Prologue-1 Brewer/Garrison/Noreen Introduction to Managerial Accounting Third Edition

Prologue © The McGraw-Hill Companies, Inc., 2007 McGraw-Hill /Irwin Managerial Accounting and the Business Environment

Prologue-3 Globalization Reduction in tariffs and quotas Improvements in global transportation systems Expansion of Internet usage Increasing sophistication in international markets

Prologue-4 The Global Marketplace Companies that have been successful in their local markets may suddenly find themselves facing competition from halfway around the globe.

Prologue-5 The Global Marketplace New Markets New Customers New Workers

Prologue-6 Strategy A strategy is a “game plan” that enables a company to attract customers by distinguishing itself from competitors. Customer Intimacy Operational Excellence Product Leadership

Prologue-7 Organizational Structure An organization is a group of people united for a common purpose. Decentralization decision–making

Prologue-8 The Functional View of Organizations Line positions are directly related to the 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.

Prologue-9 The Chief Financial Officer (CFO) A member of the top management team which is responsible for:  Providing timely and relevant data to support planning and control activities.  Preparing financial statements for external users.

Prologue-10 A business process is a series of steps that are followed in order to carry out some task in a business. Process Management

Prologue-11 Value Chain Research and Production Product Design ManufacturingManufacturingMarketingMarketingDistributionDistribution Customer Service Business Functions Making Up the Value Chain A value chain consists of the major business functions that add value to a company’s products and services.

Prologue-12 Lean Production Traditional Thinking Minimize unit costs by maximizing output. Keep everyone busy. Idleness wastes money. Push products through the system even if unsold inventory piles up in warehouses.

Prologue-13 Lean Production Step 1 Identify value in specific products/services Step 2 Identify the business process that delivers value Step 3 Organize work arrangements around the flow of the business process Step 4 Create a pull system that responds to customer orders Step 5 Continuously pursue perfection in the business process

Prologue-14 Supply Chain Management The term supply chain management is commonly used to refer to the coordination of business processes across companies to better serve end consumers.

Prologue-15 Theory of Constraints (TOC) A sequential process of identifying and removing constraints in a system. Restrictions or barriers that impede progress toward an objective

Prologue-16 Theory of Constraints (TOC) Step 1 Identify the weakest link in the chain, which is the constraint Step 2 Do not place a greater strain on the system than the weakest link can handle Step 3 Concentrate improvement efforts on strengthening the weakest link Step 4 If improvement efforts are successful, the weakest link will improve

Prologue-17 Six Sigma A process improvement method that relies on customer feedback and fact-based data gathering and analysis techniques to drive process improvements. Six Sigma is sometimes associated with the slogan zero defects.

Prologue-18 Six Sigma The DMAIC framework is the most common framework used to guide Six Sigma process improvement efforts. Define Measure Analyze Improve Control

Prologue-19 Six Sigma Six Sigma improvements can only increase profits in two ways: 1. Decrease costs 2. Increase sales

Prologue-20 Technology in Business E-Commerce

Prologue-21 Technology in Business Most companies used to implement specific software programs to support specific business functions.

Prologue-22 Technology in Business Enterprise Systems

Prologue-23 The Importance of Ethics in Business Ethical practices in business build trust and promote productive relationships. They are necessary for the functioning of a market economy.

Prologue-24 Code of Conduct for Management Accountants Part One Competence Confidentiality Integrity Objectivity Part Two Resolution of Ethical Conflict

Prologue-25 Standards of Ethical Conduct Follow applicable laws, regulations and standards. Prepare complete and clear reports after appropriate analysis. Maintain professional competence. Competence

Prologue-26 Standards of Ethical Conduct Do not disclose confidential information unless legally obligated to do so. Ensure that subordinates do not disclose confidential information. Do not use confidential information for personal advantage. Confidentiality

Prologue-27 Standards of Ethical Conduct Integrity Communicate unfavorable as well as favorable information. Refuse gifts or favors that might influence behavior. Avoid activities that could affect your ability to perform duties. Refrain from activities that could discredit the profession. Do not subvert organization’s legitimate objectives. Avoid conflicts of interest and advise others of potential conflicts. Recognize and communicate personal and professional limitations.

Prologue-28 Standards of Ethical Conduct Objectivity Communicate information fairly and objectively. Disclose all information that might be useful to management.

Prologue-29 Standards of Ethical Conduct Resolution of Ethical Conflict  Follow the established policies of the organization.  For unresolved ethical conflicts:  Discuss the conflict with immediate superior. Resolution of Ethical Conflict  Follow the established policies of the organization.  For unresolved ethical conflicts:  Discuss the conflict with immediate superior.

Prologue-30 Standards of Ethical Conduct Resolution of Ethical Conflict  Follow the established policies of the organization.  For unresolved ethical conflicts:  Discuss the conflict with immediate superior.  Maintain confidentiality.  Clarify relevant ethical issues by confidential discussion with an objective advisor.  Consult your own attorney.  Resign. Resolution of Ethical Conflict  Follow the established policies of the organization.  For unresolved ethical conflicts:  Discuss the conflict with immediate superior.  Maintain confidentiality.  Clarify relevant ethical issues by confidential discussion with an objective advisor.  Consult your own attorney.  Resign.

Prologue-31 Codes of Conduct Company Many companies have adopted formal ethics codes of conducts that provide broad guidelines for proper behavior.

Prologue-32 Codes of Conduct International The International Federation of Accountants’ (IFAC) Guidelines on Ethics for Professional Accountants governs the activities of all accountants throughout the world.

Prologue-33 Corporate Governance Corporate governance is the system by which a company is directed and controlled. If properly implemented, it should provide incentives for the board of directors and top management to pursue objectives that are in the interests of the company’s owners and it should provide for effective monitoring of performance.

Prologue-34 The Sarbanes-Oxley Act of 2002 The Sarbanes-Oxley Act of 2002 is intended to protect the interests of those who invest in publicly traded companies by improving the reliability and accuracy of corporate financial reports and disclosures.

Prologue-35 The Sarbanes-Oxley Act of Requires CEO/CFO certification. 2.Establishes the PCAOB. 3.Places power to hire, compensate and terminate auditors with the audit committee.

Prologue-36 The Sarbanes-Oxley Act of Prohibits a variety of non-audit services for audit clients. 5.Requires annual report on internal control. 6.Establishes severe penalties for criminal acts.

Prologue-37 Enterprise Risk Management A process used by a company to proactively identify the business risks that it faces and to develop responses to those risks that enable the company to be reasonably assured of satisfying stakeholder expectations.

Prologue-38 Enterprise Risk Management Companies should identify foreseeable risks before they occur. Once a risk has been identified, a company can respond in various ways such as accepting, avoiding, sharing, or reducing the risk.

Prologue-39 Identifying and Controlling Business Risks

Prologue-40 The Certified Management Accountant (CMA) Rigorous Professional Exam Greater Responsibilities Higher Compensation Information about becoming a CMA and the CMA program can be accessed on the IMA’s website at or by calling

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