Fiscal Policy Objectives

Fiscal Policy Objectives

Fiscal policy is a tool used by the Government to control national economy with the help of taxation and spending. Fiscal policy may be termed as intervention of the government in the national economy. Fiscal policy objective can be explained in terms of price stabilization, consumption pattern influencing, employment generation, income distribution and economic growth.

1.    Price Stabilization

Fiscal policy can control the price, for example if there is inflation in the market, then government may reduce the demand by increasing tax rate and reducing public expenditure.  The reduce demand will bring the prices down and inflation will be controlled.

2.    Change Consumption Pattern

Fiscal policy can change the consumption pattern, for example heavy taxes on tobacco can reduce the tobacco consumption, and similarly heavy taxes on luxury goods can also reduce the consumption on those goods.

3.    Employment Generation

Fiscal policy can generate employment especially when economy is not at full employment level. Government expenditure can create employment opportunities in many ways direct employment & indirect employment opportunities.

4.    Income Distribution Gap

Fiscal policy can play effective role for filling the income distribution gap. Government can impose heavy taxes on rich people and can spend that amount on social welfare; this will change the income structure in the economy.

5.    Economic Growth

Fiscal policy can play important role in achieving the economic growth targets set by the governments. Public expenditure can really boost the economic activity & growth in the country.

Objectives of Monetary Policy

Objectives of Monetary Policy

1.    Constant Increase in Money Supply

Money supply can bring inflation in the economy, which is not a favorable situation. Similar a tight monetary policy can also bring depression to economy, which would not be good for the economy. Therefore there must be a constant and controlled increase in money supply.

2.    Stable Exchange Rate

Stable exchange rate is important for international trade. A continuous change in the exchange rate creates an uncertainty and therefore international trade suffers. Easy money policy will devalue the money and country will suffer losses on imports (imports expensive), tight monetary policy would appreciate domestic currency (foreign country will suffer).

3.    Controlling Inflation

Monetary policy can be used to control price (inflation) in the country. Inflation control is one of the fundamental aspects of monetary policy. It is important to note that many issues are linked with inflation. At the time of high inflation, tight inflation monetary policy is used to bring the prices down.

4.    Employment and Inflation

Employment can be generated with investment and investment can be attracted by easy or lenient monetary policy (lower bank rates). People would love to invest at lower interest rate and such investment will create employment.

5.    Improve Balance of payment

Government can implement tight monetary policy to boost export. Tight monetary policy will prices will fall and export will increase and thus situation of balance of payment will improve accordingly.

6.    Higher Growth

Higher growth targets can be achieved by lenient monetary policy, as lower interest rate will encourages more investment. Similarly higher investment will increase the income & saving of people and those saving will be consumed which would extend market.

Objective of Audit

Objective of Audit

Audit is primarily is expressing of opinion on the financial statement i.e. whether or not those financial statements gives true picture of financial position and performance of the organization. It means that financial statements are not misstated due to fraud or error.

Importance of Audit

The audit is carried out to improve the confidence of the user of financial statements over the accuracy and reliability of financial statement, so that user of financial statement can use financial statement information for informed decisions making. Audit provides reasonable assurance that facts shown in financial statement are free from misstatement.

Audit Quality Control Review Objectives

Audit Quality Control Review Objectives

Audit quality control review is basically performed for following objectives. Audit quality control review is performed by a person have sufficient qualification and experience.

1.    Judgment Evaluation

Significant judgment of audit team is objectively evaluated by the independent reviewer to ensure that judgment is appropriate in the circumstances. Judgment provides bases for the conclusion and conclusion provides bases for audit opinion.

2.    Conclusion Evaluation

Audit reviewer also evaluates the conclusion drawn by the audit team based on the significant judgment. Reviewer ensures that conclusion drawn is appropriate in the circumstance and based on the audit evidence.

Audit Quality Control Review Timing

Audit quality control review is performed on or before the audit report, as one of the primary objectives of audit quality control review is to ensure that audit opinion expressed by the auditor is appropriate, and supported by the appropriate judgment and conclusion.

Audit Quality Control System Objectives

Audit Quality Control System Objectives

Audit firm establishes the audit quality control system within firm mainly for following reasons.

1.     Professional Standard Compliance

Audit is conducted in accordance with the some professional standard and guideline. Professional standards are basically internationally recognized best practices which provide basic guideline for audit. The international auditing standard is a typical example of professional standards.

2.     Regulatory Requirements Compliance

Every country has some rules and regulation for conduct of audit. These rules are specifically designed to meet the need of the respective requirement of the country. Quality control system also ensures compliance with those rules and regulations.

3.    Appropriate Opinion

Auditor provides opinion (reports) and, such reports are widely used by different user for informed decision making .Therefore it is very important that auditor must issue appropriate opinion, and audit quality control review has been introduced for assuring appropriate opinion.

Objectives of Stock take

Objectives of Stock take

Stock take is technically term used for physical count of stock at some date. There are number of objective of stock take, which have been explained below;

1.    Missing or theft item identification

Stock take is an effective tool to identify the missing or theft item. Stock take is almost done by each stock carrying organization.

2.    Record Correction

Stock taking also identifies the mistakes in record keeping of inventory. Mistakes in Record may be found & corrected during the detailed investigation of identified variation in physical counting and record. (Stock Ledger)

3.    Damaged Inventory

Physical Stock take also helps in identifying the damaged stock lying in warehouse. Therefore it can be said that stock take helps in removing obsolete or damaged stock from warehouse.

4.    Expired Stock Identification

Stock take is an effective tool for identifying the expiry stock. In some businesses like business of medicines, expiry items must be identified & disposed off in time; otherwise it can prove too costly for organization.

5.    Reporting

Auditor perform stock take to ensure that actual inventory is reported in the financial statement. Inventory is one of the important elements of financial statement and has direct impact on the profitability of the organization.

Objectives of Labour Hours Saved Calculation

Objectives of Labour Hours Saved Calculation

Labour hours saved is calculated to determine the performance of the employees or group of employees. Furthermore, labour hours saved information can be used to disburse the bonus among employees.

Hour Saved= Expected Hour > Actual Hour

Hour Saved = Expected Hour – Actual Hours

Example

Number of Hours required= 5 Hour

Unit to be produced=1000

Actual Labour taken for on job = 4000

Calculate hour saved on project?

Solution

Expected Hours = units x hour required per unit

=1000 x5

= 5000

Actual Labour hours on project= 4000

Hour saved= Standard hours – actual hours

= 5000-4000

=1000 Hours Saved

Objectives of Labour Capacity utilization

Objectives of Labour Capacity utilization

Objectives of labour capacity utilization is to determine that how much of available resources of firm are being utilized. This concept also gives information about the availability of resources for new project. The labour capacity utilization is calculated by following simple formula

Labour Capacity utilization Ratio =   Hour Spent by Labour   x 100

                                                       Total Available hour

Example

Labour Hours available for projects= 2000

Total hours utilized or spend by Labour = 1600

How resources were used?

Solution

Labour Capacity utilization Ratio =   Hour Spent by Labour   x 100

                                                      Total Available hour

= (1600/2000) x 100

=80%

80% of labour resources were utilized by the entity.