WC BEC FLASHCARDS
board of directors- primary role
primary role is to safeguard the company assets and to ultimately maximize shareholders return.
Board of directors principal duties:
- Declaration of dividends
- Fiduciary duties
a. right to rely
b. Liability for unlawful distributions
c. duty of loyalty- act in the best interest
d. Corporate opportunity doctrine - Indemnifications- if acts of bad faith then is liable
COSO- Committee in Sponsoring Organizations
Three categories:
- Operations objective- effectiveness and efficiency of an entity operations
- Reporting objectives- reliability, timeliness and transparency
- Compliance objectives- adhering to all applicable laws and regulations.
CRIME
C- Control Environment R- Risk Assessment by management I- Information and communication system M- Monitoring E- Existing control activities
Control environment
C- Commitment to ethics and integrity B- Board Independence and oversight O- Organizational structure C- Commitment to competence A- Accountability
Risk Assessment
S- Specify objectives
I- Identify and analyze
C- Consider potential for fraud
I - Identify and assess changes
Information and communication
O- Obtain and use information
I- Internally Communicate information
C- Communicate with external parties
Monitoring
O- Ongoing and separate evaluations
C- Communication of deficiencies
(Existing) Control activities
May be detective and preventive in nature.
S- Select and develop control activities
S- Select and develop technology controls
D- Deploy through policies and procedures
ERM- Enterprise risk management
COSO issued Enterprise Risk Management- integrated framework- to assist organizations in developing a comprehensive response to risk management.
ERM is a process, effected by an entity’s board of directors, management, and other personnel, applied in strategy setting and across the enterprise, designed to identify potential events that may affect the entity and manage risk to be within the risk appetite, to provide reasonable assurance regarding the achievement of entity objectives.
ERM framework: “IS EAR AIM”
I- Internal environment
S- Settings objectives
E- Event identification
A- Assessment of risk
R- Risk response
A- Activities (control)
I- Information and communication
M- Monitoring
Risk response (component of ERM)
Response to risk must aling with the organization overall risk appetite. Risk response is supported by the following key elements:
A- Avoidance- management elect to avoid or terminate risk
R- Reduction- Management may elect to reduce or mitigate risk.
S- Sharing- Management may reduce risk by transferring risk
A- Acceptance- The company may take no action.
Balanced scorecard
Framework used for implementing strategy that converts a company strategic objectives into a set of performance measure.
External benchmark-Partial productivity ratio
PPR= Quantity of output produced/Quantity of input used
External benchmark- Total factor productivity
TFP= quantity of output produced/ cost of all inputs used
Internal benchmark- Control Charts
Graphical tool used to plot a comparison of actual results by batch or other suitable constant interval to an acceptable range.
Internal benckmark- Pareto diagram
Used to determine the quality control issues that are most frequent and often demand the greatest attention. Demonstrate the frequency of defects from highest to lowest frequency.
Cause and effect (Fishbone) diagram
Provide a framework for managers to analyze the problems that contribute to the occurrence of defects. Used to identify the source of problems in the production process by resource and take corrective action.
Prime cost
= Direct material + Direct labor
Conversion cost
= Direct labor + factory overhead
Product cost
Product cost consist of direct material,direct labor and manufacturing overhead applied.
Period cost
Include selling, general and administrative expenses as well as interest (financing) expenses.
Variable cost
Variable cost= constant per unit; total varies
Fixed cost
fixed cost= varies per unit; total remains constant
Cost accumulation systems
If the cost object is a custom order, job order is used. If the cost object is a mass produced homogeneous product process costing is used.
Cost of goods manufactured:
WIP Beg balance \+ Direct material used (@) \+ Manufacturing overhead applied = Total manufacturing cost incurred (WIP ending balance) = COGM
@ If not provided Beg raw material \+ purchases = Available (End raw material) = Direct material used
Cost of goods sold
Finished goods BB \+ COGM = COG available for sale (FG ending balance) = COGS
Equivalent units definition
An equivalent unit of DM, DL and coversion costs is equal to the amount of DM, DL or conversion cost necessary to complete one unit of production.
Equivalent units (Weighted average and FIFO)
Weighted average
Units completed and transfer out
+ Ending WIP * % completed
= EU
FIFO
Beg WIP * % TO BE completed
+Units completed and tranf out LESS Beg WIP
+ Ending WIP * % completed (same as Weighted Av.)
Cost per equivalent unit (Weighted average and FIFO)
Weighted average= Beg cost + current cost
/
Equivalent units
FIFO= Current cost only
/
Equivalent units
Activity based costing definition
ABC= assumes that the resource consuming activities (tasks, units of work, etc) with specific purposes cause costs. ABC assumes that the best way to assign indirect costs to products is bases on the products demand for resource consuming activities.
By products treatment
By products represent outputs of relatively minor prices that are incidental to a manufacturing process. Any proceeds from the sale of by products are a reduction to common cost for joint product costing. In Joint products method, by products are excluded from the calculation.
