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Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/Irwin
PrologueManagerial Accounting and the Business Environment
PowerPoint Authors:Jon A. Booker, Ph.D., CPA, CIACharles W. Caldwell, D.B.A., CMASusan Coomer Galbreath, Ph.D., CPA
Globalization
Reduction in tariffs and quotas
Improvements in global
transportation systems
Expansion of Internet usage
Increasing sophistication in
international markets
P-2
The Global Marketplace
Companies that have been
successful in their local markets may
suddenly find themselves facing competition from
halfway around the globe.
P-3
StrategyA strategy is a “game plan” that enables
a company to attract customers by distinguishing itself from competitors.
Customer Intimacy
Operational Excellence
Product Leadership
P-5
Corporate Organization Chart
Purcha sing Personnel V ice PresidentO pera tions
T rea surer C ontro ller
C hief F ina ncia lO fficer
President
B oa rd of D irectors
Organizational Structure
An organization is a group of people united for a common purpose.
An organization is a group of people united for a common purpose.
Decentralizatio
n
decision–making
Decentralization
decision–making
P-6
The Functional View of Organizations Line positions are
directly related to the achievement of the basic objectives of an organization.
▫Example: Production supervisors in a manufacturing plant.
Staff positions support and assist line positions.
▫Example: Cost accountants in the manufacturing plant.
P-7
The Chief Financial Officer (CFO)
A member of the top management team which is responsible for:▫ Providing timely and relevant data to support
planning and control activities.▫ Preparing financial statements for external
users.
P-8
A business process is a
series of steps that are followed in order to carry out some task in
a business.
Process Management
P-9
Value Chain
ResearchResearchandand
ProductionProduction
ResearchResearchandand
ProductionProduction
ProductProductDesignDesign
ProductProductDesignDesign ManufacturingManufacturingManufacturingManufacturing MarketingMarketingMarketingMarketing DistributionDistributionDistributionDistribution
CustomerCustomerServiceService
CustomerCustomerServiceService
Business Functions Making Up the Value Chain
A value chain consists of the major business functions that add value to a
company’s products and services.
P-10
Lean Production
Traditional Thinking
• Minimize unit costs by maximizing output.
• Keep everyone busy. Idleness wastes money.
• Push products through the system even if unsold inventory piles up in warehouses.
P-11
Lean Production
Step 1 Identify value in
specific products and services
Step 2 Identify the
business process that delivers value
Step 3 Organize work arrangements
around the flow of the business
process
Step 4 Create a pull system that responds to
customer orders
Step 5 Continuously
pursue perfection in the business
process
P-12
Supply Chain ManagementThe term supply chain management is commonly
used to refer to the coordination of business processes across companies to better serve end
consumers.
P-13
Theory of Constraints (TOC)
A sequential process of identifying and removing constraints in a system.
Restrictions or barriers that impedeprogress toward an objective
P-14
Theory of Constraints (TOC)
Step 1 Identify the
weakest link in the chain, which is the
constraint
Step 2 Do not place a
greater strain on the system than the weakest link
can handle
Step 3 Concentrate improvement
efforts on strengthening the
weakest link
Step 4 If improvement
efforts are successful, the
weakest link will improve
P-15
Six Sigma
Six Sigma is sometimes
associated with the slogan zero defects.
A process improvement method that relies on customer feedback and fact-based data gathering and analysis
techniques to drive process improvements.
P-16
Six SigmaThe DMAIC framework is the most
common framework used to guide Six Sigma process improvement efforts.
DefineMeasureAnalyzeImproveControl
P-17
Six Sigma
Six Sigma improvements can
only increase profits in two
ways:
1. Decrease costs
2. Increase sales
P-18
The Importance of Ethics in BusinessEthical practices in business build trust and promote productive relationships. They are necessary for the functioning
of a market economy.
P-19
Code of Conduct for Management Accountants – IMA’s Statement of Ethical Professional Practice
Part One
Competence
Confidentiality
Integrity
Credibility
Part One
Competence
Confidentiality
Integrity
Credibility
Part Two
Resolution of Ethical Conflict
Part Two
Resolution of Ethical Conflict
P-20
Standards of Ethical Conduct
Competence
Maintain professional competence.
Follow applicable laws, regulations, and
standards.
Prepare accurate, clear, concise, and timely
decision support information.
Recognize and communicate professional
limitations that preclude responsible judgment.
P-21
Standards of Ethical ConductDo not disclose confidential information unless legally
obligated to do so.
Ensure that subordinates do not disclose confidential
information.
Do not use confidential
information for unethical or
illegal advantage.
Confidentiality
P-22
Standards of Ethical Conduct
Integrity
Mitigate conflicts of interest and advise others of potential conflicts.
Abstain from activities that might discredit the
profession.
Refrain from conduct that
would prejudice carrying out duties
ethically.
P-23
Standards of Ethical Conduct
Credibility
Communicate information fairly and objectively.
Disclose all relevant information that could
influence a user’s understanding of reports
or recommendations.
Disclose delays or deficiencies in
information timeliness,
processing, or internal controls.
P-24
Guidelines for Resolution of an Ethical Conflict
Resolution of Ethical Conflict
Follow the established policies of the organization.
For unresolved ethical conflicts:
Discuss the conflict with immediate superior.
Initiate discussion with levels above immediate supervisor only with the supervisor’s knowledge (assuming the supervisor is not involved).
Resolution of Ethical Conflict
Follow the established policies of the organization.
For unresolved ethical conflicts:
Discuss the conflict with immediate superior.
Initiate discussion with levels above immediate supervisor only with the supervisor’s knowledge (assuming the supervisor is not involved).
P-25
Standards of Ethical Conduct
Resolution of Ethical Conflict (Continued)
▫ Maintain confidentiality.
▫ Clarify relevant ethical issues by confidential discussion with an objective advisor.
▫ Consult your own attorney.
Resolution of Ethical Conflict (Continued)
▫ Maintain confidentiality.
▫ Clarify relevant ethical issues by confidential discussion with an objective advisor.
▫ Consult your own attorney.
P-26
Company Codes of Conduct
Many companies have adopted formal ethics codes of conducts that provide broad guidelines for proper behavior.
P-27
Codes of Conduct on the International Level
The International Federation of Accountants’ (IFAC) Guidelines on Ethics for Professional
Accountants governs the activities of all accountants throughout the world.
P-28
Corporate Governance
Corporate governance is the system by which a company is directed and controlled.
If properly implemented, it should provide incentives for the board of directors and top management to pursue objectives that are in the interests of the company’s owners and it should provide for effective monitoring of performance.
P-29
The Sarbanes-Oxley Act of 2002
The Sarbanes-Oxley Act of 2002 is intended to protect the interests of those who invest in publicly traded companies by improving the reliability and
accuracy of corporate financial reports and disclosures.
P-30
The Sarbanes-Oxley Act of 2002
1.Requires CEO/CFO certification.
2.Establishes the PCAOB.
3.Places power to hire, compensate, and terminate auditors with the audit committee.
P-31
The Sarbanes-Oxley Act of 2002
4.Prohibits a variety of non-audit services for audit clients.
5.Requires annual report on internal control.
6.Establishes severe penalties for criminal acts.
P-32
Enterprise Risk Management
A process used by a company to proactively
identify the business risks that it faces and to develop responses
to those risks that enable the company to be reasonably assured
of satisfying stakeholder
expectations.
P-33
Enterprise Risk Management
Companies should identify foreseeable
risks before they occur. Once a risk has been identified, a company
can respond in various ways such as
accepting, avoiding, sharing, or reducing the
risk.
P-34
Examples of Business RisksExamples of Controls to Reduce
Business RisksIntellectual assets being stolen from computer files
Create firewalls that prohibit computer hackers from computing or stealing intellectual property
Products harming customers Develop a formal and rigorous new product-testing program
Losing market share due to the unforeseen actions of competitors
Formalize an approach for legally gathering information about competitors' plans and practices
Poor weather conditions shutting down operations
Develop contingency plans for overcoming any disruptions due to weather
A website malfunctioning Develop a pilot testing program before going "live" on the Internet
A supplier strike halting the flow of raw materials
Establish a relationship with two companies capable of providing needed raw materials
An incentive compensation system causing employees to make poor decisions
Create a balanced set of performance measures that motivates the desired behavior
Financial statements unfairly reporting the value of inventory
Count the physical inventory on hand to make sure that it agrees with the accounting inventory
An employee stealing assets Segregate duties so that the same employee does not have physical custody of an asset and the ability to account for it
An employee accessing unauthorized information
Create password-protected barriers that prohibit employees from obtaining information not needed to do their jobs
Inaccurate budget estimates causing excessive or insufficient production
Implement a rigorous budget review process
Failing to comply with equal employment opportunity laws
Create a report that tracks key metrics related to compliance with the laws
Identifying and
Controlling Business
Risks
P-35
Corporate Social Responsibility
CSR extends beyond legal complianceto include voluntary actions that satisfy
stakeholder expectations.
CSR extends beyond legal complianceto include voluntary actions that satisfy
stakeholder expectations.
Corporate social responsibility (CSR) is a concept whereby organizations consider the needs of all stakeholders when making decisions.
Corporate social responsibility (CSR) is a concept whereby organizations consider the needs of all stakeholders when making decisions.
Customers Employees CommunitiesSuppliers StockholdersEnvironmental
& Human RightsAdvocates
P-36
Companies should provide customers with: Companies and their suppliers should provide● Safe, high quality products that are fairly employees with: priced ● Safe and humane working conditions● Competent, courteous, and rapid delivery ● Non-discriminatory treatments and the of products and services right to organize and file grievances● Full disclosure of product-related risks ● Fair compensation● Easy to use information systems for ● Opportunities for training, promotion, shopping and tracking orders and personal developmentCompanies should provide suppliers with: Companies should provide communities with:● Fair contract terms and prompt payments ● Payment of fair taxes ● Reasonable time to prepare orders ● Honest information about plans such as ● Hassle-free acceptance of timely and plant closings complete deliveries ● Resources that support charities, schools,● Cooperative rather than unilateral and civic activities actions ● Reasonable access to media sourcesCompanies should provide stockholders with: Companies should provide environmental ● Competent management and human rights advocates with:● Easy access to complete and accurate ● Greenhouse gas emissions data financial information ● Recycling and resource conservation data● Full disclosure of enterprise risks ● Child labor transparency● Honest answers to knowledgeable ● Full disclosure of suppliers located in questions developing countries
Examples of Corporate Social Responsibility
P-37
The Certified Management Accountant (CMA)
Rigorous Professional
Exam
Greater Responsibilities
Higher Compensation
Information about becoming a CMA and the CMA program can be accessed on the IMA’s
website at www.imanet.org or by calling 1-800-638-4427.
P-38
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