAM B. TAYLER. "Strategy Selection, Surrogation, And Strategic Performance Measurement Systems." Journal Of Accounting Research 51.1 (2013): 105-133. Business Source Premier. Web. 10 Apr. 2014.

Ghalayini, Alaa M., and James S. Noble. "The Changing Basis Of Performance Measurement." International Journal Of Operations & Production Management 16.8 (1996): 63-80. Business Source Premier. Web. 12 Apr. 2014.

Yadav, Neetu, Sushil, and Mahim Sagar. "Performance Measurement And Management Frameworksresearch Trends Of The Last Two Decades." Business Process Management Journal 19.6 (2013): 947-971. Business Source Premier. Web. 10 Apr. 2014.



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