STRATEGIC COST MANAGEMENT
CHAPTER 2 – THE PROFESSIONAL ENVIRONMENT OF COST MANAGEMENT
Organization Structure and the Management Accountant
Management Accountant – the one who involves in tailoring the application process to the
organization to achieve organization’s objectives.
-they may have titles as controller, treasurer, budget analyst, cost analyst and
accountant.
Management Accounting – is intended to include persons involved in such functions in
controllership, treasury, financial analysis, planning and budgeting, cost accounting, etc.
Line authority – the authority to command action or give orders to subordinates.
Staff Authority – the authority to advice but not command others.
Functional Authority–the right to command action, laterally or downward, with regard to a
specific function or specialty.
The Chief Financial Officer and the Controller
Chief financial officer – is the executive responsible for overseeing the financial operations of an
organization. It is also known as the financial director.
Responsibilities of the CFO vary among organizations, but they usually include the following areas:
Controllership - this involves giving financial information reports to managers and shareholders,
as well as supervising the accounting system's overall operations.
Treasury - this includes banking, short and long-term financing, investments, and management of
cash.
Risk management - this includes managing the financial risk of interest-rate, exchange rate
changes, and derivatives management.
Taxation - this includes income taxes, sales taxes, and international tax planning.
Internal Audit – involves reviewing and analyzing financial records to ensure the integrity of the
organization's financial reports and to adhere to its policies and procedures.
- In some organizations, the CFO is also responsible for information systems.
Controller – the financial executive that is primarily responsible for management and financial
accounting.
Controllership – it is the practice to established science of control which is the process by which
management assures itself that the resources are procured and utilized according to plans in order to
achieve the company’s objectives.
Basic Functions of Controllership
1. Planning – consistent with establishing and maintaining an integrated plan of operation.
2. Control – develop and revise standards, and provide guidance and assistance to insure conformance of
actual results to standards.
3. Reporting – prepare, analyze, and interpret financial results.
4. Accounting – design, establish, and maintain general and cost accounting systems at all company levels.
5. Other Primary Responsibilities – manage, supervise, and direct other assigned functions.
QUALIFICATIONS OF THE CONTROLLER
1. An excellent technical foundation in accounting and finance.
2. An understanding of the principles of planning, organizing, and control.
3. A general understanding of the industry.
4. A thorough understanding of the company.
5. The ability to communicate and basic understanding on other functional problems.
6. Ability to express ideas clearly.
7. Ability to motivate others.
The Chief Financial Officer and the Treasurer
Treasureship - is concerned with acquisition, financing and management of assets of a business
concern to maximize the wealth of the firms for its owners.
Treasurer’s responsibilities
1. Funds Procurement –involves raising of funds in accordance with the firms planned capital
structure.
2. Banking and Custody of Funds – involves direct management of cash and cash equivalentsand
maintenance of good relations with banks and other non-bank institution.
3. Investment of Funds – involves management of company’s placements and securities or purchase
of debt or equity instruments. It is also includes analysis of decisions related to investment.
4. Operating Responsibilities related to:
(a) Credit and Collection
(b) Inventory Management
(c) Corporate Pension and Retirement Fund
(d) Investor Relations
(e) Insurance
(f) Compliance with legal and regulatory provisions (funds procurement)
Ethical Standards for Management Accountants
- Concerns about ethical behavior in business and public life have been raised, with allegations and
scandals. The Institute of Management of Accountants (IMA) has developed the Standards of
Ethical Conduct for Practitioners of Management Accounting and Financial Management.
Code of Conduct for Management Accountants
1. To maintain a high level of professional competence.
2. To treat sensitive matters with confidentiality.
3. To maintain personal integrity.
4. To be objective in all disclosing.
Standards of Ethical Conduct for Practitioners
1. Competence - maintain appropriate level of professional competence by ongoing development of
knowledge and skills, prepare complete and clear reports and professional duties.
2. Confidentiality - Refrain from disclosing information, from using or appearing to use confidential
information and inform subordinates regarding confidentiality.
3. Integrity - Refrain from engaging in any activity that would prejudice their ability to carry out their
duties ethically, refuse any gift, favor or hospitality that can influence actions or discredit profession.
4. Objectivity - Communicate information fairly and objectively, disclose fully all relevant information
that can reasonably influence others.
Resolution of Ethical Conflict
If the established policies of the organization do not resolve the ethical conflict, such practitioner should
consider the following course of actions:
Discuss with the immediate superior (except when the superior is involved)
Clarify relevant ethical issues
Consult your own attorney for legal obligations and rights.
If the ethical conflict still exists after all of the reviews, resign from the organization.
Codes of Conduct (International) Those who engage in unethical behavior often justify their actions
with one or all of the following:
1. The organization expects unethical behavior.
2. Everyone else is unethical and/or,
3. Behaving unethically is the only way to get ahead.
Institute of Management Accountants (IMA)
- It is the principal organization of management accountants in United States, has instituted to a
program provide certifications for management accountants and financial managers.
International Certifications
Certificate of Management Accounting (CMA) – is one who passed the rigorous qualifying
examination and granted by Ima (Institute Management Accountants).
Certificate in Public Accounting (CPA) – is one who has met the pre-qualification educational
requirements, passed the CPA licensure examinations given by the Philippine Regulatory Board of
Accountancy.
Certificate In Internal Auditing (CIA) – an individual must pass a comprehensive examination
designed to ensure technical competence and have the required number of years of work
experience.
Philippine Association of Management Accountants (PAMA)
- PAMA was established in 1972 as the National Associations of Accountants (NAA) in New York. It is
founded to provide its members with educational and professional activities and knowledge in
management accounting practices and principles.
PAMA (Objectives)
1. To establish management accounting as recognized profession by identifying role of management
accountants
2. To foster higher educational standards in the field of management accounting.
3. To assist employees, educators and students by establishing measures by individual’s knowledge and
competence in the field of management accounting.
