Chapter 1 3 primary responsibilities of mngt Planning controlling directing Mgmt is making critical business decisions Planning involve the use of budgets Involve setting goals and objectives for co and determine how to achieve them Management decides to increase sales growth by 10 next year Directing oversee the co s day to day operations Mgmt uses info on product costs to determine sales prices Mgmt reviews hourly sales reports to determine the level of staffing needed to service customers Controlling evaluate the results of business operations against the plan and making adjustment to keep the co press toward its goals Determining whether the co s units are operating according to plan To lower product costs management moves production to Mexico Management conducts variance analysis by comparing budget to actual Decision making identify alternative courses of action and choosing among them Managerial Acct emphasizes reliability Managerial Acct focused on the future main characteristic of data is that it must be relevant reports tend to be prepared for the parts of the org rather than the whole org primary users are internal for ex company managers reports are prepared as needed not governed by legal reqts Financial Acct reporting is based mainly on the company as a whole reports are prepared usually qtrly annually info is verified by external auditors focused on the past governed by GAAP primary users are external creditors investors 1 US companies must follow GAAP or IFRS in their financial acct systems 2 Financial acct develops reports for external parties such as creditors and shareholders 3 When mngrs evaluate the company s performance compared to the plan they are performing the controlling role of mgmt 4 Managers are decision makers inside a company 5 Financial acct provides info on a company s past performance to external parties 6 Managerial acct systems are not restricted by GAAP or IFRS but are chosen by comparing the costs versus the benefits of the system 7 Choosing goals and the means to achieve them in the planning function of management 8 Managerial acct systems report on various segments or business units of the co 9 Financial acct statements of public companies are audited annually by CPAs Manag acct differ from finan acct in that manag acc emphasize data relevance over data objectivity Manag acct skill Oral and written communication skills knowledge of both financial and managerial acting knowledge of how a business functions Manag acct is geared toward external stakeholders such as investors and creditors F Manag acct often work in cross functional teams throughout the organization T Manag acct are now more often looked upon as internal business advisors rather than bean counters recording historical transactions T Manag acct should be technically proficient but they don t need strong oral and written communication skills F Manag acct should be proficient in Excel T The AICPA issues the CMA certification F 1 Describes historical transactions with external parties Fina 2 Is not required by any authoritative body such as the SEC M 3 Reports on the co s subunits such as prodects geographical areas and departments M 4 Is interned to be used by creditors and investors F 5 Is formatted in accordance with GAAP F Summary of IMA Ethical Standards Recap Competence this relates to having the expertise knowledge skills Qualifications to perform your job duties maintaining your skills and education seminars etc preform professional duties in accordance with laws regulations and technical standards providing decision support that is accurate clear and concise and timely maintain an appropriate level of professional expertise by continually develop Integrity abstain from engaging in or supporting any activity that would discredit the profession mitigate actual conflicts of interest regularly comm with business ass to avoid apparent conflict of interest refrain from engaging in any conduct that would prejudicecarry out duty ethically reporting conflicts of interest examples that violate this standards cheating on an expense report discussed in class stealing supplies from your company accepting gifts or factors that could be perceived to influence your actions Credibility communicating information fairly and objectively disclose all relevant information that could reasonably be expected to influence an intended user s understanding of the reports analyses or recommendations disclose delay or deficiency in information timeliness processing or internal control in conformance with organization policy and applicable law Confidentiality Inform all relevant parties regarding the appropriate use of confidential information Monitor subordinates activities to ensure compliance keep information confidential expect when disclosure is authorized or legally required refrain from using confidential information for unethical or illegal advantage 1 Don t disclose co information unless authorized to do so Confidentiality 2 Continue to develop skills and knowledge Competence 3 Don t bias the information and reports presented to management Credibility 4 If you don t have the skill to complete a task correctly don t pretend you do Competence 5 Avoid actual and apparent conflicts of interest Integrity 6 Require manag acct to mitigate conflicts of interest Integrity The user would primarily use financial current stockholders financial wall street analysts financial news reporters both company controller both board of directors financial sec employee financial external auditor public accounting firm both internal auditor financial potential shareholders financial loan officer at the company s bank managerial manager of the sales dept financial bookkeeping dept managerial managers at regional offices financial IRS agent Treasurer is in charge of raising the firm s capital issuing company bonds and stock invest company funds Controller calc the cost of a product work with various depts In preparing operating budgets for the upcoming yr oversee accts payable activities prepares company tax returns preparing journal entries for month end closing creating an analysis about whether to leas or buy a delivery truck internal Auditing Dept check to make sure that company risk management procedures are being followed report to the audit committee of the board of directors and to a senior executive such as the CFO or CEO performing cash counts at branch offices ensuring that the company s internal controls