Strategic Cost Management: Chapter 2

 

The Professional Environment of Cost Management Chapter 2

 

Organization Structure and The Management

ccountant



Line Authority is the authority to command action or give orders to subordinates.



Staff Authority is the authority to advise but not command others; it is exercised laterally or upward.



Funcio uncional nal Autho Authority rity is the right to command action, laterally or downward, with regard to a specific function or specialty.

 

The Chief Financial Officer and The Controller  



Chief Financial Officer (CFO) – is the executive responsible for overseeing the financial operations of an organization. Controllership – includes providing financial information for reports to managers and reports to shareholders and overseeing the overall operations of the accounting system.

 

Treasury – includes banking, short and longterm financing, investments and management of cash.  Risk management – includes managing the financial risk of interest-rate and exchange-rate changes and derivatives management.  Taxation – includes income taxes, sales taxes, and international tax planning.  Internal Audit- reviewing and analyzing financial and other records to attest to the integrity of the organization’s financial reports



and to adherence to its policies and procedures.

 

The Chief Financial Officer and The Controller  The

Controller – is the financial executive primarily responsible for management accounting and financial accounting.

 

Reporting Relationships for the CFO and the Corporate Controller

 

The Contro Controller ller as as the the Top Top Management Accountant  Controllership

is the process by which management assures itself that the resources are procured and utilized according to plans in order to achieve the company’s company’s objectives.



Controller provides reports for planning and evaluating company activities and to make management decisions.

 

A Typical Organization Chart Showing the Functions Functions of the Controller

 

Basic Functions of Controllership  Planning

– Establish and maintain an

integrated plan of operation consistent with the company’s company’ s goals and objectives.  Control – Develop and revise standards against which to measure performance and provide guidance and assistance to other members of management in insuring conformance of actual result to standards.

 

Basic Functions of Controllership  Accounting

– Design, establish and maintain

general costand accounting systems at all companyand levels record all financial transactions in the books of accounts.  Other Primary Responsibilities – Manage and supervise taxes and agents; maintain appropriate relationship with internal and external auditors; a uditors; develop and maintain

 

Qualifications of the Controller  An

excellent technical foundation in

accounting finance with an understanding and throughand knowledge of accounting principles.  An

understanding of the principles of planning, organizing and control.

A

general gener al understadin understading g of industry industry which which the

company competes and the social,

 

economic, and political forces involved. A

thorough understanding of the company including its technologies, products, policies, objectives, history, organization and environment.  The ability to communicate with all levels of management and a basic understanding of the other functional problems related to engineering, production, procurement, industrial relations and marketing.

 

 The

ability to express ideas clearly in writing or in making informative presentations.  The ability to motivate others to achieve positive action and results.

 

The Chief Financial Officer and the Trea reasur surer er  The

role of finance is assigned to the Chief of

Financial Officer (CFO) Vice PresidentPresidentFinance who reports to or thethe president .

The key subordinates of the financial vicepresident are the TREASURER & the CONTROLLER.

 

TREASURERSHIP   Concerned

mostly with the acquisition, financing and management of assets of a business concern to maximize the wealth of the firm for its owners.

In short, it’s mostly about receipt, care and disbursements of funds such as public revenues.

 

TREASURER 

Aside from money management duties, the treasurer is responsible for maintaining relationships with investors, banks, and other creditors. Major role includes: (1)managing cash & marketable resources, resources, (2)preparing cash forecasts and (3)obtaining financing from banks & other lenders.

 

RESPONSIBILITIES  FUNDS

PROCUREMENT – obtaining or raising funds in accordance with the firms planned capital structure. Requires negotiating for loans (short-term or long term)

 Banking

& Custody of Funds – management of company’s cash & cash equivalents and maintenance of good relations with banks and non-bank institution.

 

 Investment

of Funds – purchase of debt or equity instruments like ordinary share or preference shares in other corporate entities. This responsibility include analysis of decisions related to invested in PPE.

 



Operating Responsibilities: a)

Credit and Collection

b)

Inventory Management

c)

Corporate pension and retirement fund

d)

Investor Relation

e) f)

Insurance Compliance with legal & regulatory provisions relating to funds procurement

 

ETHICAL STANDARDS FOR MANAGEMENT ACCOOUNTANTS 

The Institute(IMA) of Management Accountants issued the Standards of Ethical Conduct for Practitioners of Management Accounting Accounting and Financial Management.

 

Code of Conduct for Management Accountants  There

are two parts to the standards: (1) provides general guidelines for ethical behavior. In a nutshell, MAs has ethical responsibilities in four broad areas: 1. To

maintain a high level of professional competence

2. To

treat sensitive matter with confidentiality 

3. To

maintain personal integrity 

4. To

be objective in all disclosing

 

 (2)

gives specific guidance concerning what should be done if an individual finds evidence of ethical misconduct within an organization.

Ethical standards require MAs to: 

Have professional behavior



Bring bad news to the attention of their supervisor



Work competently

 

If ethical standards were not g tose , qtuheenre ue nn de ersairlalyblaedherecdon cew s ould fboer everyone.

 

COMPANY CODE OF CONDUCT A

former CMA president emphasizes the importance of ethics in business:

“Employees like to work for a company that they can trust. Customers like to deal with an ethically reliable business. Suppliers like to sell to firms with which they can have a real partnership. Communities are more likely to cooperate with organizations that deal honestly & fairly with them. If the busines businesss community is to function effectiv effectively ely,, all of the players need to act ethically,”

 

 Those

who engage in unethical behavior often justify their actions with one or more of the following reasons: 1)

The organization expects unethical behavior.

2)

Everyone else is unethical.

3)

Behaving unethically is the only way to get ahead.

 

TYPES OF ETHICAL CHALLENGES 

integrity.. Case A involves competence, objectivity and integrity



Case B involves confidentiality and integrity 

 

CODES OF CONDUCT ON THE INTERNATIONAL LEVEL  International

Federation of Accountants (IFAC)

– issued “Guidelines on Ethics for Professional  Acccountantss”: governs the activities of all  Acccountant professional accountants throughout the world;

regardless if whether they are practicing as independent CPA or employed in government or private practice.

 

 IFAC’ IFAC’s s code

also outlines the accountant’s accountant’s ethical responsibilities in matters relating to taxes, fees & commissions, advertising & solicitation, the handling of monies and cross-

border activities.  January 1,2016 1,2016 – BOA of PRC approved implementation of the Revised Code of Ethics for Professional Accountants.

 

INTERNATION INTERNA TIONAL AL CERTIFICA CERTIFICATION TIONS S  Certificate

of Management M anagement Accounting (CMA)

–

calculates projections and assists planning offinancial future business endeavor. Worksin closely with upper executives to develop sound financial strategies.

 

 Certificate

in Public Accounting (CPA) (CPA) Maintain and monitor financial records. Handles current financial issues such as tax filings, accounts payable, and balancing the company’s payroll. company’s Ethical Responsibilities: 1. Responsibilities 2. 3. 4. 5.

Public Interest Integrity Objectivity & Independence Due care

 

 Certificate

in Internal Auditing (CIA) – conducts internal audits and is conferred by Institute of Internal Auditors (IIA). Work is usually in the audit departments of gov’t agencies, financial institutions or corporations. Also reviews financial records to look for deficiencies in internal controls.

 

INSTITUTE OF MANAGEMENT ACCOUNTANTS The principal org in the USA that instituted a program to provide certifications for management accountants and financial managers  CMA examination was first given in 1972 with four parts: Financial Financial Acctg Acctg and Reportin Reporting, g, Management Management 

Reporting, Analysis & Behavioral Analysis Analysis & Information Systems Issues and Decision 

CFM examination was first given in 1996 similar with CMA except that FAR is replaced with Corporate Financial Management

 

PHILIPPINE INSTITUTE OF MANAGEMENT ACCOUNTANTS  Was

established in 1972 as National

Associations of Accountants (NAA) Philippine Chapter, INC.  Founded

primarily to provide its members with

educational and professional activities that supplement in the knowledge of MA practices & methods.

 



To propagate & professionalize MA in the Philippines, PAMA conducts CMA Programs Programs through Philippin hilippine e Institute of Management Accountants (PIMA) with basic objectives of: 1.

Establish MA as a recognized profession by identifying the role of management and by outlining a course of study by b yaccountant which such knowledge is acquired

To foster higher educational standards in the field of MA 3. To assist employees, educators, students by establishing an objective measure of an individuals’ knowledge and competence in the field of MA. 2.