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P3 > Section B - Chapter 6 - 10 > Flashcards

Section B - Chapter 6 - 10 Flashcards

1
Q

Explain FeedBack and FeedForward Control

A

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)

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2
Q

Explain the below:

Primary Feedback

Secondary Feedback

Negative Feedback

Positive Feedback

Open loop system

Closed loop system

A

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)

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3
Q

What are some of the criticisims of Traditional MGMT A/c

A
  • 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
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4
Q

What are the criticisms of budgets (aka Beyond Budgeting)

A
  • Restrict flexibility of business to develop
  • Committment - therefore a constraint
  • Seens as Top Down
  • Reinforces barriers between depts
  • Bureaucratic, Internally focused and time consuming
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5
Q

What are the conditions needed for JIT to be successful

A
  • 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
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6
Q

What are the operational requirements needed for JIT

A
  • High quality and reliability
  • Speed throughout
  • Flexibility
  • Lower cost
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7
Q

Under TQM what are the cost of quality

A
  • 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
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8
Q

What are the 6 objectives of Transfer Pricing

A
  • Goal Congruence
  • Perfmance measurement
  • Maintaining divisional autonomy
  • Minimising global tax liability
  • Recording movement of goods and services
  • fair allocation of profits
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9
Q

JIT & TQM environements include what accounting practices?

A
  • Throughput - as it tries to remove bottlenecks
  • Blackflush - as it requires low inventory
  • NFPI - help reduce other aspects of the production
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10
Q

WHat is EVA

A

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

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11
Q

What are the main difference between EVA and RI

A
  • 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

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12
Q

What are the dimension sof a balance scorecard and examples

A

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
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13
Q

What can be the consequences of dysfuntional behaviour

A

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

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14
Q

What are the 4 elements of Fraud Risk MGMT

A

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

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15
Q

What are who are the responsibilites of fraud response plan

A
  • 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
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16
Q

What are the principles of ethics

A
  • 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
17
Q

What are the ethical threats

A
  • 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
18
Q

What are the safeguard against ethical threats

A
  • Disciplanry actions
  • Training
  • Internal controls
19
Q

What are the roles of Audit committee

A
  • 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
20
Q

What are the responsibilites of Risk MGMT

A
  • 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
21
Q

What are the responsibilites of IA

A
  • 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)
22
Q

What may some of the scope of IA be

A
  • 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
23
Q

What procedures can be put in place to reduce risks of outsourcing IA

A
  • Regular quality reviews
  • Performance measures, mgmt inof and risk reporting
  • procedures manuals
  • Seperate depts covering IA and EA
  • Agreed scope
24
Q

When scoping work of EA what should they consider re the IA function

A
  • 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
25
Q

What are the 3 Audit risks

A
  1. Inherent Risk - Value is FS is incorrect
  2. Control - risk that current controls are not enough to prevent or detect material mis-statements
  3. Detection - Audtiors will not detect incorrect amounts in FS
26
Q

What should be included in the Audit report

A
  • Objectives of Audit
  • Summary of the process taken by auditor
  • Results of tests carried out
  • Opinion
  • Recommendations (must be practical and cost effective)
27
Q

What are some of the Adv and Dis Adv of outsourcing IA

A

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
28
Q

Explain Competitive/Internal/Process benchmarking

A

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

29
Q

What are the types of Audit

A

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

30
Q

What are the principles of UK Corp Gov

A
  • Leadership
  • Effectiveness
  • Accountability
  • Remuneration
  • Relations with shareholders
31
Q

What is the audit committees role

A
  • 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
32
Q

In Corp Gov what/who have responsibilites

A

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

P3 (3 decks)

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