prologue-1 brewer/garrison/noreen introduction to managerial accounting third edition
TRANSCRIPT
Prologue-1
Brewer/Garrison/Noreen
Introduction to Managerial Accounting
Third Edition
ProloguePrologue
© The McGraw-Hill Companies, Inc., 2007McGraw-Hill /Irwin
Managerial Accounting and the Business
Environment
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Globalization
Reduction in tariffs and
quotas
Improvements in global
transportation systems
Expansion of Internet usage
Increasing sophistication in
international markets
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The Global Marketplace
Companies that have been successful in their local markets may suddenly find themselves facing competition from
halfway around the globe.
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The Global Marketplace
New Markets
New Customers
New Workers
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Strategy
A strategy is a “game plan” that enables a company to attract customers by
distinguishing itself from competitors.
Customer Intimacy
Operational Excellence
Product Leadership
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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 peopleunited for a common purpose.
An organization is a group of peopleunited for a common purpose.
Decentralizatio
n
decision–making
Decentralization
decision–making
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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.
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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.
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A business process is a
series of steps that are followed in order to carry out some task in
a business.
Process Management
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Value Chain
ResearchResearchandand
ProductionProduction
ResearchResearchandand
ProductionProduction
ProductProductDesignDesignProductProductDesignDesign 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.
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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.
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Lean Production
Step 1 Identify value in
specific products/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
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Supply Chain Management
The term supply chain management is commonly used to refer to the coordination of business
processes across companies to better serve end consumers.
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Theory of Constraints (TOC)
A sequential process of identifying and removing constraints in a system.
Restrictions or barriers that impedeprogress toward an objective
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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
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Six Sigma
A process improvement method that relies on customer feedback and fact-based data gathering and analysis techniques to drive
process improvements.
Six Sigma is sometimes
associated with the slogan zero defects.
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Six Sigma
The DMAIC framework is the most common framework used to guide Six Sigma process
improvement efforts.
DefineMeasureAnalyzeImproveControl
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Six Sigma
Six Sigma improvements can
only increase profits in two
ways:
1. Decrease costs
2. Increase sales
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Technology in Business
E-Commerce
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Technology in Business
Most companies used to
implement specific software
programs to support specific
business functions.
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Technology in Business
Enterprise Systems
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The Importance of Ethics in Business
Ethical practices in business build trust and promote productive relationships. They are necessary for the functioning
of a market economy.
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Code of Conduct for Management Accountants
Part One
Competence
Confidentiality
Integrity
Objectivity
Part One
Competence
Confidentiality
Integrity
Objectivity
Part Two
Resolution of Ethical Conflict
Part Two
Resolution of Ethical Conflict
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Standards of Ethical Conduct
Follow applicable laws, regulations and
standards.
Prepare complete and clear reports after appropriate
analysis.
Maintain professional competence.
Competence
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Standards of Ethical Conduct
Do not disclose confidential information unless legally
obligated to do so.
Ensure that subordinates do not disclose confidential
information.
Do not use confidential
information for personal
advantage.
Confidentiality
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Standards of Ethical Conduct
Integrity
Communicate unfavorable as
well as favorable information.
Refuse gifts or favors that might influence
behavior.
Avoid activities that could affect
your ability to perform duties.
Refrain from activities that
could discredit the profession.
Do not subvert organization’s
legitimate objectives.
Avoid conflicts of interest and advise others of potential
conflicts.
Recognize and communicate personal
and professional limitations.
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Standards of Ethical Conduct
Objectivity
Communicate information fairly and objectively.
Disclose all information that might be useful to
management.
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Standards of Ethical Conduct
Resolution of Ethical Conflict
Follow the established policies of the organization.
For unresolved ethical conflicts:
Discuss the conflict with immediate superior.
Resolution of Ethical Conflict
Follow the established policies of the organization.
For unresolved ethical conflicts:
Discuss the conflict with immediate superior.
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Standards of Ethical Conduct
Resolution of Ethical Conflict
Follow the established policies of the organization.
For unresolved ethical conflicts:
Discuss the conflict with immediate superior.
Maintain confidentiality.
Clarify relevant ethical issues by confidential discussion with an objective advisor.
Consult your own attorney.
Resign.
Resolution of Ethical Conflict
Follow the established policies of the organization.
For unresolved ethical conflicts:
Discuss the conflict with immediate superior.
Maintain confidentiality.
Clarify relevant ethical issues by confidential discussion with an objective advisor.
Consult your own attorney.
Resign.
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Codes of Conduct
CompanyMany companies have adopted formal
ethics codes of conducts that provide broad guidelines for proper behavior.
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Codes of Conduct
International
The International Federation of Accountants’ (IFAC) Guidelines on Ethics for Professional Accountants governs the
activities of all accountants throughout the world.
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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.
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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.
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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.
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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.
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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.
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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.
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Examples of Business RisksExamples of Controls to Reduce
Business Risks
Intellectual assets being stolen from computer files
Create firewalls that prohibit computer hackers from computing or stealing intellectual property
Products harming customersDevelop 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 malfunctioningDevelop 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
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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.
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End of Prologue