Enabling Competencies-Chapter 14

Chapter 14: Decision-Making

Overview

• This chapter serves as a quick reference for the decision-making process, essential for a CPA.

Lesson 1: The Decision-Making Process

• Enabling Competencies:

  • Solving problems and making decisions

  • Communicating

  • Adding value

• Learning Outcomes:

  • Identify the CPA Way in the decision-making process.

  • Assess the situation effectively.

  • Analyze issues during decision-making.

  • Make conclusions and recommendations.

  • Apply decision-making steps to scenarios.

14.1 The Decision-Making Process

• Decision-making is a crucial enabling skill for a CPA.

• Steps of the Decision-Making Process:

  1. Assess the Situation: Define the scope of the problem.

  2. Analyze Major Issues: Collect, verify information, and conduct analysis.

  3. Conclude and Advise: Make recommendations based on integrated analysis.

14.2 Assess the Situation

• Understanding the Problem: Analyze the context of the issue, e.g., outsourcing manufacturing.

• Identifying Problems:

  • Determine if the issue involves multiple sub-problems for analysis.

  • Example: Consider if outsourcing is the best option or if in-house production is viable.

• Breaking Down the Problem:

  • Should the company outsource or continue in-house manufacturing?

  • Which outsourcing supplier to choose?

  • What is the best manufacturing equipment?

• It’s essential to assess whether the issue needs attention.

  • Use provided facts to guide analysis focus:

    • If detailed information is given, a thorough analysis is likely expected.

    • If information is sparse, minimal attention may be warranted.

14.3 Analyze Major Issues

• Performing Analyses:

  • Choose appropriate tools for analyzing alternatives based on collected information.

  • Focus on quantitative analysis with consideration of qualitative factors.

• Preparation:

  • Create an outline and use it for gathering relevant information.

• Understand the problem and selected tools help frame the analysis effectively.

14.4 Conclude and Advise

• Identifying Decision Makers: Understand the goals and objectives of the individual or organization making the decision.

• Decision Criteria: Guidelines based on the decision maker's objectives:

  • Choices may involve trade-offs among competing goals.

• Example of Using Decision Criteria:

  • A cost-driven company may prioritize the most cost-effective option when outsourcing.

  • A quality-driven company will focus on overall product quality but will still consider costs.

• Recommendations: Base conclusions on existing information and suggest additional information collection if necessary to enhance advice.