Exam 2 Flashcards
what is goal congruence
aligning the goals of individuals and organizations
what are the three broad methods for aligning goals
policies and procedures, monitoring, incentive schemes and performance evaluation
what is strategic management
the art and science of formulating, implementing, and evaluating cross functional decisions that enable and org to achieve its objectives
what are the three management function
planning, directing, controlling
what is planning
looking ahead and establishing objectives
what is directing
coordinating a companies diverse activities and human resources to produce a smoothly running operation
what is controlling
the process of keeping the companies activities on track
what are the steps in planning
identify alternatives, select alternative that best achieves companies objectives, develop budgets to guide progress towards the selected alternative
how are reports used in controlling
actual vs planned reports show the differences in outcome from planning and help make further decisions to guide the org towards objectives
what is corporate social responsibility
when companies take into account people, profit, and the planet instead of just profit
what is just in time inventory
when goods are manufactured just in time for use instead of ahead of time creating stockpiles
what is the theory of constraints
identifying bottle necks or constraints, fixing them, then moving on to the next largest bottleneck or constraint
what is the value chain
all activities associated with providing a good or service
what is cost behaviour
how a cost will react to changes in the level of business activity(sales)
what is a controllable cost
a cost that is capable of being regulated by a manager
what is a non controllable cost
a cost that is not capable of being regulated by a manager
what is the COGS equation
beginning inventory + additions or purchases - ending inventory
what are direct costs
costs traceable to a single cost object
what are indirect costs
costs that can not be traced to a single cost object
what are the classifications of manufacturing costs
direct materials, direct labour, overhead costs
what are direct materials
the cost of raw material that is used to make and can be conveniently traced to the finished product
what is direct labour
cost of salaries, wages, and fringe benefits for personnel who work directly on manufactured products
what are overhead costs
all other manufacturing costs including indirect materials, indirect labour and other costs
what are the inventory classifications for a manufacturer
raw materials, work in progress, finished goods
what is cost allocation
the process of allocating common costs to individual products
what are budgets
detailed plans that set out, in monetary terms, plans for income and expenditures in a future period
what are the steps in the budgetary process
develop a budget, analyze differences between budget and actual outcome, take corrective actions, modify future plans, repeat
what is variance
the difference between actual and projected figures
favourable variance is is when actual cost is less than budgeted
unfavourable variance is when actual cost is higher than budgeted
sales budgets have opposite for favourable vs unfavourable
what is a static budget
a projection of budget data at one level of activity
what is a flexible budget
a projection of budget data at multiple levels of activity
what are the steps to making a flexible budget
identify the activity index and range of activity
identify VC and budgeted VC per unit
identify fixed costs
prepare the budget for selected activity increments
what is responsibility accounting
accounting information that is structured by responsibility centres
what is the point of responsibility accounting
it is used to motivate, evaluate, and reward based on only what can be controlled
what is a cost centre
it incurs costs but does not directly generate revenues such as the accounting department of a mechanics
what is a profit centre
incurs costs and also generates revenues
what is an investment centre
incurs costs, generates revenue, and has control over the investment funds that are available for use such as a subsidiary company
what is the controllable margin formula
sales - VC - controllable FC
contribution margin - controllable FC
what is the contribution margin formula
sales - VC
what is the contribution margin % formula
(contribution margin / sales) x 100
what is the formula for ROI
controllable margin or operating income / average operating assets
margin x turnover
what is the formula for profit margin
operating income / sales
what is the formula for turnover
sales / average operating assets
what are the three ways to increase ROI
increase sales, reduce expenses, reduce assets
what are the four types of audits
operational, compliance, financial statement, tax
what are operational auditsq
an examination of the manner in which an org conducts business with the goal of finding ways to improve ops
what are compliance audits
an examination of an orgs adherence to certain guidelines or regs
what are financial statement audits
an examination of an entities financial reporting
what are tax audits
the CRA or some tax agency checking to ensure reported tax data is correct
what are internal audits
audits done internally to improve ops, ensure reliability and integrity of reporting, safeguard assets, and ensure compliance
who does the internal audit committee report to
the audit committee to maintain independence
what is external auditing
performing checks to ensure the financial statements and or other data prepared for external use are acurate
what is the objective of an audit
enable the auditor to express an opinion as to whether the statements are prepared in a material sense in conformity with an applicable framework such as GAAP
what are the four audit opinions
unmodified, qualified, adverse, disclaimer of opinion
what is an unmodified opinion
there are no material misstatements
what is a qualified opinion
financials are fairly reported with the exception of a specific area
what is an adverse opinion
the financials are misrepresented, misstated, and do not accurately reflect the orgs financial position and health
what is a disclaimer of opinion
no opinion is being given regarding the statements due to some lack of information typically
what is business risk
the risk that a company may fail to achieve goals due to economic changes, tech changes, or for management decisions(auditors do not report on business risk)
what is information risk
the risk that the financial information fails to reflect economic substance of business activities(the risk financial info is unreliable)
what are the two categories of information risk
accounting risk and audit risk
what is accounting risk
the risk that accounting info in the statements does not accurately reflect the underlying economic events of the business
what is audit risk
the risk of insufficient evidence being gathered on the facts concerning the clients economic circumstances and an inappropriate opinion is expressed
what are the three parts to audit risk
inherent risk, control risk, detection risk
what is inherent risk
the probability a material misstatement will occur in the statements
what is control risk
material misstatements will not be prevented or detected by internal controls
what is detection risk
material misstatements will not be detected by the auditor
what is fraud
a deliberate deception practiced so as to secure unfair or unlawful gain
what is occupational fraud and abuse
the use of ones occupation for personal enrichment thorugh he deliberate misuse of the employing orgs resources
what fraud is categorized as corruption
conflicts of interest, bribery, illegal gratitudes, economic extortion
what fraud is categorized as asset misappropriations
cash misappropriation, inventory and other asset misappropriation
what are the categories of fraudulent statements
financial and non financial
what are the elements of fraud
a material false statement, knowledge that the statement was false when it was uttered, reliance on the false statement by the victim, a risk that damages may be suffered as a result of the victims reliance on the false statement
what is larceny
theft
what is conversion
unauthorized exercise of the right of ownership over property belonging to another, to the alteration of their condition or the exclusion of the owners rights
what is embezzlement
taking someone else’s property that you originally acquired lawfully in a position of trust
what is breach of fiduciary duty
breach of duty of care when in a highly trusted position
what is fraud examination
resolving allegations of fraud from tips, complaints, or accounting clues
what is involved in fraud examination
documentary evidence, interviewing witnesses, writing investigative reports, testifying, assisting in the detection and prevention of fraud
what is the order of tools used in fraud examination
observation, document analysis, neutral third party witnesses, corroborative witnesses, co-conspirators, target
what is a prediction in fraud examination
a totality of circumstances that would lead a reasonable, trained, and prudent individual to believe fraud has, is, or will, occur
what are the three points to the fraud triangle
pressure, opportunity, rationalization
what are things that lead to perceived opportunity to commit fraud
general information, technical skill, poor controls
what are the three types of tax entities
individuals(T1), Corps(T2), Trusts(T3)
what are the 7 types of individual income
employment income, business income, property income, capital gains, other income, other deductions, losses
what are examples of other income
interest, dividends, rental income
what are examples of other deductions
RRSP contributions, child care expenses
what is the process for calculating taxable income
add up all income sources and subtract losses, capital gains are only 50% taxable
what are tax credits
things that directly reduce taxes payable
how do employees pay taxes
they pay throughout the year through withholding tax on each pay check and at the end of the year file a tax return and either get back overpaid taxes or pay more for underpaid taxes
how do self employed individuals pay taxes
can pay throughout the year in instalments and file a tax return to adjust for nay over or underpayment
what is CPP
the Canada pension plan that employees pay into through withholding tax throughout the year based on a percentage of income
what is EI
employment insurance that Canadian employees pay into through withholding tax and can be claimed back in the event of loss of employment
who is required to file a tax return
any Canadian residence who have taxes payable. if the government owes you money you don’t need to file but you will not get the money
when are tax returns due
for normal employees it is April 30th of the following year
for self employed individuals and their spouses is is June 15th of the following year but the balance owing still must be paid by April 30th
what is an RRSP
a registered retirement savings plan in which contributions are tax deductible but withdrawals are taxable and their are contribution limits
what is a TFSA
a tax free savings account in which contributions are not deductible and there is a contribution limit but withdrawals are not taxable
how do you calculate current unused TFSA room
last years withdrawals + current year annual TFSA limit - current year contributions
what is a FHSA
first home savings account which has a lifetime contribution limit of $40,000 and an annual limit of $8,000. contributions are tax deductible and withdrawals for first home purchase are non taxable. FHSA lasts for 15 years after opening
