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ACT 2131 Lecture Week 1 & 2. INTRODUCTION. OBJECTIVES. Understand the function of management Objectives of management accounting Differentiate between financial accounting and management accounting The Role and Ethics of management accountant. Objective 1.
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ACT 2131Lecture Week 1 & 2 INTRODUCTION
OBJECTIVES Understand the function of management Objectives of management accounting Differentiate between financial accounting and management accounting The Role and Ethics of management accountant
Objective 1 Understand the function of management
The Functions of Management Planning Acting Controlling Feedback
Objective 2 Objectives of management accounting
Managerial Accounting Basics Definition of Managerial Accounting A field of accounting that provides economic and financial information for managers and other internal users. Also calledManagement Accounting
Objective 3 Differentiate between financial accounting and management accounting
Comparing Managerial and Financial Accounting Similarities Both managerial and financial accounting deal with economic events of a business – Thus, interests overlap Both require that economic events be quantified and communicated to interested parties – Determining unit cost is part of managerial accounting, Reporting cost of goods manufactured is a part of financial accounting LO 1 Explain the distinguishing features of managerial accounting.
Comparing Managerial and Financial Accounting Differences LO 1 Explain the distinguishing features of managerial accounting.
Objective 4 The Role And Ethics Of Management Accountant
Organizational Structure Decentralization is the delegation of decision-making authority throughout an organization.
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. Line and Staff Relationships
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.
Good Ethics – Good Business • Business Ethics • All employees are expected to act ethically • An increasing number of organizations have codes of business ethics • Despite organizational efforts: • Business scandals have caused massive investment losses and employee layoffs. • Corporate fraud has increased 13% in last 5 years. • Employee fraud – 60% of all fraud • Intentional misstatement of financial reports • Akafinancial reporting fraud is most costly
Good Ethics – Good Business • Creating Proper Incentives • Companies like Motorola, IBM, and Nike expend substantial resources to monitor and evaluate the actions of employees & managers. • Monitoring can have the negative result of producing incentives for unethical actions. • Employees may feel that they must succeed no matter what. • Ineffective and unrealistic controls may also result in declining product quality.
Code of Conduct for Management Accountants The Institute of Management Accountant’s (IMA) Statement of Ethical Professional Practiceconsists of two parts that offer guidelines for: Ethical behavior. Resolution for an ethical conflict.
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.
IMA Guidelines for Ethical Behavior Recognize and communicate professional limitations that preclude responsible judgment. Follow applicablelaws, regulationsand standards. Maintain professional competence. Competence Provide accurate, clear, concise, and timely decision support information.
IMA Guidelines for Ethical Behavior Do not disclose confidential information unless legally obligated to do so. Do not use confidential information for unethical or illegaladvantage. Confidentiality Ensure that subordinates do not disclose confidential information.
IMA Guidelines for Resolution of an Ethical Conflict 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 the board 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.
IMA Guidelines for Resolution of an Ethical Conflict Follow employer’s established policies. For an unresolved ethical conflict: • Except where legally prescribed, maintain confidentiality. • Clarify issues in a confidential discussion with an objective advisor. • Consult an attorney as to legal obligations.
Without ethical standards in business, theeconomy, and all of us who depend on it forjobs, goods, and services, would suffer. Abandoning ethical standards in business would lead to a lower quality of life with lessdesirable goods and services at higher prices. Why Have Ethical Standards? Ethical standards in business are essential for asmooth functioning economy.
Employees Customers Suppliers And to the communities inwhich the company operates. Company Codes of Conduct Broad-based statements of acompany’s responsibilities to:
Codes of Conduct on the International Level The Code of Ethics for ProfessionalAccountants, issued by the InternationalFederation of Accountants (IFAC), governs the activities of professional accountants worldwide. In addition to integrity and objectivity, resolution of ethical conflicts, 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.