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.