Managerial Accounting and the
Business Environment
Chapter 1
© 2010 The McGraw-Hill Companies, Inc.
Learning Objective 1
Understand the role of
management accountants in
an organization.
McGraw-Hill/Irwin
Slide 2
Organizational Structure
Decentralization is the delegation of decisionmaking authority throughout an organization.
Corporate Organization Chart
Board of Directors
President
Purchasing
Personnel
Vice President
Operations
Chief Financial
Officer
Treasurer
McGraw-Hill/Irwin
Controller
Slide 3
Line and Staff Relationships
Line positions are directly
related to achievement of
the basic objectives of an
organization.
 Example: Production
supervisors in a
manufacturing plant.
McGraw-Hill/Irwin
Staff positions support
and assist line positions.
 Example: Cost
accountants in the
manufacturing plant.
Slide 4
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.
McGraw-Hill/Irwin
Slide 5
Learning Objective 2
Understand the basic
concepts underlying Lean
Production, the Theory of
Constraints, and Six Sigma.
McGraw-Hill/Irwin
Slide 6
Process Management
A business
process is a series of
steps that are followed in order to
carry out some task in
a business.
R&D
Product
Design
Customer
Manufacturing Marketing Distribution Service
Business functions making up the value chain
McGraw-Hill/Irwin
Slide 7
Process Management
There are three approaches to
improving business processes . . .
Theory of
Constraints (TOC)
Lean
Production
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Six
Sigma
Slide 8
Lean Production
Lean thinking can be used to improve business
processes that link companies together.
The term supply chain management refers to the
coordination of business processes across
companies to better serve end consumers.
McGraw-Hill/Irwin
Slide 9
Theory of Constraints
A constraint (also called a bottleneck) is anything that
prevents you from getting more of what you want.
The Theory of Constraints is based on the observation that
effectively managing the constraint is the key to success.
The constraint in a system is determined
by the step that has the smallest capacity.
McGraw-Hill/Irwin
Slide 10
Six Sigma
A process improvement method relying on customer
feedback and fact-based data gathering and analysis
techniques to drive process improvement.
Refers to a process that
generates no more
than 3.4 defects per million
opportunities.
McGraw-Hill/Irwin
Sometimes
associated
with the term zero
defects.
Slide 11
Learning Objective 3
Understand the
importance of upholding
ethical standards.
McGraw-Hill/Irwin
Slide 12
Code of Conduct for Management
Accountants
The Institute of Management Accountant’s (IMA)
Statement of Ethical Professional Practice
consists of two parts that offer guidelines for:
 Ethical behavior.
 Resolution for an ethical conflict.
McGraw-Hill/Irwin
Slide 13
IMA Guidelines for Ethical Behavior
Recognize and
communicate professional
limitations that preclude
responsible judgment.
Maintain
professional
competence.
Competence
Follow applicable
laws, regulations
and standards.
Provide accurate, clear,
concise, and timely decision
support information.
McGraw-Hill/Irwin
Slide 14
IMA Guidelines for Ethical Behavior
Do not disclose confidential
information unless legally
obligated to do so.
Do not use
confidential
information for
unethical or illegal
advantage.
Confidentiality
Ensure that subordinates do
not disclose confidential
information.
McGraw-Hill/Irwin
Slide 15
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.
McGraw-Hill/Irwin
Slide 16
IMA Guidelines for Ethical Behavior
Communicate information
fairly and objectively.
Credibility
Disclose delays or
deficiencies in information
timeliness, processing, or
internal controls.
Disclose all relevant
information that could
influence a user’s
understanding of reports
and recommendations.
McGraw-Hill/Irwin
Slide 17
Why Have Ethical Standards?
Ethical standards in business are essential for a
smooth functioning economy.
Without ethical standards in business, the
economy, and all of us who depend on it for
jobs, goods, and services, would suffer.
Abandoning ethical standards in business would
lead to a lower quality of life with less
desirable goods and services at higher prices.
McGraw-Hill/Irwin
Slide 18
Company Codes of Conduct
Broad-based statements of a
company’s responsibilities to:
Employees
Customers
Suppliers
And to the communities in
which the company operates.
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Slide 19
Corporate Governance
The system by
which a company is directed
and controlled.
Board of
Directors
Incentives and
monitoring for
Top
Management
To pursue
objectives of
Stockholders
McGraw-Hill/Irwin
Slide 20
Enterprise Risk Management
A process used
by a company to
proactively identify
and manage risk.
Should I try to avoid the risk,
share the risk, accept the
risk, or reduce the risk?
Once a company identifies its risks, perhaps the
most common risk management tactic is to reduce
risks by implementing specific controls.
McGraw-Hill/Irwin
Slide 21
Corporate Social Responsibility
Corporate social responsibility (CSR) is a concept
whereby organizations consider the needs
of all stakeholders when making decisions.
Customers
Employees
Suppliers
Communities
Stockholders
Environmental
& Human Rights
Advocates
CSR extends beyond legal compliance
to include voluntary actions that satisfy
stakeholder expectations.
McGraw-Hill/Irwin
Slide 22