Accounting Report: Analysis of Demand, Governance, and Audit Practices

This accounting report provides a comprehensive analysis of several key financial concepts. It begins by examining the law of demand and its impact on product sales within a competitive market, considering factors that influence demand and potential exceptions. The report then delves into the significance of the Board of Directors, as outlined by the UK Code of Governance, highlighting their crucial role in decision-making, risk assessment, and ensuring corporate success. Finally, the report differentiates between internal and external auditing, emphasizing the importance of independent auditors in evaluating financial statements and providing assurance to investors and creditors. The report covers the scope of accounting and the importance of auditing for a company's financial health.

Accounting

Table of Contents
INTRODUCTION................................................................................................................................3
Task 1 The law of demand impacts the sale of a product of an organisation in a perfect
competitive market..........................................................................................................................3
Task 2 Analysing the importance of Board of Directors as per the UK code of Governance.........4
Task 3 Difference between internal and external auditing and importance of independent auditor5
CONCLUSION....................................................................................................................................6
REFERENCES.....................................................................................................................................7

INTRODUCTION
Accounting is related to analysing, recording, summarizing and reporting all the financial or
monetary transactions in the financial statements. It is about journal entries and posting those into
ledgers then preparing trial balance and lastly preparation Trading & Profit and Loss account and
Balance Sheet. The report covers all the aspects such the law of demand, importance of the Board
of Directors in the UK company and different types auditors in the company and importance of
independent auditor. It also covers that how company is affected by the law of demand in the
competitive market. The main role of the Board of Directors in the corporate Governance and how
important auditors are there in the evaluation and examination of the financial statements.
TASK 1
The law of demand impacts the sale of a product of an organisation in a perfect competitive market
Law of demand is inversely proportional between the price and quantity of the product. As
the price of the product increases, the demand of that particular product decreases and vice- versa.
At this point of time, it is assumed that other all factors remains constant. For example, if the
consumer uses 1 litre of petrol daily for $70 however now the price has been increased to $75 so he
may consume only 0.75 litre of petrol. This is the general behaviour of any human towards the
increase or decrease of the price level in the competitive market (Matsuyama and et.al., 2019).
There are some possible exceptions to the law of demand such as Giffen Goods and Veblen goods
whose price does not affect the demand of the goods.
Other Factors that affects the demand of a product in an organisation-
Income Levels of the consumers-
Individuals income level affects the demand of the product. There is a direct relationship
between the income of the consumer and demand of the product. As the income increases of an
individual its demand for the particular product also increases and as the income decreases its
demand for the particular product also decreases. For example, any individual having the income of
$50000 and he consumes “Toned Milk” is an inferior good but now its income increases by $70000
then he started to consume “Full cream milk”.
Consumer tastes and preferences-

Consumers taste and preferences also affects the demand of any particular product. Changes
in the taste of consumer highly affects the demand for any product. If any commodity is preferred
by the consumer than its demand will be increasing but if any commodity is out fashion than its
demand will be deceasing (Cooter and et.al., 2016).
Price of the related Goods-
Price of the related goods also affects the demand of the product. Related goods are of two
types i.e. Substitute Goods and Complementary Goods. Substitute Goods are those goods which
can be used in place of one another for satisfaction of a particular want like tea and coffee. For
example, if an individual consumes tea If the price of the substitute coffee increases than the
demand for the tea will be increasing. Thus, the demand for a given commodity is directly related to
the price of its substitute commodity.
Complementary Goods are those goods which are used simultaneously such as petrol and
car. For example, if the price of the petrol is increased than the demand of car will be decreasing.
The law of demand in complementary goods are inversely related to the other complementary
commodity.
Expectation of change in the price in future-
If the consumer assumes that the price of a particular commodity will be increasing in the
near future than the demand for that particular commodity will be increasing presently. If the
consumer assumes that the price of the particular commodity will be going to decrease in the near
future than the consumer will decrease its demand for that commodity in the present (Cooter and
et.al., 2016).
Change in the law of demand can be explained by the graph

From the above graph we can interpret that as the price of the commodity is increasing its
demand is decreasing. Clearly when the price of the commodity was increased from P 3 to P 2 than
its quantity demanded comes down from Q 3 to Q 2 and then to Q 3 and vice versa. This graph
states that the price and quantity demanded are inversely related to each other. If anyone increases
or decreases it automatically affects another factor.
Exception of law of demand-
Giffen Goods-
Giffen Goods are those which are not affected by the change in the price of the commodity.
These goods are generally inferior goods because as the price increases of this commodity than the
demand also increases. Even if the price decreases than also quantity of the goods will be remained
same. These goods are generally not affected by the increase or decrease in the price of the
commodity. For example medicines are not affected by their increase or decrease in the price.
Veblen Goods
Veblen Goods are generally those goods which are luxurious in nature. These goods are
purchased generally for showing the status of the individual. They are not affected by the decrease
or increase in the price of the commodity (Makowski and et.al., 2017). For example Diamond, Rolls
Royce car etc. Even if the price of these goods increases or decreases than also their demand is
affected in the market.

TASK 2
Analysing the importance of Board of Directors as per the UK code of Governance
UK Corporate Governance is the corporate governance in which it is directed how the
companies should work and Board of Directors are responsible for the governance of their
companies. Companies are responsible for the successful and sustainable business if they provide
employment and creates prosperity in the market. Board of Directors plays an important role in the
success of the business because they are the once who take all the decisions. Importance of Board of
Directors are-
 BOD takes the risks and opportunities in the long term which comes in the way of the
companies. They are important for assessing the basis on which company retains in the
competitive market for the long term (Zalata and et.al., 2016).
 BOD are the once who takes all the decisions related to the company and they are
accountable for all the losses that have been occurred due to the those decisions.
 They set all the general meeting of the company and set all the strategies related to the views
on the governance. The chairperson should ensure that the BOD should have the clear
understanding about the views of the shareholders.
 The board should regularly ensure the appraisal of the workforce and review their work
from time to time in order to know the related problems and how to resolve them.
 Board of Directors should resolve all the conflicts in the company related to the significant
shareholders and third party does not have to compromise or override independent
judgement.
 BOD are also accountable for all the doings in the company and how to handle to any
situation in the company related to any dispute (Kotlar and et.al., 2019).
 They are also important to appraise the employees from time to time in order to motivate
their morale and give them rewards to which they are accountable.
TASK 3
Difference between internal and external auditing and importance of independent auditor
Difference between internal auditor and External Auditor-
Internal auditing External auditing

Internal Audit is the process which is performed
by the company employees and is an ongoing
audit function performed within the organisation
itself.
External Audit is performed by the outside
auditors i.e. and independent body which is not
part of the organisation.
In this auditor is appointed by Management In this auditor is appointed by members of the
company.
The main objective of internal auditor is to
review the routine activities and provide
suggestions for the improvement.
The main objective of external audit is to
analyse and interpret the suggestion related to
the financial statements of the company.
This audit is conducted by employees in the
organisation.
This audit is conducted by third Party.
The reports are used by management itself in
order to improve the companies policies
(Elshandidy and et.al., 2015).
The reports are used mainly by stakeholders of
the company to know their position in the
market.
It is a continuous process happens within an
organisation.
This is conducted only once in a year.
This report is prepared to provide opinion on the
effective working of the company.
This report is prepared to know the truthfulness
and fairness of the financial statements of the
company.
It is prepared on the voluntary basis. It is compulsory to prepare under Indian
Companies Act, 1956.
It checks the operational efficiency of the
company.
It checks the accuracy and validity of financial
statements (Pakhuangte 2016).
Importance of Independent Auditors-
Independent Auditors are the person who examines and evaluate the financial statements of
the company. They are appointed by Board of Directors of the company in order to avoid conflicts
of interest and to ensure the integrity of performing an audit. They have their own opinion on the
reliability and fairness of clients' financial statements and communicates the same to investors,
creditors etc. They perform certain procedures in order to conduct the audit for the company. There

should be relation between the auditor and the client and the audit conducted by the auditor should
be unbiased (Hategan and et.al., 2015). The auditor should be honest professional who gives correct
opinion on the financial statements to the shareholders.
Importance of independent auditors in the organisation are-
Accurate Financial Statements-
Auditor must check all the financial statements are “accurate, truthful and complete”. They
should check that the statements does not carry any personal transaction related to the client and all
the transactions are related to the business purpose only. Auditor should also check that transactions
recorded are for specific time period only and all the entries made are of business only and are
correctly debited and credited. They should check that the company follows generally accepted
accounting principles or GAAP for recording purpose.
Accounting Standards-
Auditor should check that company is complying according to all the accounting standards
and does not change the standard every next year. All the entries are properly complied and all the
documents are duly signed and stamped by the client. The company is disclosing each and every
transaction in the financial statements without any wrong entries or wrong amounts. Auditor
reviews the company's accounting methods and procedures to prevent the company from any fraud.
Assurance-
Auditor provides assurance to the investors and creditors that the company is not having any
false information and all the financial statements are been audited by the company (Šidlauskienė
and et.al., 2017). Auditor checks all the accounting records, depicts the true position of the
company. They give the assurance to the investors and creditors that the company is in profitability
position.
CONCLUSION
Law of demand states that the price and quantity demanded are inversely related and
demand of the particular is affected by other factors also such as price of related goods, expectation
of the rise in price etc. The report concludes that the Board of Directors are important for the
corporate governance and how they resolve the disputes in the organisation. Internal auditors and
external auditors are necessary for the organisation and one used by management and other is used
by shareholders. Independent auditors reviews the financial statements in order to ensure the truth

and fairness for the assurance of investors, creditors etc. These all the items are part of the
accounting and accounting cannot be done without all these items.