HANDOUT 2 – PROFESSIONAL ENVIRONMENT OF COST MANAGEMENT

By REMAR ALLEN M. BAUTISTA, CPA, CTT

 Organizational Structure
o Line – are directly involved in carrying out the mission of the organization. They are usually responsible in
carrying out the primary activity of the organization. Sales and Production managers typically have line
authority.
o Staff – assists and supports those in the line position. Their authority is to advise but not command others.
Example are those assigned in personnel, purchasing, engineering and accounting.
 Chief Financial Officer – also called the finance director in many countries – is the executive responsible for
overseeing the financial operations of an organization. His/her responsibilities include but not limited to
o Controllership – includes providing financial information for reports to managers and reports to shareholders
and overseeing the overall operations of the accounting system. The practice of the established science of
control which is the process by which management assures itself that the resources are procured and utilized
according to the plans in order to achieve the company’s objective.
o Treasury – includes banking and short-term and long-term financing, investments and management of cash
o Risk management – includes managing of financial risk of interest-rate and exchange-rate changes and
derivatives management
o Taxation – includes income taxes, sales taxes and international tax planning
o Internal Audit – includes reviewing and analysing financial and other records to attest to the integrity of the
organization’s financial reports and to adherence to its policies and procedures.
 Controller or Chief Accounting Officer – the financial executive primarily responsible for management accounting
and financial accounting.
 Basic Functions of Controllership
o Planning – establish and maintain an integrated plan of operation consistent with the company’s goals and
objectives
o Control – develop and revise standards against which to measure performance and provide guidance and
assistance to other members of management in ensuring conformance of actual results to standards
o Reporting – prepare, analyse and interpret financial results for utilization by management in the decision-
making process
o Accounting – design, establish and maintain general and cost accounting systems at all company levels
o Other Primary Responsibilities
 Treasurership – concerned with the acquisition, financing and management of assets of a business concern to
maximize the wealth of the firms for its owners
 Basic Function of Treasurership
o Funds Procurement – raising of funds in accordance with the firms planned capital structure
o Banking and Custody of Funds – direct management of cash and cash equivalents and maintenance of good
relationship with banks and other non-bank institutions
o Investment of Funds – management of the company’s placements and securities or purchase of debt or equity
instruments
o Operating Responsibilities
 Credit and collection  Investors Relations
 Inventory Management  Insurance
 Corporate Pension and Retirement Fund  Legal Compliance
 Code of Ethics for Management Accountants as Promulgated by the Institute of Management Accountants (IMA)
o Integrity (Internal Honesty)
 Mitigate conflict of interest
 Avoid conduct that will prejudice carrying out duties ethically
 Abstain from engagements that may discredit the profession
o Competence
 Maintain appropriate level of expertise
 Perform duties in accordance with relevant laws, regulations and technical standards
 Provide information that are accurate, clear, concise, and timely
 Recognize and communicate professional limitations
o Confidentiality
 All information should be confidential except when authorized, legally or professionally required
 Inform relevant parties about the level of confidentiality of information
  Do not use information for unethical or illegal advantage
o Credibility
 Communicate information fairly and objectively
 Disclose all relevant information for decision making
 Disclose delays and/or deficiency in information
o Resolution of Ethical Conflicts

Shareholders

Chief Executive Officer (CEO)

Chief Financial Officer (CFO)

Controller or Comptroller Treasurer

Accountant Budget Officer Petty Cash

Financial Analyst Cost Manager

 International Certifications
o Certified Management Accountant (CMA) – granted by Institute of Management Accountants
o Certified Public Accountant (CPA) – granted by Professional Regulation Commission (PRC) upon passing
of CPALE given by Board of Accountancy
o Certified Internal Auditor (CIA) – granted by Institute of Internal Auditors

Activity:

A. University is a large private school located in Mountain Province. The university is headed by a president who has
five vice presidents reporting to him. These vice presidents are responsible for auxiliary services, admissions and
records, academics, financial services (controller) and physical plant.

In addition, the university has managers for central purchasing, the university press, and the university bookstore, all
of whom report to the vice president of auxiliary services; managers for computer services and for accounting and
finance, who report to the vice president for financial services; and managers for ground and custodial services and
for plant and maintenance, who report to the vice president for physical plant.

The university has four colleges – business, humanities, fine arts and engineering and quantitative methods – and a
law school. Each of these units has a dean who is responsible to the academic vice president. Each college has several
departments.

Required:
1. Prepare an organizational chart for Verona University.
2. Which of the positions on your chart would be line positions? Why would they be line positions? Which would
be staff positions? Why?
3. Which of the positions on your chart would have need for accounting information. Explain