Financial Management LO3

LO3 Evaluate the role of management accountants
Management accounting:
Is the process of preparing management reports and accounts that provide accurate financial and
statistical information that managers need to take daily and short-term decisions.
Monthly or weekly reports are generated internally to department managers and CEOs, including
the amount of cash available, sales proceeds, outstanding debts, raw materials and inventory.
The process of analyzing business costs and operations for internal financial reporting, records
and accounts to the decision-making process to achieve the objectives of the company and
manage it more effectively.
Management accountant roles and responsibilities:

The chief accountant analyzes the key financial information to provide feedback to assist
management planning and business decision-making that ensure the achievement of the
company's objectives and ensure continuous profit and carry out a series of tasks to ensure the
financial security of the company.
● Its role is also to try to reduce the operating and production costs of the company by
identifying and implementing more efficient strategies.
● Its functions are budgeting and reporting.
● Dealing with taxes, preparing and submitting tax returns.
● Asset Management.
● Assistance in strategic planning.
● And plays an important role in predicting future trade and economic events to develop
future plans.
● Cash flow forecasting.
● Make a decision to make or buy.
● Analysis of rate of return on investment.
Management accounting values:

Fulfillment of obligations to avoid conflicts of interest, personally or professionally.
To abide by the confidentiality of accounting information and not to disclose any financial
information because any diversion may result in a serious risk to the company.
You should have a spirit of cooperation and high communication skills to communicate
effectively with others.
Accounting control system:

Are the methods and procedures implemented by the Company to help ensure the accuracy and
accuracy of its financial statements which constitute the Company's internal control system.
The system is implemented by ensuring compliance with accounting policies and procedures,
safeguarding the assets of the Organization and preparing and submitting financial reports in a
timely manner.
Cost management techniques:

● Time management:
Will help employees measure how they use their time and find more efficient ways and allow
them to do more work at the same time when organizing their time and tasks, which will allow to
achieve higher productivity without increasing the cost.
● Reduce common costs:

The high costs will lead to great difficulties and will reduce the profit of the company especially
the unnecessary costs, which are easy to avoid in several ways, such as reducing the warehouses
in case it is easy to request the goods on time and try to deal with reliable suppliers so that
always on demand and the goods are available permanently.
● Outsourcing is another way of reducing costs so that you can use other sources to get the
job done quickly and at a lower cost. This will help save money. For example, if you
decide to produce a new product instead of creating a new production line and the cost of
failing or not succeeding in the market, Ready and then sold, which will reduce the cost
compared to production.
● The use of modern technology:

This will help companies compete with large companies locally and internationally and return to
the company with high interest in terms of modern equipment or through the completion of
operations that need to travel or take place outside the country through the Internet, which will
help to reduce the cost and completion of work in a shorter time.
● Manage Inventories
While inventory might be a necessary evil, it's one where you can usually shave costs. The first
consideration is to try to match your ordering to your demand. For your most active items,
consider making more, smaller orders so that you always have fresh stock and don't take up too
much warehouse space. Items that you sell in smaller quantities, though, should be stocked so
that you don't have to spend too much time tracking them or reordering them. Since they're low-
volume, you don't need to keep too many of them on hand.
Advantages of cost management:

● Cost control provides a basis for measuring operational performance. Comparing the
actual costs of the standard m provides a confirmation of efficiency or incompetence
easily.
● Standard costing is the basis for budgeting where budgets are prepared on the basis of
standard costs.
● Ability to control project expenses.
● Maintain a central record of all expected expenses.
Tools of cost control:

External:
Comparing the performance of the company with other companies through the external standards
of companies, it helps to assess and determine the size of the discrepancy and determine whether
this discrepancy requires corrective action.
Internal:
● Budgets:
It is the simplest way to control common costs. It is a process of revenue planning and how it is
allocated to different categories of work expenses. Monthly and annual budgets are developed by
discussing and reviewing different categories of expenditure and return on investment
● Audit:
Audits are additional cost control measures as they are a comprehensive review of budget use in
each department
Fraud:
Acts of deceit or deliberate concealment or misrepresentation of the truth either in order to gain
an advantage is illegal or unfair and is also in the activities of theft, corruption, conspiracy and
embezzlement.
It is a crime to which the law is severely punished.
Fraud risk:
Fraud and fraud can result in serious damage to the company:
1. Heavy losses that could lead to the closure of the company and the termination of its
operational activities in full.
2. Loss of the company's reputation in the market and between competitors, which will lead to
the withdrawal of investors and the loss of the company.
3. The high cost of time If fraud is detected, it will take more time to investigate, detect fraud and
who has done it and take corrective measures to minimize loss.
Fraud types:
● The most common form of fraud is fraudulent checks on payment, with the prior
knowledge that the balance is insufficient to pay the check amount.
● Falsification of financial statements:

Although less common but more harmful to the company where it will cost the company a lot of
losses.
● Embezzlement:
The illegal use of money by the person who controls the money.
● Internal thefts:
Such as stationery and office supplies that do not make a big difference in stock.
● Fraud in purchases:
Includes the demand for excess of the product and then return some of it and refund money or
purchase from a fictitious account by the fraudulent buyer in the company.
Fraud implication:
● The lack of transparency through complex financial transactions that are difficult to
understand is an ideal way to hide fraud and fraud.
● Lack of control and weak system in the company.
● Assign one employee to work and deliver all tasks.
● Lack of control over staff work and lack of audit.
● Put the money and make control of its movement with one employee.
● The absence of a moral factor among employees.
Fraud detection:
You can prevent or attempt to thwart fraud by:
● Implement tight internal controls on accounting and cash-related functions.
● Conduct random checks of records payable and receivable.
● The rotation of staff duties in accounts payable and receivable.
● Giving and imposing mandatory disability of employees.
● Supervising checks and issuance operations and immediate and quick disposal of
canceled or canceled checks.
Fraud triangle
Is a model to explain the factors and reasons why an employee commits the crime of fraud at
work
It is classified into three stages:
1. Pressure: The motive behind the crime can be personal financial pressures such as debt
and lack of income.
2. Opportunity: is the means or time used by the employee to fraud in a way unlikely to be
discovered in a hidden way away from suspicions.
3. Justification or rationalization is the cognitive stage when an employee is able to justify
the crime to himself in a way that is acceptable to his moral concept by being convinced
of the pressure he feels and the conviction that he is a victim.
References:
http://www.businessdictionary.com/
https://www.myaccountingcourse.com/
https://www.roberthalf.com.au/
https://www.allbusinessschools.com/
https://www.mbaknol.com
https://online.maryville.edu/
https://thelawdictionary.org/
https://www.investopedia.com/
http://www.specialistcostauditors.co.uk/
https://www.limitlesstechnology.com/
https://www.business.org/
http://www.yourarticlelibrary.com/
https://i-sight.com/

Financial Management LO3

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LO3 Evaluate the role of management accountants

Management accountant roles and responsibilities:

Management accounting values:

Accounting control system:

Cost management techniques:

● Reduce common costs:

● The use of modern technology:

Advantages of cost management:

Tools of cost control:

● Falsification of financial statements:

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