Managerial Accounting and the Business Environment

1. Managerial Accounting and the Business Environment Chapter 1

2. Learning Objective 1 Understand the role of management accountants in an organization.

3. Organizational Structure Decentralization is the delegation of decision-making authority throughout an organization.

4. Line and Staff Relationships Line positions are directly related to 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.

5. The Chief Financial Officer (CFO) A member of the top management team responsible for: • Providing timely and relevant data to support planning and control activities. • Preparing financial statements for external users.

6. Learning Objective 2 Understand the basic concepts underlying Lean Production, the Theory of Constraints, and Six Sigma.

7. Business functions making up the value chain Product Customer R&D Design Manufacturing Marketing Distribution Service Process Management A businessprocess is a series ofsteps that are followed in order tocarry out some task ina business.

8. Process Management There are three approaches toimproving business processes . . . • Theory ofConstraints (TOC) • LeanProduction • SixSigma

9. Lean Production Lean thinking can be used to improve business processes that link companies together.  The term supply chain management refers to the coordination of business processes across companies to better serve end consumers.

10. A constraint(also called a bottleneck) is anything that prevents you from getting more of what you want. The Theory of Constraints is based on the observation that effectively managing the constraint is the key to success. Theory of Constraints The constraint in a system is determinedby the step that has thesmallest capacity.

11. Six Sigma 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 morethan 3.4 defects per million opportunities. Sometimes associatedwith the term zero defects.

12. Learning Objective 3 Understand the importance of upholding ethical standards.

13. Code of Conduct for Management Accountants The Institute of Management Accountant’s (IMA) Statement of Ethical Professional Practiceconsists of two parts that offer guidelines for:  Ethical behavior.  Resolution for an ethical conflict.

14. IMA Guidelines for Ethical Behavior Recognize and communicate professional limitations that preclude responsible judgment. Follow applicablelaws, regulationsand standards. Maintain professional competence. Competence Provide accurate, clear, concise, and timely decision support information.

15. IMA Guidelines for Ethical Behavior Do not disclose confidential information unless legally obligated to do so. Do not use confidential information for unethical or illegaladvantage. Confidentiality Ensure that subordinates do not disclose confidential information.

16. IMA Guidelines for Ethical Behavior Mitigate conflicts of interest and advise others of potential conflicts. Refrain from conduct that would prejudice carrying out duties ethically. Integrity Abstain from activities that might discredit the profession.

17. IMA Guidelines for Ethical Behavior Communicate information fairly and objectively. Disclose delays or deficiencies in information timeliness, processing, or internal controls. Credibility Disclose all relevant information that could influence a user’s understanding of reports and recommendations.

18. Without ethical standards in business, theeconomy, and all of us who depend on it forjobs, goods, and services, would suffer. Abandoning ethical standards in business would lead to a lower quality of life with lessdesirable goods and services at higher prices. Why Have Ethical Standards? Ethical standards in business are essential for asmooth functioning economy.

19. Employees Customers Suppliers And to the communities inwhich the company operates. Company Codes of Conduct Broad-based statements of acompany’s responsibilities to:

20. Board ofDirectors Incentives andmonitoring for TopManagement To pursueobjectives of Stockholders Corporate Governance The system bywhich a company is directedand controlled.

21. Should I try to avoid the risk, share the risk, accept therisk, or reduce the risk? Enterprise Risk Management A process usedby a company toproactively identifyand manage risk. Once a company identifies its risks, perhaps themost common risk management tactic is to reduce risks by implementing specific controls.

22. Corporate Social Responsibility Corporate social responsibility (CSR) is a concept whereby organizations consider the needs of all stakeholders when making decisions. Customers Employees Suppliers Communities Stockholders Environmental & Human RightsAdvocates CSR extends beyond legal complianceto include voluntary actions that satisfy stakeholder expectations.