Chapter 1

Competing in Global Marketplace

-Barriers to international trade have fallen -More accurate and timely information needed

Summary of IMA Ethical Standards

-Competence -Confidentiality -Integrity -Credibility

Manager's Responsibilities

-Decision making Which concludes: -Planning -Directing -Controlling

TQM (Total Quality Management)

-Goal to provide customers with superior products and services -Continuously set higher goals for quality -International Organization for Standardization (ISO)-ISO 9001:2008

Changing Roles of Management Accountants

-Impact of technology -Ensuring accurate financial records -Planning, analyzing, and interpreting accounting data -Providing decision support

Sarbanes-Oxley Act of 2002 (SOX)

-Restore trust in publicly traded corporations, management, financial statements, and auditors. -Independent audit committee -Increases white-collar crime penalties CEO/CFO requirements: -Financial statements -Internal control structure -Annual assessment

Planning

-Setting goals and objectives and how to achieve them. -Budgets Examples: -Generates more sales via opening new stores -Reduce labor costs by reducing store hours

Shifting Economy

-Shift away from manufacturing toward service -Managerial accounting has expanded

Enterprise Resource Planning (ERP)

-System that integrates a company's functions, departments, and data Advantages: -Streamline operations -Respond quickly to changes -Replace separate software systems Disadvantage: -Expensive

Lean Operations

A philosophy and business strategy of manufacturing without waste -Lowers costs -Increases competitive position

Required Skills of Managerial Accountants

Analytical skills, Microsoft Excel skills, Ability to work on a team, Written and Verbal communication, Business Knowledge, Accounting knowledge

The internal audit function reports to the CFO or the _________ and the __________________.

CEO; audit committee.

The company's operations are the direct responsibility of the _____________.

COO.

The ____________ and the _____________ report to the CEO.

COO; CFO

The Institute of Management Accountants (IMA) issues the ____________________.

Certified Management Accountant (CMA).

The certification launched in 2012 jointly by the American Institute of Certified Public Accountants (AICPA) and the Chartered Institute of Management Accountants (CIMA) is called the __________________________.

Chartered Global Management Accountant (CGMA).

Even though Meagan's company is adopting a new ERP system that impacts the accounting system, Meagan (a management accountant) has not completed the required ERP training from the vendor.

Competence

Jack, an accountant for a smartphone manufacturer, told his friends about a new model of smartphone being released by the company in the following quarter. For competitive reasons, the company keeps its models shrouded in secrecy until the release date.

Confidentiality

Management analyzes the impact of a recent advertising campaign by comparing budgeted sales to actual sales.

Controlling

Oliver provides an analysis of the profitability of a company-owned store that is managed by Oliver's best friend, Bob. Oliver neglects to include allocated fixed costs in Bob's report. If Oliver includes those allocated fixed costs, the store will show a loss and Bob's job could be in danger.

Credibilty

Management reviews hourly sales reports to determine the level of staffing needed to staff the customer service desk.

Directing

Management uses information on product costs to determine sales prices.

Directing

To lower production costs, management moves production to China.

Directing & Controlling

Controlling

Evaluating results of operations against plans and making adjustments as needed Examples: -Comparing budgeted sales with actual sales to take corrective actions -Comparing budgeted product costs against actual product costs to take corrective actions

Focus is on the past.

Financial accounting

Information is verified by external auditors.

Financial accounting

It is governed by Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards

Financial accounting

Primary users are external (i.e., creditors, investors).

Financial accounting

Reporting is based mainly on the company as a whole.

Financial accounting

Reports are usually prepared quarterly and annually.

Financial accounting

The primary characteristics of information are that it must be reliable and objective.

Financial accounting

Steps to Resolve Ethical Dilemmas

Follow company's policies for reporting unethical behavior. If not resolved: -Discuss with immediate supervisor -Discuss with objective advisor -Consult an attorney

The CFO directed that certain expenses be reclassified as assets, so that target profit could be achieved. The CFO rationalized that jobs would be saved by reaching the targeted income figures.

Integrity

Yimeng, a purchasing agent for her company, received two tickets from a supplier to the upcoming Ohio State versus University of Michigan football game. These tickets sell for over $500 each.

Integrity

Focus is on the future.

Managerial accounting

It is not governed by legal requirements.

Managerial accounting

Main characteristic of information is that it must be relevant.

Managerial accounting

Primary users are internal (i.e., company managers).

Managerial accounting

Reports are prepared as needed.

Managerial accounting

Reports tend to be prepared for the parts of the organization rather than the whole organization.

Managerial accounting

Just-in-Time Inventory (JIT)

Manufactured "just in time" to fill orders Reduces: -Raw materials inventory -Finished goods inventory -Storage costs -Handling costs

Ethical behavior

Means doing the right thing, regardless of consequences. Examples of unethical behavior: -Allowing reimbursement of false expense reports -Manipulating income -Performing tasks not qualified to perform

Unethical vs. Illegal Behavior

Not all unethical behavior is illegal, but all illegal behavior is unethical. Unethical behavior includes: -Dishonesty -Unfairness -Lack of objectivity -Irresponsibility

Directing

Overseeing the company's day-to-day operations Examples: -Using daily/weekly sales reports to adjust marketing strategies -Using product cost reports to adjust raw material usage

Management decides to increase sales growth by 20% next year.

Planning

Institute of Management Accountants (IMA)

Professional association for management accountants. IMA's functions: -Certification (CMA) -Forum for research -Practice development -Education -Knowledge sharing -Ethical standards -Public education

International Financial Reporting Standards (IFRS)

Results of globalization -Consistent reporting standards needed worldwide -SEC is studying IFRS

The monthly professional magazine published by the Institute of Management Accountants is called ______________________.

Strategic Finance.

The certification offered by IMA focuses on ________________ and ________________ topics.

accounting; finance

A subcommittee of the board of directors is called the _____________.

audit committee.

To earn CMA certification, a candidate must have a ________________ degree. The CMA exam can be taken, however, before finishing this degree.

baccalaureate

The CEO is hired by the ____________.

board of directors.

Failing to read the specifications of the software package before purchasing it violates the _______ standard.

competance

Skipping continuing education sessions could violate the requirement to maintain professional ___________. If your company paid for you to attend the conference, skipping the sessions also violates the ___________ standard.

competence; integrity

Providing earnings information to your sister before it is publicly announced violates the ______________ standard.

confidentiality

Financial accounting, managerial accounting, and tax reporting are the direct responsibilities of the _____________.

controller.

Failing to provide job description information to management because you fear it may be used to cut a position in your department violates the ___________ standard.

credibility

Management accountants often work on _____________________.

cross-functional teams.

Stealing from your employer is a violation of the _________ standard.

integrity

Raising capital and investing funds are the direct responsibilities of the _______________.

treasurer.