ACC 315 Chapter 1

Baille, Creighton University

financial accounting

focuses on reporting financial information to outside parties; complies with GAAP; impacts managers’ compensation

how do financial accounting and managerial accounting relate?

financial accounting results directly impact how managers are compensated (ex. bonuses)

management accounting

use of financial and nonfinancial information to help managers make decisions to reach the goals of an organization; does not have to comply with GAAP; internal use

what is the most important planning tool?

a budget; used to allocate resources and set financial targets for the organization.

comparing actual results to budgeted results is a key element of ________

control the budgeting process

a budget is an element of ______ and ______

planning; control

cost accounting

the process of measuring, analyzing, and reporting information related to the cost of acquiring and using resources; term used interchangeably with management accounting

the Sarbanes-Oxley Act (SOX) states that…

• CEOs and CFOs must certify that financial statements fairly represent the results of operations

• the audit committee must hire, compensate, and fire CPA firm who audits the company

• CPA firms cannot provide consulting, tax, and other advisory services to the company they audit

• the PCAOB is to oversee, review, and investigate the work of auditors

Institute of Management Accountants (IMA) ethical guidelines principles

• honesty

• fairness

• objectivity

• responsibility

IMA ethical guidelines standards

• competence

• confidentiality

• integrity

• credibility

competence

always keep learning, follow the rules/laws, clearly and truthfully share information

confidentiality

keep information private, know all privacy rules, don’t use information for personal gain

integrity

don’t do anything that would cause someone to question your objectivity, let others know of any conflicts of interest, avoid unethical situations, think about how your actions could impact the reputation of accountants, be honest and trustworthy

credibility

be unbiased, give all the facts needed completely and accurately, communicate and fix any errors, let others know if you have professional limitations

accounting systems are used to…

record economic events and transactions

managers use accounting information to…

make decisions about the activities, businesses, or areas they oversee

cost management

the activities managers undertake to use resources in a way that increases' a product’s value to customers and achieves a company’s goals

ethics are the ________ of a well-functioning economy

foundation

Sarbanes-Oxley Act (SOX)

passed in response to a series of corporate scandals; focus on improving internal control, monitoring of management, and disclosure practices

Public Company Accounting Oversight Board (PCAOB)

oversees, reviews, and investigates the work of auditors

Institute of Management Accountants (IMA)

a professional accounting organization that advocates high ethical standards

budget

the quantitative expression of a proposed plan of action by management