Skip to main content
Business LibreTexts

1.7: Summary

  • Page ID
    10423
  • Section Summaries 

     

    1.1 Define Managerial Accounting and Identify the Three Primary Responsibilities of Management

    • The purpose of managerial accounting is to supply financial and nonfinancial information to the organization’s management and other internal decision makers.
    • Most of the job responsibilities of a manager fit into one of three categories: planning, controlling, and evaluating.
    • Planning involves setting goals and forming the plans to achieve those goals.
    • Controlling involves the day-to-day activities. Its purpose is to help in planning functions and to facilitate coordination within the organization.
    • Evaluation determines whether plans are being followed and whether progress is being made as planned toward the fulfillment of organizational goals and objectives. It also involves taking corrective measures in case of deviations identified in the course of action.

    1.2 Distinguish between Financial and Managerial Accounting

    • Managerial accounting provides information to managers and other users within the company. It has a specific focus, and the information is detailed and timely.
    • Financial accounting follows the guidelines of the GAAP, set in place by the FASB and, in many cases, by the SEC. Managerial accounting is much more flexible and does not have to follow specific rules or guidelines.
    • There are seven key differences between managerial accounting and financial accounting: users, types of reports produced, frequency of producing the reports, purpose of the information produced, focus of the reporting information, nature of the original information used to produce the reports, and verification of the data used to create the reports.

    1.3 Explain the Primary Roles and Skills Required of Managerial Accountants

    • Essential skills for managerial accountants include commercial awareness, collaboration, effective communication skills, strong technology talents, extensive analytical abilities, and elevated ethical values.
    • Management accountants work with individuals at all levels of an organization from the CEO to the shop floor workers.
    • There are many different career paths management accountants can take to work in corporations, government entities, service firms, or nonprofit organizations.
    • There are numerous certifications that accountants can earn to improve their careers and set themselves apart from their peers.

    1.4 Describe the Role of the Institute of Management Accountants and the Use of Ethical Standards

    • Many professional organizations share resources, such as education, research, and practice development, with their members. They also enforce a code of ethics for their members.
    • All employees within a company are expected to act ethically within their business actions. This can sometimes be difficult when the company almost promotes the idea of unethical actions.
    • In response to several corporate scandals, the United States Congress passed the Sarbanes-Oxley Act of 2002 (SOX).
    • Ethical codes can be helpful guidelines, but the rationale to act ethically must originate from within oneself, from personal morals and values. There are steps that provide an outline for examining ethical issues.
    • One of the issues with ethics is that what one person, community, or even country considers unethical or wrong, another person, community, or country may have no problem with and see it as just a way of doing business.
    • The Foreign Corrupt Practices Act of 1977 specifically prohibits payments to foreign government officials to aid in attaining or retaining business. This provision applies to all US persons and foreign firms acting within the United States.

    1.5 Describe Trends in Today’s Business Environment and Analyze Their Impact on Accounting

    • Business regulations are always being altered, global competition continues to increase, and technology provides continual disruption. Management accounting must keep up with the changes in the business environment.
    • The fundamental difference between manufacturing organizations and service-based firms is whether the organizations produce a tangible product.
    • Business entities have been in the lead for using technology, but they must continue to adjust quickly with the ever-advancing business technology.
    • ERP systems help companies streamline their operations and help management respond quickly to change.
    • Lean manufacturing, which was started in Japan by automakers, is now a widely used practice that attempts to increase productivity and eliminate waste.
    • The philosophy of continuous improvement has led organizations to adopt practices such as TQM, JIT manufacturing, and LSS.
    • The balanced scorecard approach uses both financial and nonfinancial measures in evaluating all attributes of the organization’s procedures.
    • Globalization has expanded competitive borders, giving customers and companies more alternatives.
    • Many companies have started to assess their corporation not only on financial profits, but also on their corporate social responsibility.

     

    Key Terms

     

    automation
    method of using systems such as computers or robots to operate different processes, and machinery to improve efficiencies and lower direct labor costs
    balanced scorecard
    tool used to evaluate performance using qualitative and nonqualitative measures
    board of directors
    group of individuals elected by the shareholders of a company with the role of placing management, supervising management, and making key decisions on major issues of the company
    bribery
    when an organization or representative of an organization gives money or other financial benefits to another individual, business, or official in order to gain favor or to manipulate a business decision
    budget analyst
    someone who arranges and manages the master budget and compares master budget projections to actual results
    cash-management accountant
    someone with responsibilities that include transferring monies between accounts, monitoring deposits and payments, reconciling cash balances, creating and tracking cash forecasts, and performing all other cash-related financial processes
    Certified Financial Analyst (CFA)
    certification for a career in the finance and investment domains; requirements include a bachelor’s degree or four years’ experience and passing all three sections of the exam
    Certified Fraud Examiner (CFE)
    signifies proven proficiency in fraud prevention, detection, and deterrence; requirements include bachelor’s degree, two years of work-related experience, moral character references, and passing of four separate exams
    Certified Government Auditing Professional (CGAP)
    designation exclusively for auditors employed throughout the public sector (federal, state, local); requirements are the same as for the CIA, but with a different exam
    Certified Internal Auditor (CIA)
    credential offered by the Institute of Internal Auditors (IIA) and one of the only certifications accepted worldwide; requirements include a bachelor’s degree, two years of work experience in a related field, and passing the three sections of the examination
    Certified Management Accountant (CMA)
    certification for a specialist in corporate accounting management, including financial analytics, budgeting, and strategic assessment; requires a bachelor’s degree, two years of work experience, and successfully passing both parts of the exam
    Certified Public Accountant (CPA)
    top tier in accounting certifications; in the United States, each state has different educational and experience requirements, and certification requires passing the four-part CPA administered by the American Institute of Certified Public Accountants (AICPA)
    chief executive officer (CEO)
    executive within a company with the highest ranking title who has the overall responsibility for the management of a company; reports to the board of directors
    chief financial officer (CFO)
    corporation officer who reports to the CEO and oversees all of the accounting and finance concerns of a company
    collaboration
    working in cross-functional teams and earning the trust and respect of colleagues in order to complete a task
    commercial awareness
    knowing how a business is run and how it is influenced by the external environment, and knowing and understanding the overall industry within which the business is operating
    continuous improvement
    ongoing effort to improve processes, products, services, and practices
    controller
    financial officer of a corporation reporting to the CFO who is responsible for an organization’s accounting records, financial statements, tax returns, and internal reporting
    controlling
    monitoring of the planning objectives that were put into place
    corporate social responsibility (CSR)
    actions that firms take to assume responsibility for their impact on the environment and social well-being
    cost accountant
    employee who amasses large sums of data, checking for accuracy and then formulating the cost of raw materials, work in process, finished goods, labor, overhead, and other associated manufacturing costs
    effective communication
    conveying information in both written and oral forms in a way that the intended audience can understand
    Enrolled Agent (EA)
    credential focusing on a career in taxation; created by the IRS to signify significant knowledge of the US tax code and the ability to apply the concepts of that code
    enterprise resource planning (ERP)
    system that helps a company streamline its operations and helps management respond quickly to change
    evaluating
    comparing actual results against the planned results
    external user
    someone who relies on the financial statements and annual reports to access information about a company in order to make more informed decisions (e.g., creditor, tax authority and regulator, investor, customer, competitor, and others)
    Financial Accounting Standards Board (FASB)
    independent, nonprofit organization that sets financial accounting and reporting standards for both public and private sector businesses in the United States that use Generally Accepted Accounting Principles (GAAP)
    financial analyst
    someone who assists in preparing budgets and tracking actual costs, and performs other tasks that support other management personnel in organizing forecasts and projections
    Foreign Corrupt Practices Act (FCPA)
    law that specifically prohibits payments to foreign government officials to aid in attaining or retaining business and requires a company to have good internal controls so a slush fund to pay bribes cannot be created and maintained
    generally accepted accounting principles (GAAP)
    common set of rules, standards, and procedures that publicly traded companies must follow when composing their financial statements
    globalization
    development of business through international influence, or extending social and cultural aspects around the world
    goal
    what a company expects to accomplish over time
    government agency
    found at all levels of government: federal, state, county, city, and so on; includes military, law enforcement, airports, and school systems
    Institute of Management Accountants (IMA)
    professional organization for management accountants that provides research, education, a means of knowledge sharing, and practice development to its members
    intangible good
    good with financial value but no physical presence; examples include copyrights, patents, goodwill, and trademarks
    internal auditor
    employee of an organization whose job is to provide an independent and objective evaluation of the company's accounting and operational activities
    internal user
    someone inside the company or organization who is responsible for managing the company’s business interests and executing decisions (e.g., all levels of management, owner, and other employees)
    just-in-time (JIT) manufacturing
    inventory system that companies use to increase efficiency and decrease waste by receiving goods only as they are needed within the production process, thereby reducing warehousing costs
    kaizen
    another process that is often linked to Six Sigma and is designed for continuous improvement by eliminating waste and increasing efficiencies; a Japanese word meaning change for the better
    lean business model
    one in which a company strives to eliminate waste in its products, services, and processes, while still fulfilling the company’s mission
    Lean Six Sigma (LSS)
    quality control program that depends on a combined effort of many team members to enhance performance by analytically removing waste and diminishing variations between products
    managerial accounting
    process that allows decision makers to set and evaluate business goals by determining what information they need to make a particular decision and how to analyze and communicate this information
    mission statement
    short statement of a company’s purpose and focus
    monetary accounting information
    relating to money or currency
    nonmonetary accounting information
    not relating to money or currency, such as the quantity of materials, number of employees, number of hours worked, and so forth
    nonprofit (not-for-profit) organization
    tax-exempt organization that serves its community in a variety of areas
    objective
    target that needs to be met in order to meet company goals
    outsourcing
    act of using another company to provide goods or services that your company requires
    planning
    process of setting goals and objectives
    radio-frequency identification (RFID)
    technology that uses electromagnetic fields to routinely identify and trace inventory tags that have been attached to objects
    Sarbanes-Oxley Act (SOX)
    federal law that regulates business practices; intended to protect investors by enhancing the accuracy and reliability of corporate financial statements and disclosures through governance guidelines including sanctions for criminal conduct
    strategic planning
    setting priorities and determining how to allocate corporate resources to help an organization accomplish short-term and long-term goals
    sustainability
    meeting the needs of the present generation without compromising the ability of future generations to meet their own needs by being aware of current economic, social, and environmental impacts
    tangible good
    physical good that customers can handle and see
    theory of constraints (TOC)
    process of recognizing and removing bottlenecks within the value chain that may be limiting an organization’s profitability
    total quality management (TQM)
    process in which management and employees look to reveal waste and errors, streamline the supply chain, improve customer relations, and confirm that employees are informed and properly trained
    treasurer
    financial officer of a corporation reporting to the CFO who is in control of the finance side of the business (cash position, corporation funds)
    whistleblower
    someone who provides evidence of fraud

     

    Multiple Choice

     

    1

    LO 1.1The managers of an organization are responsible for performing several broad functions. They are ________.

    1. planning, controlling, and selling
    2. directing, controlling, and evaluating
    3. planning, evaluating, and manufacturing
    4. planning, controlling, and evaluating
    2

    LO 1.1Management accountants help the management of an organization in their planning function through ________.

    1. monitoring anti-theft systems
    2. strategic planning
    3. evaluating costs
    4. analyzing profits
    3

    LO 1.1Which of the following is a primary aspect of the evaluating function within an organization?

    1. comparing actual results against expected results for products, departments, divisions, or the company as a whole
    2. reviewing only the quantitative or financial results of the company
    3. setting goals
    4. putting controls in place for the upcoming year
    4

    LO 1.1During the control function, the measurements taken of the performance must be accurate enough to see ________.

    1. only positive results
    2. deviations and variances
    3. the primary focus
    4. only the negative results
    5

    LO 1.1Which of the following is false regarding strategic planning?

    1. It is the sole responsibility of supervisors.
    2. It will span many years.
    3. It should include both short-term and long-term goals.
    4. Strategic objectives will be diverse and vary from company to company.
    6

    LO 1.2Managerial accounting produces information:

    1. to meet the needs of external users
    2. that is often focused on the future
    3. to meet the needs of investors
    4. that follows the rules of GAAP
    7

    LO 1.2Management accounting:

    1. emphasizes special-purpose information
    2. relates to the company as a whole
    3. is limited to strictly cost figures
    4. is controlled by GAAP
    8

    LO 1.2Internal users of accounting information would not include ________.

    1. managers
    2. employees
    3. creditors
    4. officers
    9

    LO 1.2External users of accounting information would include ________.

    1. employees
    2. managers
    3. investors
    4. supervisors
    10

    LO 1.2Which of the following statements is incorrect?

    1. The practice of management accounting is fairly flexible.
    2. The information gathered from management accounting is not required by law.
    3. Management accounting focuses mainly on the internal user.
    4. Reports produced using management accounting must follow GAAP.
    11

    LO 1.3The stockholders of a company are:

    1. the owners
    2. policy setters
    3. responsible and liable for the financial well-being of the company
    4. operating within the company as independent shareholders
    12

    LO 1.3The controller of a corporation:

    1. reports to the CFO and is in charge of the finance side of the business
    2. reports to the CFO and is in charge of the accounting side of the business
    3. reports to the CEO and implements all cash policies
    4. reports to the board of directors
    13

    LO 1.3The Certified Financial Analyst (CFA) certification:

    1. only requires a high school diploma
    2. is administered by the AICPA
    3. consists of three separate exams that must be taken in succession
    4. is the most popular certification among accountants in the United States
    14

    LO 1.3The Certified Management Accountant (CMA) certification:

    1. signifies someone specializing in tax accounting
    2. requires an associate’s degree and four years of work experience
    3. includes a two-part exam, education requirements, and a work experience requirement
    4. is offered to managers who take special courses in accounting
    15

    LO 1.3Which of the following terms means the ability to work in cross-functional teams in order to complete a task?

    1. supervisory skills
    2. conceptualization
    3. collaboration
    4. resource planning
    16

    LO 1.3Which of the following terms means knowing how a business is run and how it is influenced by external forces, and knowing and understanding the overall industry?

    1. commercial awareness
    2. conceptualization
    3. collaboration
    4. imagination
    17

    LO 1.4What is the law that protects investors from fraudulent financial accounting activity?

    1. FASB
    2. SACS
    3. SOX
    4. CPAS
    18

    LO 1.4What year was the Sarbanes-Oxley Act enacted?

    1. 2007
    2. 1992
    3. 1997
    4. 2002
    19

    LO 1.4When a representative of an organization gives money to another business official in order to gain favor and/or manipulate a business decision, this is known as ________.

    1. whistleblowing
    2. bribery
    3. buyer debits
    4. face value
    20

    LO 1.4The law that specifically prohibits payments to foreign officials in order to attain business is known as ________.

    1. FCPA
    2. AICPA
    3. SOX
    4. IFRS
    21

    LO 1.4Which of the following is not a step in the outline for examining ethical issues?

    1. Establish the facts of the situation.
    2. Evaluate each course of action.
    3. Make a decision.
    4. Confirm decision with FASB.
    22

    LO 1.5Which of the following is not an objective used in the balanced scorecard approach?

    1. Customer
    2. Financial
    3. Vendor
    4. Learning and growth
    23

    LO 1.5Which of the following is not true regarding continuous improvement?

    1. It applies to both service and manufacturing companies.
    2. It is used to reduce performance costs.
    3. It rejects the idea of “good enough.”
    4. It can be applied only to improve processes and products but not services and practices.
    24

    LO 1.5A company’s attempts to utilize sustainable business practices with regard to its employees, the environment, and society are known as ________.

    1. a balanced scorecard
    2. corporate social responsibility
    3. total quality management
    4. value chain
    25

    LO 1.5A process that is often linked to Six Sigma and is designed toward continuous improvement by eliminating waste is ________.

    1. kamikaze
    2. value chain
    3. total quality management
    4. kaizen
    26

    LO 1.5An inventory system that organizations use to increase efficiency and decrease waste is ________.

    1. corporate social responsibility
    2. just-in-time manufacturing
    3. total quality management
    4. Lean Six Sigma
    27

    LO 1.5A quality control program that depends on multiple team members for removing waste and diminishing defects within products is ________.

    1. kaizen
    2. total quality management
    3. Lean Six Sigma
    4. a balanced scorecard

     

    Questions

     

    1

    LO 1.1Carlita believes an important part of the planning process for managers is being sure to position the company to achieve its goals. She thinks that positioning is an extensive concept and can depend on the right information and that managerial accountants assist in positioning the company. Is she correct? Explain.

    2

    LO 1.1What are some activities and tasks a manager might perform when engaging in the controlling function of management responsibilities?

    3

    LO 1.1If there are deviations from the stated goals and objectives, what steps can managers take to get back on track? Provide at least two specific examples.

    4

    LO 1.1Explain how managerial accountants help managers plan, control, and evaluate.

    5

    LO 1.1How do the subject matter of reports and the verification of reports differ between financial accounting and managerial accounting?

    6

    LO 1.2What is the purpose of management accounting?

    7

    LO 1.2Who are the primary users of the information gathered by managerial accountants?

    8

    LO 1.2What are the key differences between financial accounting and managerial accounting?

    9

    LO 1.3Other than accounting skills, what six qualities must be prevalent in a managerial accountant?

    10

    LO 1.3Explain how having more than one of the accounting credentials would be beneficial to an accounting career.

    11

    LO 1.3Briefly discuss the chain of command for someone being hired into an organization as a staff managerial accountant.

    12

    LO 1.3According to the information available at http://www.accounting.com/careers/, what are six different areas of accounting on which you can focus your career?

    13

    LO 1.3According to the information on management accounting available at http://www.accounting.com/careers/, what are some areas of specialization?

    14

    LO 1.3Go to http://www.accounting.com/careers/ and look up your state to find projected job growth and projected salaries.

    15

    LO 1.4What other professional business organizations have a code of ethics?

    16

    LO 1.4How can having a bonus system based purely on sales goals create an environment that encourages unethical behavior?

    17

    LO 1.4What led to the United States Congress passing the public accounting reform act called Sarbanes-Oxley?

    18

    LO 1.5What is an enterprise resource planning (ERP) system? What are the principal benefits of such a system?

    19

    LO 1.5Describe what is meant by the term “balanced” in the term balanced scorecard method.

    20

    LO 1.5What is corporate social responsibility, and who are the stakeholders?

     

    Exercise Set A

     

    EA1

    LO 1.2Indicate whether each statement describes financial accounting or managerial accounting.

    1. The information is directed at external users who are making decisions pertaining to investing, extending credit, and other decisions.
    2. The principal users are the organization’s managers.
    3. The key focus is on the entity as a whole.
    4. The rules and principles are very flexible.
    5. The information gathered is usually available after an independent audit has been completed.
    EA2

    LO 1.2Identify the following as True or False:

    1. Managerial accounting reports must comply with the rules set in place by the FASB.
    2. Financial accounting reports are typically general-purpose reports.
    3. Financial accounting reports pertain to the entity as a whole, whereas managerial accounting focuses more on subunits of the organization.
    4. The main users of the financial accounting information are the internal users.
    5. Managerial reports are prepared on an as-needed basis.
    6. Financial accounting reports often must be audited at least annually by an independent auditor.
    EA3

    LO 1.2Define each of these users of accounting information as an internal user of external user:

    1. Management
    2. Employees
    3. Investors
    4. Creditors
    5. Customers
    6. Tax authorities
    EA4

    LO 1.2Discuss what information would be most useful for these users of accounting information:

    1. Management
    2. Employees
    3. Investors
    4. Creditors
    5. Customers
    6. Tax authorities
    EA5

    LO 1.3Taylor Speedy has prepared the following list of statements about managerial accounting, financial accounting, and the functions of management. Identify each statement as true or false.

    1. Financial accounting centers on providing information to internal users.
    2. Staff positions are directly involved in the company’s primary revenue-generating activities.
    3. Preparation of budgets is part of financial accounting.
    4. Managerial accounting applies only to merchandising and manufacturing companies.
    5. Both managerial accounting and financial accounting deal with many of the same economic events.
    EA6

    LO 1.3Match the term with the description:

    A. Certified Public Accountant i. Specialist in corporate accounting management; favors financial analytics, budgeting, and strategic domains
    B. Certified Financial Analyst ii. Considered the top tier in accounting certifications; must pass a four-part exam, with education and work experience requirements
    C. Certified Management Accountant iii. Designation that is exclusively for auditors of the public sector
    D. Certified Internal Auditor iv. Credential for auditors who work within organizations and is one of a few that is accepted worldwide
    E. Certified Fraud Examiner v. Certification for those with a career in finance and investment areas
    F. Certified Government Auditing Professional vi. Designation that proves proficiency in fraud prevention, detection, and deterrence
    EA7

    LO 1.4After the passage of the Sarbanes-Oxley Act in 2002, many new responsibilities were put into place for organizations and their management. What are the four significant issues that were addressed by the act and its provisions as presented in this chapter? How does the act and its various requirements help deter fraudulent activity?

    EA8

    LO 1.4Indicate whether each of the following statements is true or false.

    1. Bribery in the world of business typically happens when an organization or representative of an organization gives financial benefits to an official to gain favor or manipulate a business decision.
    2. The Foreign Corrupt Practices Act was implemented in the aftermath of disclosures that businesses were violating the IMA Code of Ethics.
    3. Managers are required to follow specific rules issued by the IMA for internal financial reporting.
    4. Ethics is more than obeying laws.
    5. The Sarbanes-Oxley Act addressed public company accounting reform.
    EA9

    LO 1.5Match each lean business method to the best description:

    A. Just-in-time manufacturing i. The focus is on quality throughout the entire process.
    B. Continuous improvements ii. Inventory is attained or produced only as needed.
    C. Total quality management iii. A combined effort of team members is used to eliminate waste and defects.
    D. Lean Six Sigma iv. All managers and employees are always looking for ways to improve operations.
    EA10

    LO 1.5For each of the activities listed, choose the manufacturing concept that applies: (i) just-in-time inventory, (ii) continuous improvement, or (iii) total quality management.

    1. A company receives inventory daily based on customer orders.
    2. Manufacturing factories have been arranged in such a fashion to reduce inefficiencies.
    3. Companies organize customer focus groups in order to look at customer needs and expectations.
    4. The entire production process is standardized and written down with procedures.
    5. Each customer receives a survey of satisfaction with their product.
    6. All orders are complete and shipped within three business days.
    EA11

    LO 1.5Look up the definitions for the following terms:

    1. Budget (Budgeting)
    2. Capital budget (Capital Budgeting Decisions)
    3. Balanced scorecard (Balanced Scorecard and Other Performance Measures)
    4. Break-Even point (Cost Volume Profit Analysis)

    Provide examples of how each of these terms is used in your own life and how using these practices is useful.

     

    Exercise Set B

     

    EB1

    LO 1.2Indicate whether the statement describes reporting by the financial accounting function or the managerial accounting function of an organization.

    1. The users of the report are managers who need a daily summary of work done each shift.
    2. The report is a job cost sheet for jobs completed in a 24-hour period.
    3. The annual report is released each year on the company’s website.
    4. The report is audited by the company’s certified public accountant firm.
    5. The report is prepared every day because the customer service manager needs information about inventory ready to be shipped to customers.
    EB2

    LO 1.2Identify the following as true or false:

    1. Financial accounting reports are not released to external users.
    2. Managerial accounting reports are not used by employees inside the organization.
    3. Managerial accounting reports include only monetary information.
    4. Financial accounting reports are monetary in nature.
    5. If a result of a company’s operations is nonmonetary in nature, it must be converted to monetary units for managerial reporting.
    6. Tax authorities and government regulatory agencies are external users of financial information.
    EB3

    LO 1.2Companies need to report both monetary and nonmonetary data and information.

    1. Define these two terms and provide examples of each.
    2. Discuss what sources are available that provide companies with both types of data and information.
    EB4

    LO 1.3Marvin has been thinking about the fields of managerial and financial accounting and the functions of management within an organization. He has the following list of statements to understand. Identify them as true or false.

    1. Managerial accounting reports are prepared only quarterly and annually.
    2. Financial accounting reports are general-purpose reports.
    3. Managerial accounting reports pertain to subunits of the business.
    4. Managerial accounting reports must comply with GAAP.
    5. The company treasurer reports directly to the vice president of operations.
    EB5

    LO 1.3Match the term with the description.

    A. Chief Executive Officer i. has responsibilities that include transferring monies between accounts and monitoring deposits
    B. Chief Financial Officer ii. the corporation officer who has the overall responsibility of the management of a company
    C. Enrolled Agent iii. a corporate officer who reports to the chief executive officer and oversees all of the accounting and finance concerns of a company
    D. Cash Management Accountant iv. the financial officer of a corporation reporting to the chief financial officer who is responsible for the accounting records and financial statements
    E. Controller v. credential focusing on a career in taxation created by the IRS to signify significant knowledge of the US tax code
    F. Financial Analyst vi. Someone who assists in preparing budgets, tracking actual costs and performs other tasks that support other management personnel in organizing forecasts and projections
    EB6

    LO 1.4The Foreign Corrupt Practices Act (FCPA) was implemented in 1977. Why was it enacted, and what are its major provisions?

    EB7

    LO 1.4Indicate whether each of the following statements is true or false.

    1. Section 302 of Sarbanes-Oxley requires the CEO and CFO to review all financial reports and sign the reports.
    2. One of the three questions put forth by the Institute of Business Ethics is “Do I mind others knowing what I have done?”
    3. Ethical issues may be faced on a small scale, such as making a business decision to produce excess inventory for the sole purpose of trying to influence managers’ bonuses.
    4. A manager who spends excess budgeted funds remaining at the end of a fiscal year on unnecessary expenditures thinking that it is better to “use it than lose it” is acting ethically.
    5. The Foreign Corrupt Practices Act was implemented in 2001 to protect investors by enhancing the accuracy and reliability of corporate financial statements and disclosures.

     

    Thought Provokers

     

    TP1

    LO 1.1Table 1.3 shows how different areas within the business world use the information from managerial accountants. Think of the ways that the events coordinator for the United Way (a nonprofit charitable organization) would use each area (planning, controlling, and evaluation).

    TP2

    LO 1.1There are individuals who are under the impression that managerial accounting provides services mainly for manufacturing organizations. Are they correct? Explain.

    TP3

    LO 1.3Think about the organization chart in Figure 1.7. Describe ways in which each of the accounting and managerial functions might overlap and complement each other.

    TP4

    LO 1.4Controversy tends to surround the topic of whistleblowers. For example, should they be considered heroes or traitors? Many pro-whistleblowing policies have been enacted by the federal government to allow these individuals to reap significant monetary rewards for coming forward and giving information about behaviors and actions such as corporate fraud and unethical deeds. Many corporate whistleblowers face negative consequences of their actions, such as reassignment, revenge, and hate crimes, and are seen as traitors (e.g., Edward Snowden and Gina Gray). Yet Sherron Watkins and Cynthia Cooper were celebrated as heroes. Look up the stories of Sherron Watkins and Cynthia Cooper. Why do you think that some whistleblowers are vilified and others made to be heroes?