CMA Real Essay Questions

June 6, 2018 | Author: aamir | Category: Internal Audit, Audit, Labour Economics, Strategic Management, Innovation
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1- What are characteristics of successful budgeting?a-Well planned. A good budget takes time and effort to prepare. Planning a budget should involve everyone affected by it. The Budget must be aligned with the corporate strategy b-Realistic. The budget must be achievable and to be used as a motivation tool rather than a blame tool. c-Flexible. The budget shall be flexible to meet the unexpected events and to be adjusted to meet the new outcomes. d-Clearly communicate. The budget shall be communicated clearly to all employees and to give the involved employees a chance to participate in the preparation process because that will make the budget accepted and also it shall be supported by the higher level management. 2-Describe the compliance audit: A compliance audit is performed in order to determine to what degree an organization is operating in an orderly way, effectively and visibly conforming to certain specific requirements of its policies, procedures, Standards, or laws and governmental regulations. Compliance auditing is more objective than other internal auditing applications. To perform a compliance audit, the auditor must know exactly what policies, procedures, standards, laws, etc., are required. In a compliance audit, the internal auditor is not interested only in the compliance or lack of compliance, but in case of noncompliance, he or she will also determine the cause of the noncompliance, the cost of the noncompliance and what needs to be done in order to be in compliance. The causes of noncompliance may be faulty procedures, changes in the conditions related to the regulation, or perhaps simply mistakes and lack of review or supervision. 3-describe the operational audit. The purpose of a performance or operational audit is examining and evaluating systems of internal control, overall company operations and the quality of performance in carrying out assigned responsibilities. Two levels of policies and procedures must be set in place :Data backup policies and Disaster recovery policies and procedures . This will include controls related to policies. the internal auditor evaluates the adequacy and effectiveness of existing controls in responding to risks within the organization's governance. is required to prevent loss of critical business information and to ensure continued operation in the face of a major system failure or a destruction of the facility. regulations. effectiveness and economy.In order to assess these items. and information systems regarding the • Reliability and integrity of financial and operational information. and contracts (Internal Auditing Standard No. the internal auditor will make recommendations about how to improve the process or operation. Input controls. And these controls are divided into three categories. 5.Al). In auditing controls. detect. • Safeguarding of assets. a company must have a standard level of behavior or output. as well as financial records and information.Define backup control: Control that. Processing controls and output controls. as part of an operational audit. the observation of departmental activities and questionnaire interviews of employees. Internal auditors will evaluate the adequacy and effectiveness of the controls that are in place in relation to operating information. procedures and decision-making. The focus of a performance or operational audit is on the three Es efficiency. • Effectiveness and efficiency of operations. The internal auditors will also look at areas that do not affect the financial statements themselves.Define transaction control: Applications and transaction controls are designed to prevent. The scope of the performance or operational audit exceeds that of a financial audit. which is the focus of the financial audit. and correct errors and irregularities in transactions that are processed by accounting systems. In addition. The main techniques for the auditor in a performance audit are financial analysis. operations. 4. or something that is to be achieved. The internal auditors will then compare the results of the operations with these standards. 2130. and • Compliance with laws. -RI gives the managers the incentive to select any project that generates returns above the required rate of return. But as it is a percentage it is good to compare different business unit sizes.RI Vs ROI benefits and limitations: -focusing only on ROI is not a good general policy. Financial performance is still a priority. revenue from new products. A common method of measuring this success is the trend in the company's share of the market over time: is it increasing in . EVA and ROI. instead firms should take many factors into account. Some of the more common measures of financial performance are: operating income. 7. cost reductions. long production runs and repeated trials. It is not effective when machinery performs repetitive tasks such as robotics it is most appropriate for labor intensive contexts that involves repetitive tasks. Customer: developing the company's customer perspective involves identifying the market segment(s) it wants to target and then measuring its success in those segments. And the manager may reject a project with positive ROI if its percentage is less than the aggregate ROI percentage although it will participate in the company total profits. Conclusions may be unreliable because observed because observed changes in productivity may be due to factors other than learning curve such as change in labor mix or the product mix or a combination of the two. 8. revenue growth. but it is recognized that good long-term financial performance will not be achieved if goals in the other categories are not attained.6. gross margin percentage. The learning rate is assumed to be constant in the calculations but actual declines in labor time are not constant.Limitations of the learning curve analysis.Balanced score Card benefits and limitations: The BSC gives companies a simple tool that shows them specific financial and non-financial indicators translating the company strategy into four categories: Financial: focusing on profitability. but as it is depend on the absolute value of return coming from the investment it is less useful when comparing different business unit sizes. Technological capability for customer service personnel is necessary to be able to provide excellent customer service. low-cost production. And meeting customers' needs better than the competition is supported by innovations in products and services. Number of new product introductions is one way to measure this. meeting the customers' needs better than the competition. and/or being known for high quality and excellent customer service. innovations and improvements in operations. How well customers’ needs are being met can be measured by the number of repeat customers and the percentage of deliveries that are made as promised and when promised. or whether they frequently have to put customers on hold to go search out the information. because if customers are not satisfied. And without customers. they will take their business elsewhere. The level of customer service provided after the sale can be measured with customer surveys. that will need to be supported operationally by maintaining efficient. This may include pricing goals (becoming the lowest cost supplier). Here also is the support for quality in the Learning and Growth: product required to meet the customer satisfaction goals. Efficient cycle times also keep costs low. Customer satisfaction goals relate to how the company wants its customers to view it. the number of employee hours needed to manufacture a unit of product. a business has no business. which can be measured by metrics such as the cost of raw materials. Percentage of manufacturing processes with advanced controls would be a way of measuring manufacturing technology. Being the lowest cost supplier can be measured by the customer's total cost of using the company's product relative to the customer's total cost to use competitors’ products. If one of the company's customer goals is to be the lowest cost supplier. and it is also needed in the manufacturing area to be able to manufacture product efficiently.line with management goals? Customer satisfaction is another vital part of the customer perspective. Internal Business Process: This includes innovation in products and services. and plant utilization. Employee surveys of customer service Personnel could be used to determine whether those employees have the information they need immediately available to them. and customer service/support after the sale. Quality goals can be measured by means of number of defective products returned and the level of product reliability over time. BSC helps the company to measure the performance not only based solely on financial measures but also depend on non financial measures . Eliminate non-value added activities.Clarify &communicate the strategy .Measures process effectiveness and identifies areas to reduce costs or increase customer value.Companies use BSC as management tool to: . and needing to prepare reports using traditional methods may influence management decision making enough to dilute the impact of ABC/ABM.Link strategy to the budgeting process. .Advantages and disadvantages of ABM: Advantages: . .Uses continues improvement to maintain the firm’s competitive advantage.Changing to ABC/ABM will result in different pricing. . 9. .Allocates more resources to activities. . Disadvantages: . process design.ABC/ABM is not used for external reporting. .Implementing ABC/ABM is expensive and time consuming.Get feedback for continues strategy improvement. . manufacturing technology.Align individual and unit goals to the strategy . so costbenefit analysis should be done to identify all hidden costs and benefits.Works well with JIT Process. . and product design decisions and the company must be prepared to support managers who embrace this method and discourage managers who continue to use the old methods.Ties Performance management to ABC to provide consistent inventories for using ABC. strategically redirecting the management focus. products and customers that add more value. 10-What are the four Ethical Principles: Honestly –Objectivity-Fairness-Responsibility . Consult your own attorney or legal advisor to know the legal rights and obligations concerning the ethical issue. 4. . present the issue to the next managerial level. in that case. board of directors. the reviewing authority may be a group such as the audit committee.11-What are the four ethical standards? Competence-Integrity-Confidentiality. board of trustees or owners. 2-If the immediate supervisor is the chief executive officer or equivalent.Creditability 12-Courses of action to be used in case of ethical conflict resolution: 1-Discuss such problem with your immediate supervisor except when it appears that the supervisor is involved. And discussion of the problem with authorities or individuals not employed or engaged by the organization is not appropriate unless the member believes there is a clear violation of law. 3-clarify relevant ethical issues by identifying discussion with an IMA ethics counselor to obtain a better understanding of possible course of action. executive committee.


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