Section B - Chapter 6 - 10 Flashcards
Explain FeedBack and FeedForward Control
FB = Variances between planned and actual output and modification to acheive future results (Outcome is certain as it has happened) - This is most common
FF = Forecasting differences between planned and actual and making adjustments before the event to prevent such differences (e.g Bank Overdraft/Material Variances)(Outcome is uncertain as its not yet occured)
Explain the below:
Primary Feedback
Secondary Feedback
Negative Feedback
Positive Feedback
Open loop system
Closed loop system
P FB = reported to line manager in form of control reports, comparing act vs bud. Info may not be fed back to anyone higher
S FB = Reported to higher level and can lead to plan being reveiews and possible changed
N FB = info taken to revese a deviation from standard
P FB = info taken to reinforce deviation from standard
OLS = Where there is scope with control system for outside involvement (Manager has 3 options)
CLS = Where contol is automatic (theromstat)
What are some of the criticisims of Traditional MGMT A/c
- Cumbersome with little value added
- Systems are too formal
- Some assumtions are questionable (treating labour as variable when in ST its fixed)
- Systems may not take into account business strategy so tend to restrict busines
What are the criticisms of budgets (aka Beyond Budgeting)
- Restrict flexibility of business to develop
- Committment - therefore a constraint
- Seens as Top Down
- Reinforces barriers between depts
- Bureaucratic, Internally focused and time consuming
What are the conditions needed for JIT to be successful
- Reliable supplier
- Stable high demand
- Co-ordination of daily production of supplier and consumer
- Suitable factory layout
- Get it right first time
- No scrap
- Lower cost as lower inventory
- Continous inprovement
What are the operational requirements needed for JIT
- High quality and reliability
- Speed throughout
- Flexibility
- Lower cost
Under TQM what are the cost of quality
- Prevention (conformance)- costs of reducing or avoiding defects - quality equipment, quality circles
- Appriasal costs (conformance) - Asses actual quality achieved - inwards inspection and outward inspection
- Internal Failure costs (non-conformance) - reworking or fixing when quality has not been met
- External Failure costs (non-conformance) - Customer complains, warrenty claims from bad quality
What are the 6 objectives of Transfer Pricing
- Goal Congruence
- Perfmance measurement
- Maintaining divisional autonomy
- Minimising global tax liability
- Recording movement of goods and services
- fair allocation of profits
JIT & TQM environements include what accounting practices?
- Throughput - as it tries to remove bottlenecks
- Blackflush - as it requires low inventory
- NFPI - help reduce other aspects of the production
WHat is EVA
Perfomance of company should be measured on value that has been added to biz during the period
EVA - NOPAT minus CapitalCharge
Capital charge - Economic value of business assets x CoC
What are the main difference between EVA and RI
- RI uses Account profit and value of Cap Employeed
- EVA is calculated using estimated value of economic profit and economic value of Cap Employed
Economic values are obtained by making adj to accounting profit and accounting CE
What are the dimension sof a balance scorecard and examples
Financial
Customer
- Target new customers (and rentention)
- Orders fulfilled
- Market Share
- Customer satisfaction
Internal Biz
- % of tenders accepted by customers
- % of products that need to be reworked (TQM)
Innovation and learning
- # of new products launched
- Revenue per employee
- Productivity
- % of revenue coming from new products
What can be the consequences of dysfuntional behaviour
Tunnel vision - Focus on performance measure to detriment of other areas of business
Myopia - Short sight at expense of LT
Measure fixation - Focus on performance indicators rather than underlying objective
Misrep - False representation
Ossification - Unwilling to change
Sup-Optimisation - Pursiut of local narrow objectives at expense of bigger organisation ones
Gaming - pursue particular performance when they know its not in best interest of business
What are the 4 elements of Fraud Risk MGMT
Fraud Prevention - Reduce oppurtinuty and remove temptation
- Polices and procedures
- Whistleblowing
- Risk Awareness
- Internal controls
Fraud Detection - (Auditors do not find fraud)
- Internal Audit should look out for possible fraud and evidence
- Unusal Behaviour
- Lack of documentation
- Accounting difficulties
Fraud Response
- Purpose of response plan
- Corporate policy
- Definition of fraud
- Roles and responsibilites
- The Response
- The Investigation
- Objectives with respect to fraud
- Follow up action
Risk Deterrance
What are who are the responsibilites of fraud response plan
- Managers - detect fraud in their area
- FD - Overall responsibility for response ot fraud
- Can be delegated to fraud officer
- HR - Discipline
- Audit committe - review details through reports of fraud
- IA - investigating fraud
- EA - Expertise
What are the principles of ethics
- Integrity - Straightforward and honest in all professional realtionships
- Objectivity - Do not allow bias or conflict of interest
- Professional competence - Knowledge and skill
- Confidentialty
- Professional behaviour - abide by laws and do not discredit the profession
What are the ethical threats
- Self Interest - financial or other seld interest conflict
- Self Review
- Advocacy - When a person promotes a psotion or opinion that will subsequently compromise further objectivity
- Familiarity
- Intimidation
What are the safeguard against ethical threats
- Disciplanry actions
- Training
- Internal controls
What are the roles of Audit committee
- Integrity of FS
- Review internal controls
- Review and monitor effectivness of IA
- Recommendation of External Auditors and renumeration
- Review EA effectivness and independence
- Deveop and implement policy on engagement of EA to supply NON-AUDIT services
What are the responsibilites of Risk MGMT
- Own entire risk mgmt process
- identification, maintenance of risk register, assessment and establishment of controls to manage those risk
- Develop biz risk response strategy
- Training to biz about risk awareness
What are the responsibilites of IA
- Monitor and review the effectiveness of the controls implemented by Op’s managers
- Test and evaluate the controls that have been implemented
- Wider view is that they can carry out special investigation and review efficent use of resources
- Help ops team identify risks (but not primary function)
What may some of the scope of IA be
- Special investigations
- Review the 3 E’s of operations
- Assit in identifying key risks
- Assit in external audit procesdures
- Review complicance with laws and regulations
- Review accounting and internal controlf systems
What procedures can be put in place to reduce risks of outsourcing IA
- Regular quality reviews
- Performance measures, mgmt inof and risk reporting
- procedures manuals
- Seperate depts covering IA and EA
- Agreed scope
When scoping work of EA what should they consider re the IA function
- Status of IA withing Org
- Scope of IA
- Competence of IA
- Objectives of IA aid objectives of EA
- Whether MGMT act on recommendations of IA
- If IA work was planned, supervised, reviewed and documented
What are the 3 Audit risks
- Inherent Risk - Value is FS is incorrect
- Control - risk that current controls are not enough to prevent or detect material mis-statements
- Detection - Audtiors will not detect incorrect amounts in FS
What should be included in the Audit report
- Objectives of Audit
- Summary of the process taken by auditor
- Results of tests carried out
- Opinion
- Recommendations (must be practical and cost effective)
What are some of the Adv and Dis Adv of outsourcing IA
Adv
- Increase independence
- Access to specialists
- Turnover of staff passed on
DisAdv
- Flexibility and Availabilty may not be as readily available
- Decisions relating to IA may be based on cost
- Possible conflict of intertest
- Loss of control
Explain Competitive/Internal/Process benchmarking
Competitive - help identify risk areas where Org is performaing worse that rivals but can be difficult to convince rival to share secrets
Internal - focus on other parts of the Org so can fail to provide insight into performance vs rivals but can help identofy underperforming divisions
Process - can be diffcult, as they may be fewm if any, non-competing Org that have the same core processes - it is therefore undertaken for non core activities
What are the types of Audit
Compliance - check implementation of rules, regulations and procedures
MGMT Audit - identify existing and potential mgmt weakness
System Audit - objective of the business system - can refer to any type of system
Risk based
Enviromental - controld around environment and regulations
What are the principles of UK Corp Gov
- Leadership
- Effectiveness
- Accountability
- Remuneration
- Relations with shareholders
What is the audit committees role
- Monitor the integrity of the FS
- Review biz internal financial controls
- monitor and review effectivness of internal audit
- recommendations to the board for re-appointment and appointments
- review and monitor external auditors indepedence
- develop and implement policy on engagement of external auditors
In Corp Gov what/who have responsibilites
Board
- Maintaining sound internal control system
- reveiw the effectivness of internal controls
- reporting to S/h that the review has been carried out
MGMT
- identify and evaluate the risks faced by the company for consideration to the board
- design, operate and monitor internal control system
