66. What is cross-functional expertise and why is it important to the systems approach?
ANSWER:
The ability to see situations from many perspectives is the key to cross-functional thinking. The ability to see the whole, not just one part or function, is part of cross-functional thinking. The ability to foster creative linkages and see relationships and dependencies among the interrelated parts of the organizational system is also part of cross-functional thinking. Open-mindedness, inclusiveness, and flexibility in pursuit of organizational goals are necessary for employees to maintain and grow their organizational systems.
67. Describe the connection between planning, controlling, and feedback.
ANSWER:
Planning establishes performance standards, feedback compares actual performance with planned performance, and control uses feedback to evaluate deviations from plans.
68. Give some examples of reporting feedback that will assist in continuous improvement of a dry cleaning company.
ANSWER:
A dry cleaners will be interested in monitoring all aspects of performance. It may prepare performance reports on materials and labour usage, as well as on meeting revenue targets. It will want to keep track of things important to customers, turnaround time, customer satisfaction, types of complaints, and requests for auxiliary services (i.e., delivery and tailoring). It may keep records about the characteristics of customers (i.e., profession, residence, age) to better understand their market. It will be interested in efficiency and productivity of labour and equipment. It might monitor the usage of capacity. It will be interested in reporting on all aspects of performance.
69. You are a management accountant for the Eugene Division of Lowden Company. Your longtime friend, David Orth, is the Eugene Division manager. David was instrumental in helping you obtain your current position. Because the manager's annual bonus is based on the amount of profit the Eugene Division reports for the year, David has asked you to "massage the numbers" to make the Eugene Division appear more profitable.
Considering the Standards of Ethical Conduct for Management Accountants, how would you respond to David Orth's request?
ANSWER:
According to the Standards of Ethical Conduct for Management Accountants, management accountants have a responsibility to "perform their professional duties in accordance with relevant laws, regulations, and technical standards." Therefore, if "massaging the numbers" involves violating any laws, regulations, or technical standards, it would violate the Standards of Ethical Conduct for Management Accountants. In addition, the Standards of Ethical Conduct for Management Accountants indicate that management accountants have a responsibility to communicate information fairly and objectively and to communicate unfavorable as well as favorable information.
70. Discuss how the goal of profit maximization is affected by ethical considerations. What incentives are there for managers to manipulate accounting data in unethical ways in order to increase profits?
ANSWER:
The objective of profit maximization should be constrained by the requirement that profits are achieved through legal and ethical means. Because performance evaluation and rewards for managers often are linked to reported profits, managers might manipulate accounting data to show increased profits in order to increase their own bonuses. The evaluation and reward system should be designed to discourage unethical behaviour.
71. You are a management accountant for Burn's Ltd. Ruth Hamilton, the sales representative for one of Burn's suppliers, invited you to attend a professional sporting event. Because you are an avid sports fan, you accepted Ruth's invitation.
At the sporting event, Ruth begins talking about Burn's upcoming contract renewals with suppliers. Because there is intense competition and because it is the first bid she will submit to Burn's Ltd., she asks you to review her bid to make sure "it is good enough" before she submits it to the company. In addition, because you are knowledgeable about costs, especially regarding this contract, she asks you to tell her if her bid is "in the ballpark" or "needs improvement." She indicates that if she wins the contract, you will be provided with season tickets for the rest of the year.
Considering the Standards of Ethical Conduct for Management Accountants, how would you respond to Ruth's request?
ANSWER:
According to the Standards of Ethical Conduct for Management Accountants, management accountants have a responsibility to "refrain from using or appearing to use confidential information acquired in the course of their work for unethical or illegal advantage either personally or through a third party." If you agree to review Ruth's bid and tell her if the bid needs improvement so that she will win the contract, this could be viewed as using confidential information for your personal advantage (season tickets). In addition, management accountants have a responsibility to refuse any gift, favor, or hospitality that would influence their actions.