Week 1: Accounting as a control tool

Question 1

How does accounting play a role in management?

Answer 1

1) Measures and targets
2) Tracking and reporting of performance
3) Reward and punishment

Question 2

What is corporate governance?

Answer 2

Corporate governance is the system by which companies are directed and controlled; deals with controlling the
behaviors of top management

Question 3

What is management control?

Answer 3

The process by which managers of all level ensure that the people they
supervise implement their intended strategies.

Question 4

What is coercive control?

Answer 4

Top-down management. High emphasis on centralisation and preplanning.

Question 5

What is Enabling control?

Answer 5

Bottom-up management. Employees are given freedom to deal with contingencies using their own judgment.

Question 6

Are enabling and coercive controls mutually exclusive?

Answer 6

NO. They can be used together to increase efficiency and flexibility.

Question 7

Potential management control problems:

Answer 7

1) Lack of direction
2) Lack of motivation
3) Personal limitations

Question 8

Solutions to MCS problems:

Answer 8

1) Automation- e.g. robots
2) Activity elimination- e.g. subcontracts
3) Centralisation
4) Risk sharing- e.g. insurance

Question 9

What are the steps of designing a management control system?

Answer 9

1) Identify key activities and see if they are suited to coercive or enabling controls

2) Develop an initial sketch of a control system

3) Hold workshops with managers and employees to ensure they agree with this system.

4) Assign responsibilities for different parts of the system

5) Implement the system and monitor activity.

6) Based on the problems arised, adjust the system.