MANAGERIAL ACCOUNTING AND THE BUSINESS ENVIRONMENT Chapter 1 PowerPoint Authors: Susan Coomer Galbreath, Ph.D., CPA Charles W. Caldwell, D.B.A., CMA Jon.

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

1-22

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.

1-33

Process ManagementProcess Management

There are three approaches toimproving business processes . . .

LeanProduction

Theory ofConstraints (TOC)

SixSigma

1-44

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.

1-55

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

1-66

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.

1-77

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.

1-88

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:

1-99

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.

1-1010

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

1-1111

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.

1-1212

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.” 

1-1313

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

1-1414

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

1-1515

End of Chapter 1