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143 Cards in this Set
- Front
- Back
- 3rd side (hint)
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Board of Directors Rights & Responsibilities |
1) Appoint, supervise, and terminate officers. 2)Declare dividends. 3) Adopt Amendment and Repeal By Laws 4)Setting Management Compensation 5)Initiating Fundamental Changes to Corp Structure. 6)Fiduciary agents by quorum majority respon. of corp. 7) Resolve potential conflicts between senior mgmnt and shareholders. |
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Officers Duties |
Actual and Apparent authority Selection and removal of officers Obligated fiduciary duties and to discharge them in good faith. May be a director Could be a shareholder |
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SOX 2002 Key Functions of Enhancement |
Corporate Responsibility Financial Statement Disclosure Fraud Detection & Deterance |
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BOD Primary Role |
Safeguard company's assets ultimately maximize shareholder return. |
"$" "^" |
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BOD Unlawful Distributions |
Authorized Distribution by BOD that would cause
1) A corporation to not be able pay debts as they become due in the regular course of business. 2) A corp's assets would be less than total liabilities.
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Corp. Responsibility Role Sox 2002 |
Establish Audit Committee Reps made by key corp officers such as CEO and CFO |
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Audit Committee's Role Sox 2002 |
1) Appt, Comp, and and oversight of the work of the public accounting firm employed by the issuer. 2) Resolving disputes between management and the auditor. 3) Establish procedures to accommodate confidential by employees of the issuer regarding audit accounting and internal control. 4) Must receive, retain, develop methods to address and address complaints regarding audit, accounting, or internal control issues. |
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Corp Officials Signed Representation/Assertion Responsibility for Financial Reports SOX 2002 |
1)Review report 2) Report does no contain untrue statements or omit material information. 3)The financial statements fairly present in all material the financial condition and results of operations of the issuer. 4) The CEO and CFO signing the report have assumed responsibility for internal controls, certain assertions. 5) The CEO & CFO signing the report assert that they have made the following disclosures to the issuers auditors and audit committee. |
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CEO and CFO IC assertion responsibilities SOX 2002 |
A) Internal controls have been designed ensure that material information has been available. B) Internal controls have been evaluated for effectiveness as of a date within 90 days prior to report. C) Their report includes their conclusions as to the effectiveness of internal controls based upon their evaluation. |
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FIFO Equivalent Units
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% Incomplete Beg Bal Units + (100% During Period Completed Units - Total Beg Bal Units) + % Completed Ending Bal Units = FIFO Equivalent Units |
3 part formula only look at units
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WAvg Equivalent Units
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100% During Period Completed Units +% of Complete Units Ending Balance. = WAVG Equivalent Units |
2 part Formula Only Look at Units
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WAvg Equivalent Unit Cost of an Input
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Beginning Inv of Input + Ending Inv of Input / Wavg Equivalent Units |
Identify the input to determine which cost. 2 Input costs used
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FIFO Equivalent Cost of an input
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Current Cost only of input/ FIFO Equivalent Units |
1 input used only
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CEO and CFO FS disclosure responsibilities SOX 2002 |
1) All significant deficiencies in the design or operation of internal controls which adversely affect the financials. 2) Any fraud (regardless of materiality) at involves management or any other employee with a significant role in internal controls. |
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Enhanced Financial Statement Disclosure Purpose - SOX 2002
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Intended to ensure that the application of GAAP reflects the economics of the transactions included in the report and that those transactions are transparent to the reader. 1) All material correcting adjustments identified by the auditor should be reflected.
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Enhanced Financial Statement Disclosure Purpose - SOX 2002
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1) Operating leases 2) Contingent obligations 3) Relationships with unconsolidated subsidiaries/related parties. 4)No untrue statement 5) No omitted material information 6) Proforma reconciled with GAAP basis. 7) Use of special purpose entities. 8)off balance sheet transactions. |
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Corp Gov Conflict of Interest Trans - SOX 2002
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Issuers are generally prohibited from making loans to directors or executive officers unless such loans are made in the ordinary course of business and terms are arms length.
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Corp Gov Conflict of Interest Trans Disclosure Req - SOX 2002
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Disclosure are required for transactions with persons who have direct or indirect ownership of more than 10% of any class of most equity stock. These are made by filing a statement with the SEC.
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Disclosure Statement Filing Timeframes - SOX 2002 |
1) At time of registration 2)When the person achieves 10% ownership 3)If there has been a change in ownership. |
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SEC scheduled reviews high risk criteria - SOX 2002
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1) Issuers with material restatements of financial results. 2) Issuers that experience signif volatility in stock prices when compared to others. 3) Issuers with the largest market capitalization. 4) Emerging companies with disparities in price-to-earning ratios. 5) Issuers whose operations significantly affected any material sector of the economy. |
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Criminal Penalties for fraud - SOX 2002
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If alter, destroy, mutilate, conceal, coverup, falsify, make false entry in recrods, or intangible object with the intent to impede, obstruct or influence an investigation will be fined or imprisoned for up to 20 yrs or both.
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Criminal Penalties for Auditors of Issuers fraud - SOX 2002
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Auditors of issuers should retain all audit and review workpapers for 7 years from the end of the fiscal year in which the audit or review occurred. Failure to do so will result in a fina, or imprisonment for up to 10 years or both.
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Statute of Limitations for Securities Fraud - SOX 2002
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The earlier of 2 years after the discovery, or 5 years after the violation.
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Whistleblower Protection -SOX 2002
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An employee who alleges discharge or discrimination for providing evidence of fraud may file a complaint with the "Secretary of Labor" and may be provided with compensatory damages.
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Securities Fraud Penalty - SOX 2002
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An individual who knowingly executes, or attempts to execute, securities fraud will be 1)fines or 2) imprisoned up to 25 years 3) or both. |
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White Collar, Mail Fraud, Wire Fraud, and Violations of ERISA Penalties- SOX 2002
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Subject to pre-determined penalties by the United Stated Sentencing Commission.
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Corp Officers SEC Financial Report Certification Requirements -SOX 2002
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1) Written statement that the periodic report fully complies with SEC Act 1934. 2)Written statement that info therein fairly presents in all material respects, the financial condition and operating results of the issuer. |
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Corp Officer Certification Penalty - SOX 2002
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Fines or imprisonment are penalties for certifications that 1) are made when knowingly the issuer does not comply with all requirements fine up to $1million and prison up to 10 years. 2) are made willfully or intentionally while knowing that the issuer does not comply with all requirements will be fined up to $5 million or imprisoned for up to 20 years. |
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COSO Definition
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Committee of Sponsoring Organizations. It is an integrated framework to assess controls over financial reporting. Also to assist organizations in developing comprehensive assessments of internal control.
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COSO Objective
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O - Operations R - Reporting C - Compliance |
3
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COSO Components
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C- Control Environment. EBOCA, "Tone at the Top" R - Financial Statement and Fraud Risk Assessment. EAR I - Information and Communication. Internal and Ext. - FACT M - Monitoring, and ongoing and separate evaluations. Report and correct deficiencies. E - Existing control environment such as in place policies, procedures to detect and prevent. Segregation of duties. Selection of controls, IT Policies and Procedures. |
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EBOCA - COSO IC
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E - Ethics B - Board of Directors O - Organizational structure. C - Commitment to Competencies. A - Accountability |
Were we live with an E. The prevailing conditions.
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EAR - COSO IC
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E - Event Identification A - Assess risk. R - Respond to risk. |
Actions
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FACT - COSO IC
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F- Fair A- Accurate C - Complete T - Timely |
Quality
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ERM COSO Objectives
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O - Operations - dynam R - Reporting - dynam C - Compliance- dynam S - Strategy - longer time frame |
Considering Business goals and going concern.
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ERM Components
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C - I - Internal Environ. - EBOCA, Risk Philoso, HR standards. Co. Risk Appetito, and S-Setting Objectives R - EAR I- Information Communication M - Monitoring E - Existing Control Activities |
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Financial Measures of Performance
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Profit - All income generated after all expenses. ROI - Income generated from specific Inv. VA Balance Scorecard |
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Balance Scorecard Definition
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A framework used for implementing strategy that converts a company's strategic objectives into a set of performance measures. ie. to achieve this you must do step 1, 2 and 3.
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Non financial Measures of Performance
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Benchmarking and Best Practices. There are External and Internal.
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External Productivity Benchmarks
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Total Factor Productivity (output to total cost) and Partial Factor Productivity Ratios (output to specific quantity).
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2
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Internal Benchmarks Purpose
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To find and analyze problems or performance measures.
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Internal Benchmarks Techniques
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Controls Charts/Deviat diag, Pareto Diagrams/Freq., Cause and Effect Diagrams ( Fishbone)
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Marketing Practices and Methods
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1) Transactional Marketing 2) Interaction based relationship marketing 3)Database Marketing 4) E Marketing 5) Network Marketing |
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Types of Compensation
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1) Fixed Salary 2) Bonus based on sales, profit, expenses or stock price. Could be Cash bonus, or stock bonus. 3) Other employee perks. |
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Taxable Perks
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Perks received that are not related to performing the maanger's business activities may also need to be included in taxable income of the manager.
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Perk Authorization
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Must be authorized by the BOD.
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Cost Objects
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Resources or activities that serve as the basis for management decisions. Can be product lines, departments, geographic territories, or other.
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Cost Measurement
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Valuation of product costing or cost control.
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Single Cost Object with Multi measurements
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A single cost object can have more than one measurement ie. Tax vs GAAP, Internal vs External
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Product Cost Flow
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DM, DL, O/H, WIP, FG, COGS
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Conversion Costs
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Direct Labor and Factory Overhead
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Prime Costs
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Direct Materials and Direct Labor.
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Product Cost
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DM + DL + OVH
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Periodic Costs
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Selling General & Administrative Expenses, interest and financing costs.
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Most Freq. cost objects/objectives
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Prod Cost, Income, Efficiency
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Cost of Goods Sold
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COGS = Beg Inv + COGSM - Ending Inv
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Cost of Goods Manufactured
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COGM = Beg WIP + DM + DL + OH - Ending WIP
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Raw Materials Used
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Beg RM + Purchases - Ending RM = RM Used
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Use Cost Drivers to Determine Cost Allocation Rate
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Budgeted Cost / Budgeted Driver Volume = Rate $/measurement $ Cost Driver Rate * Actual Driver Activity = Actual Cost Allocated |
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Manufacturing Overhead T account
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Manufacturing overhead has a normal debit balance the budget is booked on the credit side and the actual on the debit side. If the credit is higher this is favorable because the budget is higher. If the Debit is higher this is Unfavorable because the actual expense is higher than the budgeted expense.
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Process Costing
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A Method of costing that averages costs and applies them to a large # of homogenous products.
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Segments determination of COGS
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1) Summarize the flow of units. 2) Calculate Equivalent Units output. 3) Accumulate total cost or the production report. 4) Total Cost per Equivalent Units = $ per unit. 5)$ unit = Avg Cost, Avg Cost * Completed Units, and Avg Cost * Ending WIP |
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WAvg Equiv Units
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1) 100% Units Complete plus 2) Ending WIP Units % Completed = WAvg Equiv Units |
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FIFO Equiv Units
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1) Beg Units % NOT COMPLETED plus 2)100% Units Completed less Beg Units plus 3)Ending % Units Completed =FIFO Equiv Units |
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Activity Based Cost Driver
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More accurate costing method uses multiple O/H rates by department to improve allocation.
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Cost Driver
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Is a factor that has the ability to change total cost. Cost Drivers can be nonfinancial or statistical. Can be related to a single cost pool like in the Traditional Costing Method, or Multi as in ABC Costing Method.
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Allocation Bases
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Cost Driver/s used to allocate overhead
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Volume based Cost Drivers
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Are Traditional Cost drivers assigns overhead based on a single cost pool with a single plant wide overhead application rate using Direct Labor or Machine Hours as the allocation base.
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Operations Cost Drivers 2 Types
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Traditional or Activity Based
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Example of Traditional Allocation of Cost
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All Overhead Task Material Handling $100 Ordering $200 Redesign $150 Utilities$200 Total Budgeted Cost = $650/ Total Direct Labor Hours, results in the Allocation Rate of all overhead costs to departments/ product. |
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Example of Activity based Cost Allocation
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Budget Activity Lvls Tasks Cost Cdr Cans Bottles Handling $100 lbs 500 150 Ordering$200 odr 100 60 Redesign$150 chgs 100 100 Utilities $200 hrs 50 200 For each determine $/Drvr For each Multiply the Allocation Rate * Actual Driver per Prod |
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Service Cost Usual Allocation Method
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Direct Method/ Direct Billing Per Department or Product
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Service Cost Step Down Allocation Method
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More useful when prod or Dept. do not have direct billing of services. Like activity based costing but for each service. |
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Joint Costing Method
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Like ABC Costing.
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Split off Costing Method
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Is a mix of Traditional and ABC
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Variable cost
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1)Change proportionally to cost driver changes 2)Constant cost per unit 3) Long run |
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Fixed Costs
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1)Short run or within a relevant range fixed cost does not change when cost driver change. 2) Total Cost Constant 3) Per unit cost changes |
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Semi Variable cost
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Mixed Cost has 2 prices associated one is fixed and one is variable.
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Joint Cost Assignment Net Realizable Method
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In Joint Prod Costing, Joint Cost Assignment: Prod Sales - Prod Seper Cost / Total Sales - Total Seper Cost |
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Residual risk |
The cost of avoiding IH. |
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Inherent Risk |
The cost of risk you are trying o avoid. |
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ERM Effectiveness |
ERM needs strong internal controls. Quality of ERM components determine the effectiveness of ERM. |
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ERM Effectiveness |
ERM needs strong internal controls. Quality of ERM components determine the effectiveness of ERM. |
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Joint Cost Alloc - Net Realizable Value |
Sales - Seperable Cost of Prod/ Total Sales - Total Seperable Cost |
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Ethics Training |
Corp Compliance Training |
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BOD Reporting |
Effective IC principles. |
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Tone at the top
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Best defense against non ethical conduct. Lead by example. Internal control environment.
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Monitoring
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Ensures internal controls continue to operate effectively. Updating mission and values.
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A Control Chart
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Shows results of a particular process in relation to accepted limits
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Information Communication
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Ongoing reporting to audit committee reps, internal communication. NOT MONITORING.
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Internal Control Environment
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Checking for no criminal history - HR Principle.
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Breakeven Analysis Assumptions
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1)Over a relevant range unit VC are unchanged. 2)VC an R are constant on a per unit basis and linear over a relevant range. 3)TC changes or a relevant range. 4)Fxd Cost is constant linear over a relevant range. |
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Contribution Margin Formula, for CM or finding VC or SP
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CM = SP - VC
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Mixed Cost
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FC and VC
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Read questions break it down use the facts, do not make it more complicated than necessary
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Sunk Cost
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Past unavoidable cost
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Committed Cost
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Future Unavoidable Cost |
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Carrying Cost
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The Balance Sheet Cost
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Allocation of Joint Cost - Net Sales Value at Split
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POS Sales $-Cost to complete after JC split ( aka excess cost) = Net Sales Value at Split (additional earnings due to addit. processing)
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Net Sales Value at Split (additional earnings due to addit. processing) has a Zero Profit if
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Equal to Joint Cost, or Sales less Profit
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By Product Gross Margin
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Sales - Selling Cost= Adj to COGS. It has a sole reduction impact to COGS (Expense)
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Main Product Gross Margin
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Sales is increased by Sales, COGS by Prod Cost Only, and Selling is a operating expense. Converting a By Product to a Main Product increases Operating Expense by the Selling Exp $, Increases Sales and COGS only by Product costs therefore Gross Margin will increase. Net Income is not impacted.
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JC Splitting Rules - NRV Method
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1)JC Splitting is prorated over Net realizable value at the saleable value when no further processes is necessary. 2)It is ( Saleable Units * Sales Price)- Additional Costs to Make it Saleable; 3)Summed with the same from the other prod gives allocation base 4)NRV/NRV Base * JC = JC Alloc. Total Cost is additional cost + JC Alloc Cost
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Breakeven Point in units
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Fixed Cost/(Selling Price Per Unit -VC Per Unit) or Fixed Cost/CM per unit Note: CM = SP-VC |
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Breakeven Point Sales
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Fxd Cost/ CM per Sale (CM/Sales) |
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Safety Margin
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Fixed Cost/Breakeven in Sales
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Prime Cost
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Direct Labor and Direct Materials Not OV |
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COGSM
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Direct Materials, Direct Labor, Overhead Applied (not actual) Difference in OV App vs Actual Selling Exp |
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Weighted Average Equivalent Units
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100% Units Completed + 75% Ending Work-In-Process
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Weighted Average Unit Cost
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(Cost During Period + Beg Inv Cost)/Weighted Avg Equiv Units
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Ending Inventory Weighted Avg Cost
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%Ending Inv Completed * Wght Avg Unit Cost
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Completed Inventory Weighted Avg Cost
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100% Completed Inv * Wghted Avg Unit Cost
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ABC Activity Based Costing
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Assumes the resource assuming activities of an enterprise that generate cost are activities not outputs. IS appropriate for al types of cost accumulation systems Job and Process Costing
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FIFO Equivalent Units
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% WIP Beg Units + Units Completed-100% WIP Beg= FIFO Equiv Units + % Completed WIP Ending
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FIFO Weighted Unit Cost
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Only Used Total Cost Added During the Period/ FIFO Equiv Unit Cost
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Ending Inventory FIFO Cost
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FIFO Wght Avg Unit Cost * Ending Inventory %Completed
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By Product Sales - By Prod Method |
Selling Exp nets against selling price to arrive at a deduction from COGS |
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By Prod Sales - Joint Method |
Total sales reduce COGS / Joint Cost increase gp goes up by sales |
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By Prod Treatment |
1) Subtract from joint cost 2) Classify as Miscellaneous Income |
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Direct Labor |
Cost directly associated with the finished ptofuct, such as Loom operators |
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Indirect Labor |
Labor costs not directly associated with the finished prod. Factory foreman or machine mechanics could be classed as indirect labor or factory overhead. |
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ABC system assignment of costs to prods in varying characteristics is done by |
Multiple Cause & Effect Relationships |
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ABC - Assignment of Cost to various lot sizes |
Multiple Cause and Effect Relationships |
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Factory overhead application |
Overhead Applied is credited to the Factory Overhead Control Account, Actual Overhead is Debited to this account. |
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Joint Costing Basic Allocation Approach |
Sales Value at Split off, Constant Gross Margin % NRV, Physical Units/Volume |
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Process Costing System
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Method of Allocating production costs to products and services by averaging the cost over the total units produces. Costs are usually accumulated by department rather than by job.
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Operations Costing System
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Is a hybrid system that allows company to use job order costing for some costs of production and process costing for others.
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ABC Costing System
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Accumulates all cost of overhead for each of the activities of the organization then allocates those costs to the cost objects that caused the activity.
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Job Order Costing System
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A method of allocating production costs to products and services that are identifiable as separate units and require greater or lesser amounts of work to complete.
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Target Costs
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Carefully predetermined standard cost that should be obtained.
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Indirect Costs
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AKA Overhead are all manufacturing costs other than direct materials and direct labor.
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Fixed Costs
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All organization and plant costs that continue to be incurred and cannot be reduced without damaging the organization's ability to meet long range goals.
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Engineered Costs
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Bears an observable and known relationship to a quantifiable activity base.
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Conversion Cost Emphasis
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Places heavy emphasis on indirect costs and disregards consideration of direct cost.
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Traditional Costing Approach
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When changes occur to basic operations traditional costing approaches are not appropriate for cost allocation. Preferring Plant wide application rates applied to machine hours should be used when there are minimal org changes.
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Detailed Cost Allocation
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When there are more org changes more detailed cost allocations are preferred such as using several machine cost pools, to measure prod cost and the basis of time, Using Cost drivers as application bases to increase accuracy of reported product cost, using throughput time as an application base to increase awareness of the costs associated with lengthened throughput time.
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Indirect Cash Flow Effect
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Net Proceeds reduce the cost of the new. depreciation indirect benefit cash flow effect (Depreciation * Tax Rate)
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Stages of Cash Flow
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Inception, Operation, and Disposal of Asset
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Sunk Cost
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Asset Abandonment - Book Value neither in or out flow.
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Margin of Safety |
Breakeven Sales - Total Sales
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Breakeven Sales/Point $
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Fixed Cost / ( CM/Sales)
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Breakeven Sales Units
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Addit Fixed Cost (asso. specifically with prod)/ CM
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Profit Increase In Units, ie $30,000
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Addit (asso. specifically with prod) Fixed Cost+(Desired increased net of taxes)/CM. Desired increase net of tax is the increase/1-tax rate.
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