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8/8/2019 Ch 1 (Revised)
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© 2010 The McGraw-Hill Companies, Inc.
Managerial Accounting and the
Business EnvironmentChapter 1
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Learning Objective 1
Understand the role of Understand the role of
management accountantsmanagement accountants
in an organization.in an organization.
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Corporate Organization Chart
Purchasing Personnel Vice President
Operations
Treasurer Controller
Chief Financial
Officer
President
Board of Directors
Organizational Structure
Decentralization is the delegation of decisionDecentralization is the delegation of decision--
making authority throughout an organization.making authority throughout an organization.
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Line and Staff Relationships
Line positions are directlyrelated to achievement of the basic objectives of anorganization.
Example: Productionsupervisors in amanufacturing plant.
Staff positions supportand assist line positions.
Example: Cost
accountants in themanufacturing plant.
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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.
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Learning Objective 3
Understand theUnderstand the
importance of upholdingimportance of upholding
ethical standards.ethical standards.
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Code of Conduct for Management Accountants
The Institute of Management Accountant¶s (IMA)
Statement of Ethical Professional Practice
consists of two parts that offer guidelines for: Ethical behavior.
Resolution for an ethical conflict.
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Competence Follow applicable
laws, regulations
and standards.
Maintain
professional
competence.
Provide accurate, clear,
concise, and timely decision
support information.
IMA Guidelines for Ethical Behavior
Recognize andcommunicate professional
limitations that preclude
responsible judgment.
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Mitigate conflicts of
interest and advise others
of potential conflicts.
Abstain from activities that
might discredit the
profession.
Refrain fromconduct that
would prejudice
carrying out
duties ethically.
Integrity
IMA Guidelines for Ethical Behavior
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Follow employer¶s established policies.
For an unresolved ethical conflict:
` Discuss the conflict with immediate supervisor or next highest uninvolved manager.
` If immediate supervisor is the CEO, consider theboard of directors or the audit committee.
` Contact with levels above the immediate supervisor should only be initiated with the supervisor¶s
knowledge, assuming the supervisor is not involved.
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Follow employer¶s established policies.
For an unresolved ethical conflict:
` Except where legally prescribed, maintainconfidentiality.
` Clarify issues in a confidential discussion with anobjective advisor.
` Consult an attorney as to legal obligations.
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Abandoning ethical standards in business would
lead to a lower quality of life with less
desirable goods and services at higher prices.
Why Have Ethical Standards?
Without ethical standards in business, the
economy, and all of us who depend on it for
jobs, goods, and services, would suffer.
Ethical standards in business are essential for a
smooth functioning economy.
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Company Codes of Conduct
Employees Customers Suppliers
And to the communities in
which the company operates.
BroadBroad--based statements of abased statements of a
company¶s responsibilities to:company¶s responsibilities to:
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Codes of Conduct on the International Level
In addition to integrity and objectivity, resolution of ethicalconflicts, competence, and confidentiality, the IFAC¶s code
deals with the accountant¶s ethical responsibilities in:
Taxes,
Independence,Fees and commissions,
Advertising and solicitation,
Handling of monies, and
Cross-border activities.
The Code of Ethics for Professional Accountants, issued by the International
Federation of Accountants (IFAC), governs the
activities of professional accountants worldwide.
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Corporate Governance
The system byThe system by
which a company is directedwhich a company is directed
and controlled.and controlled.
Board of Directors
Top
Management
Stockholders
To pursue
objectives of
Incentives andmonitoring for
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The Sarbanes-Oxley Act of 2002 The Sarbanes-Oxley Act of 2002 was intended to protect the
interests of those who invest in publicly traded companies byimproving the reliability and accuracy of corporate financial
reports and disclosures. Six key aspects of the legislation include:
The Act requires both the CEO and CFO to certify in writing
that their company¶s financial statements and disclosuresfairly represent the results of operations.
The Act establishes the Public Company Accounting Oversight
Board to provide additional oversight of the audit profession.
The Act places the power to hire, compensate, and terminatepublic accounting firms in the hands of the audit committee.
The Act places restrictions on audit firms, such as prohibiting
public accounting firms from providing a variety of non-audit
services to an audit client.
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The Sarbanes-Oxley Act of 2002
(continued) The Act requires a public company¶s independent auditor
to issue an opinion on the effectiveness of the company¶s
internal control over financial reporting to accompany
management¶s assessment, and both are included in the
company¶s annual report.
The Act establishes severe penalties for certain behaviors,
such as:
Up to 20 years in prison for altering or destroying anydocuments that may eventually be used in an official
proceeding.
Up to 10 years in prison for retaliating against a
³whistle blower.´
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Corporate Social Responsibility
CSR extends beyond legal compliance
to include voluntary actions that satisfy
stakeholder expectations.
Corporate social responsibility (CSR) is a concept
whereby organizations consider the needs
of all stakeholders when making decisions.
Customers Employees CommunitiesSuppliers Stockholders
Environmental
& Human Rights
Advocates
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Certified Management Accountant
A management accountant
who has the necessary qualifications and
who passes a rigorous professional exam earns
the right to be known as a Certified
Management Accountant (CMA).
Information about becoming a CMA and the CMAInformation about becoming a CMA and the CMA
program can be accessed on the IMA¶s website atprogram can be accessed on the IMA¶s website at
www.imanet.orgwww.imanet.org or by calling 1or by calling 1--800800--638638--4427.4427.
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End of Chapter 1
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