THE PROFESSIONAL ENVIRONMENT OF COST MANAGEMENT Flashcards
A major function of the management accountant
TAILORING THE APPLICATION PROCESS TO THE ORGANIZATION
The accounting function is usually the
staff
authority to command action or give orders to subordinates
Line authority
directly responsible for attaining the objectives of the business firm as efficiently as possible
line managers
typically have line authority
Sales and production managers
Except for exercising line authority over his department, generally fills the staff role in his company as contrasted with the line roles of sales and production executives
CHIEF ACCOUNTING OFFICER usually the controller
transmits the best accounting procedures to be followed by the line people to the President who will communicate such through a manual of instructions
controller
holds delegated authority from top line management to direct the line people on how to apply these procedures
CONTROLLER
the right to command action laterally or downward with regard to a specific function or specialty
FUNCTIONAL AUTHORITY
the authority to advise but not command others
Staff authority
it is exercised laterally upward
Staff authority
gives support, advice and service to line departments
Staff managers
Examples of staff authority
are found in personnel, purchasing, engineering and accounting
also called the finance director in many countries
Chief financial officer (CFO)
is the executive responsible for overseeing the financial operations of an organization
Chief financial officer (CFO)
The responsibilities of the CFO vary among organizations, but they usually include the following areas:
- controllership
- treasury
- risk management
- taxation
- internal audit
includes providing financial information for reports to managers and reports to shareholders and overseeing the overall operations of the accounting system
Controllership
includes banking and short and long-term financing, investments, and management of cash
Treasury
includes managing the financial risk of interest-rate and exchange-rate changes and derivatives management
Risk management
includes income taxes, sales taxes and international tax planning
Taxation
includes reviewing and analyzing financial and other records to attest to the integrity of the organization’s financial reports and to adherence to its policies and procedures
Internal audit
also called the Chief Accounting Officer
CONTROLLER
the financial executive primarily responsible for management accounting and financial accounting.
CONTROLLER
do not do any controlling in terms of line authority except over their own departments.
Modern controllers
maintains that the controller does control in a special sense
modern concept of controllership
by reporting and interpreting relevant data (problem-solving and attention-directing roles), exerts a force of influence that impels management toward making better-informed decisions.
controller
the practice of the established science of control which is the process by which management assures itself that the resources are procured and utilized according to plans in order to achieve the company’s objectives.
Controllership
In most organizations, the top managerial accounting position is held by the
controller
provides reports for planning and evaluating company activities (e.g. budgets and performance reports) and provides the information needed to make management decisions (e.g. decisions related to construction of a new factory or decisions related to adding or dropping a product).
controller
has responsibility for all financial accounting reports and tax filings with the Bureau of Internal Revenue and other taxing agencies, as well as coordinating the activities of the firm’s external auditors
controller
an integral part of the top management team
controller
If one wants a high-level career in management accounting, he/she will need not only strong accounting skills but also skills required of all high-level executives. These skills include:
- excellent written and oral communication skills
-solid interpersonal skills
-a deep knowledge of the industry in which the firm competes
The basic principal functional responsibilities and activities of controllership may be categorized as follows:
- planning
- control
- reporting
- accounting
- other primary responsibilities
Establish and maintain an integrated plan of operation consistent with the company’s goals and objectives, both short and long term, analyzed and revised, as required, communicated to all levels of management, with appropriate systems and procedures installed
Planning
Develop and revise standards against which to measure performance and provide guidance and assistance to other members of management in insuring conformance of actual results to standards.
Control
Prepare, analyze, and interpret financial results for utilization by management in the decision-making process, evaluate the data with reference to company and unit objectives; prepare and file external reports as required to satisfy government regulatory bodies, shareholders, financial institution, customers, and the general public.
Reporting
Design, establish and maintain general and cost accounting systems at all company levels, including corporate, divisional, plant and unit to properly record all financial transactions in the books of accounts and records in accordance with sound accounting principles with adequate internal control.
Accounting
Although organizational structures vary from firm of firm, the role of finance is assigned to the
Chief Financial Officer (CFO)
The financial vice-president’s key subordinates are the
- treasurer
-controller
concerned with the acquisition, financing and management of assets of a business concern to maximize the wealth of the firms for its owners.
treasurership
has the custody of cash and funds invested in various marketable securities
Treasurer
In addition to money management duties, is generally responsible for maintaining relationships with investors, banks and other creditors.
Treasurer
the treasurer plays a major role in
- managing cash and marketable securities
- preparing cash forecasts
- obtaining financing from banks and other lenders
Both report to the Chief Financial Officer (CFO) who is the senior executive reporting for both accounting and financial operations
- controller
- treasurer
senior executive reporting for both accounting and financial operations
Chief Financial Officer (CFO)
developed a very useful ethical code called the Standards of Ethical Conduct for Practitioners of Management Accounting and Financial Management
Institute of Management Accountants (IMA) of the United States
Institute of Management Accountants (IMA) of the United States have developed a very useful ethical code called
Standards of Ethical Conduct for Practitioners of Management Accounting and Financial Management
were specifically developed for management accountants, but they have much broader application
Standards of Ethical Conduct for Practitioners of Management Accounting and Financial Management
There are two parts of the standards
- first part provides general guidelines for ethical behavior
- second part gives specific guidance concerning what should be done if an individual finds evidence of ethical misconduct within an organization
provide sound, practical advice for management accountants and managers
ethical standard
require professional behavior, especially in avoiding conflicts of interest
ethical standard
require management accountants to bring bad news to the attention of their supervisors, and to work competently
ethical standard
Standards of Ethical Conduct for Practitioners of Management Accounting and Financial Management
- competence
- confidentiality
- integrity
-objectivity
serve a very important practical function in an advanced market economy
Ethical standard
Those who engage in unethical behavior often justify their actions with one or more of the following reasons:
- the organization expects unethical behavior
- everyone else is unethical, and/or
-behaving unethically is the only way to get ahead
one who has passed the rigorous qualifying examination, has met an experience requirement, and participates in continuing educations
Certificate of Management Accounting (CMA)
granted by the Institute Management Accountants (IMA)
Certificate of Management Accounting (CMA)
main responsibility is to provide assurance concerning the reliability of the information contain in the firm’s financial statements.
Certified Public Accountant (CPA)
The three certifications available to management accountants
- certificate of management accounting (CMA)
- certificate of public accounting (CPA)
- certificate in internal auditing (CIA)
one who has met pre-qualification educational requirements, passed the CPA licensure examination given by the Professional Regulatory Board of Accountancy and has satisfied all other legal and regulatory requirements of a public accountant
Certified Public Accountant (CPA)
the principal organization of management accountants in the United States, has instituted a program to provide certifications for management accountants and financial managers.
Institute of Management Accountants (IMA)
the first CMA examination was given.
1972
The examination of CMA consists of the following four parts:
- economics, finance and management
- financial accounting and reporting
-management reporting, analysis and behavioral issues
- decision analysis and information systems
Certified in Financial Management examination was first given
1996
Certified in Financial Management examination is similar with CMA with one major difference: the Financial Accounting and Reporting section is replaced with
corporate financial management
professional organization that publishes the monthly magazine STRATEGIC FINANCE
IMA
The IMA is a professional organization that publishes the monthly magazine
STRATEGIC FINANCE
PAMA was established as the National Association of Accountants (NAA) Philippine Chapter, Inc.
1972
affiliated with NAA in New York
Philippine Association of Management Accountants (PAMA)
founded primarily to provide its members with educational and professional activities that supplement in the knowledge of management accounting practices and methods.
Philippine Association of Management Accountants (PAMA)
also part of the Association’s (PAMA) efforts to service its members.
Publication of technical materials
reports for planning and evaluating company activities
(e.g. budgets and performance reports)
information needed to make management decisions
(e.g. decisions related to construction of a new
factory or decisions related to adding or dropping a
product)
the treasurer has the following responsibilities:
- Funds procurement
- Banking and Custody of Funds
- Investment of Funds
- Operating Responsibilities related to
a. Credit and Collection
b. Inventory Management
c. Corporate pension and retirement fund
d. Investor Relations
e. Insurance
f. Compliance with legal and regulatory provisions
relating to funds procurement, use and distribution as
well as coordination of the finance function with
accounting function
