B-6 2013 Flashcards
List the five process management activities.
- Design 2. Modeling 3. Execution 4. Monitoring 5. Optimization
List the elements of PDCA.
- Plan 2. Do 3. Check 4. Act
List the benefits of process management.
- Efficiency 2. Effectiveness 3. Agility
Define: Outsourcing
Outsourcing is generally defined as the contracting of services to external providers. Examples might include a payroll service or even a call center to provide support or back office services for a fee. A contractural relationship exists between the business and its soutsource provider.
Define: JIT and the underlying concept of JIT
Just-in-time (JIT) management anticipates achievement of efficency by scheduling the deployment of resources just in time to meet customer or production requirements. The underlying concept of JIT is that inventory does not add value. The maintenance of inventory levels purely produces wasteful costs. Reducing inventory by ensuring that resources arrive only if they are needed (just in time for use) is the idea behind JIT.
Define: Demand flow
Demand flow manages resources using customer demand as the basis for resource allocation. Demand flow contrasts with resource allocations based on sales forecasts or master scheduling.
Define: Theory of constraints
Theory of contraints anticipates that organizations are impeded from achieving objectives by the existence of one or more constraints. The organization or project must be consistently operated in a manner that either works around or leverages the constraint.
What are the five steps in the theory of constraints?
- Identification of the constrain. 2. Exploitation of the constraint. 3. Subordinate everything else to the above decisions. 4. Elevate the constraint. 5. Return to the first step.
What is Six Sigma?
Six Sigmaanticipates the use of rigorous metrics in the evaluation of goal achievement. The program is a continuous quality-improvement prgram that requires some specialised training. Six Sigma expands on the Plan-Do-Check-Act model of process management and logically anticipates methodologies to improve current processes and develop new processes.
In Six Signma, what is DMAIC?
Existing product and business process improvements (DMAIC): 1. Define the problem. 2. Measure key aspects of current process. 3. Analyze data. 4. Improve or optimize current processes. 5. Control.
In Six Signma, what is DMADV?
New product or business process development (DMADV): 1. Define design goals. 2. Measure CTQ (Critical to Quality issues). 3. Analyze design alternatives. 4. Design optimization. 5. Verify the design.
Define: Project management
Project management consists of five major processes carried out by a project manager tasked with balancing the needs and expectaions of various stakeholders against the organization’s constraints. The processes include authorization, planning, implementation, monitoring, and closing.
Define: Project charter
Project charteris a document that contains a business justification to fulfill the needs and expectations of initial stakeholders by carrying out a statement of work that will achieve the project objectives. If formally establishes a partnership between the requesting organization and the receiving organization.
Define the roles of project members.
Project members perform the project tasks, and their roles generally include: 1. Carrying out the work and producing the deliverables that have been defined by the project manager. (Project members may be either individuals or organizations.) 2. Understanding the work that must be completed, planning out the assigned activities in more detail if needed; completing the work within the budget, time, and quality expectations, and proactively communicating the status of their work to the project manager.
Identify the project sponsor and that role.
An individual at the executive level of management who is responsible for allocating funding as well as resources to the project.
Identify the executive steering committee and its role.
A steering committee is to a project what the board of directors is to a company, both groups direct, but they do not manage on a daily basis. A group of executive level people or external organizations charged with regular oversight of a project and taking responsibility for the business issues associated with a project.
The quality of deliverables should be SMART. Define: SMART
Specific, Measurable, Attainable, Relevant, Time based
Describe the impact of globalization.
Globalization results in deeper integration of the world’s individual national economies and makes those economies more interdependent.
What is a frequently used statistical measure for globablization?
World trade expressedas a percentage of GDP.
What is meant by shift in economic balance of power?
The ability of the world’s emerging nations to contend with the economies of the industrialized world for power, resources, influence, etc., is a change or shift in the economic balance of power from previous decasdes. Balance of power theory holds that the states that are members of the global economy can either engage in balancing or bandwagoning behavior. An emerging nation might side with the US or other industrialized nations in an embargo or other economic sanction (bankwagoning) or could join with other emerging nations in ignoring the leadership of the US (balancing). The significance of their decision to change the impact of the embargo represents an important shift in the balance of economic power.
Name the motivations for developing international business operations.
- Comparative Advantage: Creating economic advantage through specializations. 2. Imperfect Markets: Barriers of trade. 3. Product Cycle: Establishment of foreign subsidiaries to more efficiently capitalize on foreign demand for domestic products.
Identify three inherent risks of international business operations.
- Exchange rate fluctuation 2. Operating in foreign economices 3. Polical risk
Identify three categories of exchange rate exposure.
- Transaction risk (exposure) 2. Economic risk (exposure) 3. Translation risk (exposure)
Name the factors influencing exchange rates.
Trade-Related Factors: 1. Relative inflation rates 2. Relative income levels 3. Government controls. Financial Factors: 1. Relative interest rates 2. Capital flows.
Distinguish beween diversifiable and non-diversifiable risk.
D = Diversifiable Risk; U = Unsystematic Risk (Non-market/firm specific); N = Non-diversifiable Risk; S = Systematic Risk (Market).
Define a futures hedge.
A futures hedge entitles its holder to either purchase or sell a particular number of currency units of an identified currency for a negotiated price on a stated date.
Define money market hedge.
A money market hedge uses international money markets to plan to meet future currency requirements by either investing internationally in a manner that times investment maturities with settlement of foreign payables or borrows against foreign receivables in a manner that times the maturity of borrowings with the collection of receivables.
Name the currency option hedge used to mitigate transaction exposure to exchange rate risk for payables. Name the currency option hedge used to mitigate transaction exposure to exchange rate risk for receivables.
Call Option: Option to buy a foreign currency (for currency hedges) at a pre-negotiated price; mitigates payables exchange rate risk. Put Option: Option to sella foreign currency (for currency hedges) at a pre-negotiated price; mitigates receivable exchange rate risk.
Name an objective of transfer pricingbetween foreign and domestic subsidiaries and their parent companies.
Minimization of taxation.
What are the advantages and disadvantages of short-term financing?
Advantages: Increased liquidity; Incresed profitability; Decreased financing costs. Disadvantages: Increased inherent rate-risk; Increased credit risk.
What are the advantages and disadvantages of long-term financing?
Advantages Decreased interest rate risk; Decreased credit risk. Disadvantages: Decreased liquidity; Decreased profitability; Increased financing costs.
Differentiate between a line of credit and a letter of credit.
A line of credit is a revolving line of credit with a bank that is for a defined term and renewable prior to or upon expiration. A letter of credit is a third party guarantee (usually by a bank) of obligations incurred by a company.
Compare an operating lease to a capital lease (as it pertains to a lessee).
In an operating lease, the lessee makes rent (expense) payments to a lessor in exchange for the use of an asset for an insignificant portion of its useful life. In a capital lease, the lessee essentially acquires the assets from the lessor either in substance or in legal firm.
Define a debenture and a distinguishing characteristic of a subordinated debenture.
A debenture is an unsecured obligation of the issuing company. A subordinated debentureis a bond issue that is unsecured and ranks behind senior creditors in a bankruptcy or liquidation scenario.
Why do creditors use debt covenants in lending agreements and how could this impact the issuer?
Debt covenants are stipulated in lending agreements to protect the creditors’ interests by limiting or prohibiting certain actions of the debtors that may be harmful to the creditors’ interests (i.e. issuing more debt). Debt covenants are disadvantageous to the issuer as they may restrict certain management activities (i.e. selling assets).
List the major valuation methods.
Discounted Cash Flow (DCF). Price Multiples: Price Earnings (P/E); PEG (Price/Earnings per unit of growth); Price Sales (Price/Sales).
List the behavioral issues that potentially distort decisions.
Assuming stereotyped characterizations are accurate; Adjusting from presumed baselines; Using intuition rather than analysis; Excessive optimism; Confirmation bias or using only data that supports conclusions; Overconfidence; Illusion of control.
What decision context or environment is considered the most distracting?
Losses are considered the most distracting backdrop for decisions (far more distracting than gains).
What is the implication of an “aversion to a sure loss”?
A manager’s fears of accepting a known or guaranteed loss may actually increase losses as projects are continued and losses are sustained longer than appropriate in hopes that the project will become profitable.
How does the International Professional Practices Framework define Internal Auditing?
- Internal auditing is an independent and objective assurance and consulting activity designed to add value and improve an organization’s operations. 2. Internal auditing adds value and helps an organziation accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of the following: a. Risk management b. Control c. Governance processes.
Describe the attributes standards of the International Standards for the Practice of Internal Auditing.
Atribute standards address many of the same issues as the general standards under generally accepted auditing standards. Issues related to auditor independence, technical proficiency, and professional care are addressed here.
Describe the performance standards of the International Standards for the Practice of Internal Auditing.
Performance standards address many of the same issues as fieldwork standards and reporting standards under GAAS. Planning and supervision of the engagement and documentation of evidence or basis for conclusions are addressed along with generic reporting requirements.
Describe the implementation standards of the International Standards for the Practice of Internal Auditing.
Implementation standards are embedded within the attribute and reporting standards to address the requirements of implementing both assurance and consulting activities.
Identify and describe the four elements of the Code of Ethics adopted by the International Standards for the Practice of Internal Audit.
- Integrity: Internal auditors are to perform work with honesty, diligence, and responsibility, observing both law and organization objectives. 2. Objectivity: Internal auditors exhibit professional objectivity in gathering, evaluating, and communicting information and should not participate in relationship that represent conflicts of interest. 3. Confidentiality: Internal auditors do not disclose information without appropriate authority or use information for personal gain. 4. Competency: Internal auditors apply the knowledge, skills, and experience needed in the performance of internal auditing services.
Attribute Standards are defined by what four major headings?
- Purpose, Authority, and Responsibility 2. Independence and Objectivity 3. Proficiency and Due Professional Care 4. Quality Assurance and Improvement Program
Performance Standard are defined by what seven major headings?
Managing the Internal Audit Activity; Nature of Work; Engagement Planning; Performing the Engagement; Communicating Results; Monitoring Progress; Management’s Acceptance of Risk
What are the two primary features of managng the internal audit activity?
- Effective Management: Effective management is characterized by ensuring that activities are contemplated by the internal audit charter and that activities conform to the definition of internal audit, the Standards and the Code of Ethics. 2. Added Value: Added value is characterized by objective and relevant assurance and contributions to the effectiveness and efficiency of governance, risk management, and control processes.
What major features of an internal audit engagement must be documented as part of planning?
Engagement objectives; Engagement scope; Engagement resource allocation; Engagement work program
In performing an engagement, the internal auditor must identify information that meet which four criteria?
Sufficiency, Reliable, Relevant, Useful
Communication of the results of an internal audit engagement must generally include what elements?
Communications must include the following: 1. Engagement objectives 2. Engagement scope 3. Conclusions 4. Recommendations 5. Action plans
List and define the three parties involved in assurance services provided by an internal audit engagement.
- Auditee: The person or group directly involved with the entity, operation, function, process, system, or other subject matter. 2. Internal Auditor: The person or group making the assessment. 3. User (sponsor): The person or group using the assessment.
List and define the two parties involved in consulting services provided by an internal audit engagement.
- Internal Auditor: The person or group offering the advice. 2. User (Sponsor): The person or group seeking and receiving the advice.
