Managerial Accounting Chapter 1

Managerial Accounting and the Business Environment Chapter 1 © 2010 The McGraw-Hill Companies, Inc. Learning Objective 1 Understand the role of management accountants in an organization. McGraw-­? Hill/Irwin Slide 2 Organizational Structure Decentralization is the delegation of decisionmaking authority throughout an organization. Corporate Organization Chart Board of Directors President Purchasing Personnel Vice President Operations Chief Financial Officer Controller Slide 3 Treasurer McGraw-­? Hill/Irwin The Chief Financial Officer (CFO) A member of the top management team responsible for: ?? ??

Providing timely and relevant data to support planning and control activities. Preparing financial statements for external users. McGraw-­? Hill/Irwin Slide 4 Line and Staff Relationships Line positions are directly related to achievement of the basic objectives of an organization. ?? Example: Production supervisors in a manufacturing plant. Staff positions support and assist line positions. ?? Example: Cost accountants in the manufacturing plant. McGraw-­? Hill/Irwin Slide 5 Work of Management Accountants Management accountants work under Controller or directly under CFO ?? Considered staff position ??

Internal consultants or business analysts within the organization ?? Less time on mechanical aspects of accounting ?? More time on analyzing and interpreting information for decision-making purposes ?? Cross-functional team and face-to-face communication within the organization McGraw-­? Hill/Irwin Slide 6 Learning Objective 2 Understand the importance of upholding ethical standards. McGraw-­? Hill/Irwin Slide 7 Why Have Ethical Standards? Ethical standards in business are essential for a smooth functioning economy. Without ethical standards in business, the economy, and all of us who depend on it for jobs, goods, and services, would suffer.

Abandoning ethical standards in business would lead to a lower quality of life with less desirable goods and services at higher prices. McGraw-­? Hill/Irwin Slide 8 Code of Conduct for Management Accountants The Institute of Management Accountant’s (IMA) Statement of Ethical Professional Practice offers guidelines for ethical behavior. McGraw-­? Hill/Irwin Slide 9 IMA Guidelines for Ethical Behavior Recognize and communicate professional limitations that preclude responsible judgment. Maintain professional competence. Competence Provide accurate, clear, concise, and timely decision support information.

Follow applicable laws, regulations and standards. McGraw-­? Hill/Irwin Slide 10 IMA Guidelines for Ethical Behavior Do not disclose confidential information unless legally obligated to do so. Do not use confidential information for unethical or illegal advantage. Confidentiality Ensure that subordinates do not disclose confidential information. McGraw-­? Hill/Irwin Slide 11 IMA Guidelines for Ethical Behavior Mitigate conflicts of interest and advise others of potential conflicts. Refrain from conduct that would prejudice carrying out duties ethically. Integrity Abstain from activities that might discredit the profession.

McGraw-­? Hill/Irwin Slide 12 IMA Guidelines for Ethical Behavior Communicate information fairly and objectively. Disclose delays or deficiencies in information timeliness, processing, or internal controls. Credibility Disclose all relevant information that could influence a user’s understanding of reports and recommendations. McGraw-­? Hill/Irwin Slide 13 Analyzing an Ethical Dilemma 1. what is the ethical issue? 2. who are the stakeholders? 3. How would each of the stakeholders be affected? 4. What IMA Statement(s) of Ethical Professional Practice are violated? Why? 5.

What decision options are available? 6. What is the proposed solution? McGraw-­? Hill/Irwin Slide 14 Learning Objective 3 Corporate Governance / Corporate Social Responsibility McGraw-­? Hill/Irwin Slide 15 Corporate Governance The system by which a company is directed and controlled. Board of Directors Incentives and monitoring for Top Management To pursue objectives of Stockholders McGraw-­? Hill/Irwin Slide 16 Corporate Social Responsibility Corporate social responsibility (CSR) is a concept whereby organizations consider the needs of all stakeholders when making decisions. Customers

Employees Suppliers Communities Stockholders Environmental & Human Rights Advocates CSR extends beyond legal compliance to include voluntary actions that satisfy stakeholder expectations. McGraw-­? Hill/Irwin Slide 17 Examples of Corporate Social Responsibility Companies should provide customers with: Companies and their suppliers should provide ? Safe, high quality products that are fairly employees with: priced ? Safe and humane working conditions ? Competent, courteous, and rapid delivery ? Non-discriminatory treatments and the of products and services right to organize and file grievances ?

Full disclosure of product-related risks ? Fair compensation ? Easy to use information systems for ? Opportunities for training, promotion, shopping and tracking orders and personal development Companies should provide suppliers with: Companies should provide communities with: ? Fair contract terms and prompt payments ? Payment of fair taxes ? Reasonable time to prepare orders ? Honest information about plans such as ? Hassle-free acceptance of timely and plant closings complete deliveries ? Resources that support charities, schools, ? Cooperative rather than unilateral and civic activities actions ?

Reasonable access to media sources Companies should provide stockholders with: Companies should provide environmental ? Competent management and human rights advocates with: ? Easy access to complete and accurate ? Greenhouse gas emissions data financial information ? Recycling and resource conservation data ? Full disclosure of enterprise risks ? Child labor transparency ? Honest answers to knowledgeable ? Full disclosure of suppliers located in questions developing countries McGraw-­? Hill/Irwin Slide 18 Corporate Social Responsibility End of Chapter 1 McGraw-­? Hill/Irwin Slide 19