Chp 5: Internal control systems Flashcards
What are the three key areas for internal control to focus on?
- Operational objectives
- Reporting objectives
- Compliance objectives
What are the three dimensions of the COSO cube?
- Objectives in relation to operations, reporting and compliance
- Components of internal control
- Levels of the organisation
What are the five components of internal control?
- The control environment - culture, risk appetite etc.
- Risk assessment - objectives allow risks to be clearly identified
- Control activities - suitable activites to control risk
- Information and communication - relevant info is required for internal controls
- Monitoring activities - feedback loops
What are the six ethical threats?
MASSIF
- Management responsibility - making but also reviewing the same management decisions
- Advocacy - representing someone whilst reviewing them
- Self-review - reviewing your own work
- Self-interest
- Intimidation
- Familiarity - being influenced by a close connection to someone
What is strategic management accounting?
- Providing information on both the business and competitive environment
- Collecting competitor information
- Exploiting cost reduction opportunities
- Focus on continuous improvement and non-financial performance
- Matching accoutning practices to the organisations position and expectations
What is the difference between Managerial and Operational information?
Managerial
- Entire business unit
- Quantitative
- Reported regulalry from a tactical perspective
Operational
- Daily information
- Details can vary
- Usually qualitative (ie. order times)
What are the advantages and disadvnatges of Costing Systems?
3 adv, 5 disadv
Adv.
- Manages cost in high volume production
- Identifies fixed costs
- Allocates costs to activities that generate them (ABC)
Disadv.
- Attempts to manage uncontrollabel costs
- Ignores value streams
- Imprecise overhead valuations
- Rewards excess production
- No incentive to improve
What are the advantages and disadvnatges of Performance measurement?
1 adv, 1 disadv
Adv.
- Using various reward systems to aid accoutnability
Disadv.
- Inappropriate measures can be used
What are the advantages and disadvnatges of Capital Investment Appraisal (eg. NPV, ROCE)?
1 adv, 3 disadv
Adv.
- Straightforward techniques for matching costs and revenues with timescales
Disadv.
- Cost of capital is difficult to estimate
- Assumptions often too broad
- Ignores non-financials
What is Just-in-Time (JiT)?
A system of continous improvement where edemand pulls production through a system
Low inventory levels
What is Throughput Accounting?
Requires three conditions
1. All costs treated as fixed in the short term
2. Inventory not created until a sale is made
3. Profitability is determined by sales
Requires attention to bottlenecks
What is Lean Management Accounting?
Empahsis on continuous improvement, eliminating waste and unnecessary cost
Value to customers is reflected in the price
Business is managed through value streams
Non-value adding activites eliminated
What is Life cycle costing?
Accumulates all relevant costs and revenues over a products life
Estimating the product life is a challenge
What is Target costing?
Setting a target price and managing production based on that price
What is Kaizen?
Japanese for continuous improvement at every level
Workers identify incremental imporvements to reduce costs
