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Transcript of MANAGERIAL ACCOUNTING AND THE BUSINESS ENVIRONMENT Chapter 1 PowerPoint Authors: Susan Coomer...
MANAGERIAL ACCOUNTING AND THE BUSINESS ENVIRONMENT
Chapter 1
PowerPoint Authors:Susan Coomer Galbreath, Ph.D.,
CPACharles W. Caldwell, D.B.A., CMAJon A. Booker, Ph.D., CPA, CIA
Copyright © 2011 by the McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
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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 StructureOrganizational Structure
Decentralization is the delegation of decision-Decentralization is the delegation of decision-making authority throughout an organization.making authority throughout an organization.
Decentralization is the delegation of decision-Decentralization is the delegation of decision-making authority throughout an organization.making authority throughout an organization.
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Process ManagementProcess Management
There are three approaches toimproving business processes . . .
LeanProduction
Theory ofConstraints (TOC)
SixSigma
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Lean ProductionLean Production
The lean thinkingmodel is a fivestep approach.
The lean thinkingmodel is a fivestep approach.
Identify valuein specific
products/services.
Identify valuein specific
products/services.
Identify thebusiness process
that delivers value.
Identify thebusiness process
that delivers value.
Organize workarrangements around
the flow of thebusiness process.
Organize workarrangements around
the flow of thebusiness process.
Create a pullsystem that respondsto customer orders.
Create a pullsystem that respondsto customer orders.
Continuously pursueperfection in the
business process.
Continuously pursueperfection in the
business process.
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4. Recognize that the weakest linkis no longer so.
4. Recognize that the weakest linkis no longer so.
1. Identify the weakest link.1. Identify the weakest link.
2. Allow the weakest link to set the tempo.
2. Allow the weakest link to set the tempo.
3. Focus on improving
the weakest link.
3. Focus on improving
the weakest link.
Only actions that strengthen the weakest link in the “chain” improve the process.
Theory of ConstraintsTheory of Constraints
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Six SigmaSix Sigma
A process improvement method relying on customer feedback and fact-based data gathering and analysis
techniques to drive process improvement.
A process improvement method relying on customer feedback and fact-based data gathering and analysis
techniques to drive process improvement.
Refers to a process that generates no more
than 3.4 defects per million opportunities.
Refers to a process that generates no more
than 3.4 defects per million opportunities.
Sometimes associated
with the term zero defects.
Sometimes associated
with the term zero defects.
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Abandoning ethical standards in business would lead to a lower quality of life with less
desirable goods and services at higher prices.
Why Have Ethical Standards?Why Have Ethical Standards?
Without ethical standards in business, theeconomy, and all of us who depend on it for
jobs, goods, and services, would suffer.
Ethical standards in business are essential for asmooth functioning economy.
Ethical standards in business are essential for asmooth functioning economy.
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Company Codes of ConductCompany Codes of Conduct
EmployeesEmployees CustomersCustomers SuppliersSuppliers
And to the communities inwhich the company operates.
And to the communities inwhich the company operates.
Broad-based statements of aBroad-based statements of acompany’s responsibilities to:company’s responsibilities to:Broad-based statements of aBroad-based statements of acompany’s responsibilities to:company’s responsibilities to:
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Codes of Conduct on the Codes of Conduct on the International LevelInternational Level
In addition to integrity and objectivity, resolution of ethical conflicts, competence, and confidentiality, the IFAC’s code deals with the accountant’s ethical responsibilities in:
1. Taxes,2. Independence,3. Fees and commissions,4. Advertising and solicitation,5. Handling of monies, and6. Cross-border activities.
The Code of Ethics for ProfessionalAccountants, issued by the International
Federation of Accountants (IFAC), governs the activities of professional accountants worldwide.
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Corporate GovernanceCorporate Governance
The system byThe system bywhich a company is directedwhich a company is directed
and controlled.and controlled.
Board ofDirectorsBoard ofDirectors
TopManagement
TopManagement
StockholdersStockholders
To pursueobjectives of
Incentives andmonitoring for
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The Sarbanes-Oxley Act of 2002The Sarbanes-Oxley Act of 2002The Sarbanes-Oxley Act of 2002 was intended to protect theinterests of those who invest in publicly traded companies byimproving the reliability and accuracy of corporate financialreports and disclosures. Six key aspects of the legislation include:
The Act requires both the CEO and CFO to certify in writing that their company’s financial statements and disclosures fairly represent the results of operations.
The Act establishes the Public Company Accounting Oversight Board to provide additional oversight of the audit profession.
The Act places the power to hire, compensate, and terminate public accounting firms in the hands of the audit committee.
The Act places restrictions on audit firms, such as prohibiting public accounting firms from providing a variety of non-audit services to an audit client.
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The Sarbanes-Oxley Act of 2002The Sarbanes-Oxley Act of 2002(continued)
The Act requires a public company’s independent auditor
to issue an opinion on the effectiveness of the company’s
internal control over financial reporting to accompany
management’s assessment, and both are included in the
company’s annual report.
⑥ The Act establishes severe penalties for certain behaviors,such as:
• Up to 20 years in prison for altering or destroying anydocuments that may eventually be used in an officialproceeding.
• Up to 10 years in prison for retaliating against a“whistle blower.”
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Enterprise Risk ManagementEnterprise Risk ManagementExamples of Controls to
Examples of Business Risks Reduce Business Risks● Products harming customers ● Develop a formal and rigorous
new product testing program● Losing market share due to the ● Develop an approach for legally unforeseen actions of competitors gathering information about
competitors' plans and practices● Poor weather conditions shutting ● Develop contingency plans for down operations overcoming weather-related
disruptions● Website malfunction ● Thoroughly test the website
before going "live" on the Internet● A supplier strike halting the flow ● Establish a relationship with two of raw materials companies capable of providing
raw materials● Financial statements unfairly ● Count the physical inventory on reporting the value of inventory hand to make sure that it agrees
with the accounting records● An employee accessing ● Create password-protected barriers unauthorized information that prohibit employees from
obtaining information not needed to do their jobs
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Corporate Social ResponsibilityCorporate 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
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End of Chapter 1