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- What should an organization do if performance measures change? A. Make sure that the manager being evaluated is aware of the measurement change, as this may affect his or her decision-making. B. Make sure that the manager benefits without the corporation also benefitting. C. Make sure that there are significant overriding opportunities for each manager, if the manager is unaware of the change. D. Obtain customer surveys on the change before communicating the change to the manager.Assume that management is gathering evidence as part of its process for assessing the effectiveness of internal control over financial reporting. The company is a manufacturer of high-dollar specialized Control Tested machines used in the medical profession. The following table identifies important controls that management is testing regarding accounts related to revenue recognition, accounts receivable, and other sales related activities. The first column describes the control, and the second column describes the test results. Based on the test results, determine the conclusion that management should likely make about the deficiency. (Is it a control deficiency, a significant deficiency, or a material weakness?)Assume you have been hired by Cabelas Sporting Goods. As part of your new role in the accounting department, you have been tasked to set up a responsibility accounting structure for the company. As your first task, your supervisor has asked you to give an example of a cost center, profit center, and an investment center within the Cabelas organization. Your supervisor is a little unsure of the difference between a profit center and investment center and would like you to explain the difference.
- A company is trying to set up proper internal controls for their accounts payable/inventory purchasing system. Currently the purchase order is generated by the same person who receives the inventory. Together the purchase order and the receiving ticket are sent to accounts payable for payment. What changes would you make to improve the internal control structure? A. No changes would be made since the person paying the bills is different from the person ordering the inventory. B. The person in accounts payable should generate the purchase order. C. The person in accounts payable should generate the receiving ticket once the invoice from the supplier is received. D. The responsibilities of generating the purchase order and receiving the inventory should be separated among two different people.Which of the following is false about accounting information systems? A. They provide reports that people analyze. B. They prevent errors and stop employees from stealing inventory. C. They are designed to gather data about the companys transactions. D. They consist of processes that involve input of data from source documents, processing, output, and storage.Performance measures are only useful if _______. A. there are both controllable and uncontrollable factors to evaluate managers B. manager reward systems are designed by the chief financial officer prior to implementation C. all of the measures used are accounting numbers D. there is a baseline against which to compare the measured results
- Consider the following conversation between Gary Means, manager of a division that produces industrial machinery, and his controller, Donna Simpson, a certified management accountant and certified public accountant: Gary: Donna, we have a real problem. Our operating cash is too low, and we are in desperate need of a loan. As you know, our financial position is marginal, and we need to show as much income as possibleand our assets need bolstering as well. Donna: I understand the problem, but I dont see what can be done at this point. This is the last week of the fiscal year, and it looks like well report income just slightly above breakeven. Gary: I know all this. What we need is some creative accounting. I have an idea that might help us, and I wanted to see if you would go along with it. We have 200 partially finished machines in process, about 20% complete. That compares with the 1,000 units that we completed and sold during the year. When you computed the per-unit cost, you used 1,040 equivalent units, giving us a manufacturing cost of 1,500 per unit. That per-unit cost gives us cost of goods sold equal to 1.5 million and ending work in process worth 60,000. The presence of the work in process gives us a chance to improve our financial position. If we report the units in work in process as 80% complete, this will increase our equivalent units to 1,160. This, in turn, will decrease our unit cost to about 1,345 and cost of goods sold to 1.345 million. The value of our work in process will increase to 215,200. With those financial stats, the loan would be a cinch. Donna: Gary, I dont know. What youre suggesting is risky. It wouldnt take much auditing skill to catch this one. Gary: You dont have to worry about that. The auditors wont be here for at least 6 to 8 more weeks. By that time, we can have those partially completed units completed and sold. I can bury the labor cost by having some of our more loyal workers work overtime for some bonuses. The overtime will never be reported. And, as you know, bonuses come out of the corporate budget and are assigned to overheadnext years overhead. Donna, this will work. If we look good and get the loan to boot, corporate headquarters will treat us well. If we dont do this, we could lose our jobs. Required: 1. Should Donna agree to Garys proposal? Why or why not? To assist in deciding, review the corporate code of ethics standards described in Chapter 1. Do any apply? 2. Assume that Donna refuses to cooperate and that Gary accepts this decision and drops the matter. Does Donna have any obligation to report the divisional managers behavior to a superior? Explain. 3. Assume that Donna refuses to cooperate; however, Gary insists that the changes be made. Now what should she do? What would you do? 4. Suppose that Donna is 63 and that the prospects for employment elsewhere are bleak. Assume again that Gary insists that the changes be made. Donna also knows that his supervisor, the owner of the company, is his father-in-law. Under these circumstances, would your recommendations for Donna differ?Identify the major problems in this situation and explain how they impact the organization. You will need to consider both behavioral and analytical factors. Specifically, how might managerial accounting concepts, tools, or techniques be applied to help resolve this dilemma? What are possible consequences of applying the same to this dilemma? Briefly explain Orange Electronics has been experiencing declining profit margins and has been looking for ways to increase operating income. It cannot raise selling prices for fear of losing business to its competitors. It must either cut costs or improve productivity. The company uses a standard cost system to evaluate the performance of the soldering department. It investigates all unfavorable variances at the end of the month. The soldering department rarely completes the operations in less time than the standard allows (which would result in a favorable variance). In most months, the variance is zero or slightly unfavorable. Reasoning that…All of the following are problems with traditional accounting information EXCEPT: a. Managers in a JIT setting require immediate information. b. The measurement principle tends to ignore standards other than money. c. Variance analysis may yield insignificant values. d. The overhead component in a manufacturing company is usually very large. e. All of these are problems associated with traditional accounting information.
- Which of the following statements regarding flaws suffered by financial measures is not correct?A)They are hard to quantify.B)They do little to motivate employees to improve accounting profits.C)They are not effective in getting managers' attention.D)They are useful in identifying operational problems.E)None of the above.In the scenario, where employer has been putting more emphasis on controlling costs for the various businesses. With the slowing of overall spending in one sector, while ordering managers to closely monitor expenses, selling several companies and giving vice presidents greater responsibility for statements of financial positions. Whatpositive and negative consequences might this pose to the company in future fraud prevention? Outline at least three of each type.Segregation of duties is an important internal control. However,this control is often a challenge for smaller businesses because they donot have sufficient staff. Normally, a segregation of duties deficiencyresults in either a significant deficiency or a material weakness in internalcontrol. For each segregation of duties deficiency identified as(1)–(6), complete the following three tasks:a. Indicate the risk to financial reporting that is associated with theinadequacy of the segregation of duties.b. Identify other controls that might mitigate the segregation ofduties risks.c. Identify possible tests of controls for the mitigating controlsselected in (b).The inadequate segregation of duty situations includes:1. The same individual handles cash receipts, the bank reconciliation,and customer complaints.2. The same person prepares billings to customers and also collectscash receipts and applies them to customer accounts.3. The person who prepares billings to customers does not handlecash…
