Roles of a Management Accountant and US Anti-Money Laundering Regulations - Case Study Example

Managerial Accounting Name: Institution: Course: Lecturer: Date: a. MONTH MACHINE HOURS MAINTENANCE COST(RM) January 90,000 185,000 February 110,000 220,000 March 100,000 200,000 April 120,000 240,000 May 85,000 170,000 June 105,000 215,000 July 95,000 195,000 August 115,000 235,000 September 95,000 190,000 October 115,000 225,000 November 105,000 180,000 December 125,000 250,000 We have, At the highest Activity: x2 = 125,000.00 y2 = 250,000.00 At the lowest Activity x1 = 85,000.00 y1 = 170,000.00 Variable Cost per unit (y2-y1)/(x2-x1) Total Fixed Cost y2-bx2 = y1-bx1 Variable Cost per unit = (250,000-170,000)/ (125,000-85,000) Variable Cost per unit = 2 Total Fixed Cost = 250,000 - (2*125,000) = 170,000 - (2*85,000) Total Fixed Cost = 0 Therefore: Cost Volume Formula y = 0 + 2x b. Where x = 90,000.00 y= (0+2(90,000) Therefore y = 180,000.00 1. Roles of a Management Accountant Background The major role of a management accountant in a firm is to support competitive decision-making by collecting, processing as well as giving information that assist the management to plan, control; besides evaluating the processes and strategy of the firm. The title ‘management accountant’ falls in different categories. This means that there exist sub-titles or sub-units that make up the main title. This includes financial accountants, internal auditors, taxation accountants as well as cost accountants. The major initiative of developing and using management accounting concepts is an important aspect for many persons including finance professionals, marketing managers, operational heads, top-level managers as well as information technologists (DRURY 2013). Management accountant is engraved in a process of creation and utilization of cost, quality as well as time-based information with an aim of making effective decisions in a firm. As aforementioned, different categories of individuals ensure that the firm has smooth and efficient operations. The financial accountants are tasked to provide relevant and reliable reports to external stakeholders to aid in decision making. This includes creditors, customers, stockholders and government agencies. System professionals are tasked with developing reliable soft wares that ensures information is available to the management and in the most desired format for presentation. The tax accountants perform the tasks that ensure that management complies with tax laws and that no payment exceeds what the firm is obligated to pay. Moreover, tax professionals participate in instituting plans, controls as well as process-evaluation which eventually impact on future tax-expense exposure. Cost accountants perform the key role of tracking and reporting overall relevant products as well as service costs. The overall management accountant works in bringing together all the information acting like an integral part, pertaining to planning, evaluating, control and decision-making practices occurring within the firm(DRURY 2013). The main objectives regarding management accounting information given to both management and the executives within the firm is quite different with the financial information disseminated to external stakeholders such as investors and regulators. Queries arise on how information as well as performance measures pertaining to quality and time is provided by a distinctive general ledger system bearing only debits and credits of amounts. In the twentieth century, management accountants are obligated to produce management reports via the use of general ledger system derived from financial accounting (Chartered Institute of Management Accountants 2011). Thus, the marriage between management accounting and the financial accounting exists as long as the goal of the management accountant is to track cost information. However, with the emergence of modern techniques such as Just in Time technique which is coupled with an influx of competition in the global market, a lot of firms have been involved in ensuing competition of quality, timeliness and cost. This means that it is a challenge for the managers to track the performance of an organization via the use of debit and credit system. This has been eased by the adoption of modern computerized systems, especially the database system which provide the firms with a feasible opportunity of tracking different categories of information. Presently, the current and future challenge facing the management accountant is the organization of data provided by different programs to support decision-making, in absence of information and data overload to managers and executives. In this regard, the management accountant is obligated to have a high level of comprehension in respect to modern technology. This is an additional role that is quite inevitable. Therefore, the future managers should seek advanced education and experience in the field of computing in order to sharpen their skills that will make them better managers (DRURY 2013). Generally, in order to obtain the required results within a firm, management accountant is required to perform these roles; that is, planning, controlling, organizing, motivating and communicating (Chartered Institute of Management Accountants 2011). Planning This process is accomplished on a long-term or short-term basis. Long-term planning process centralizes on the future management demands. The process takes place in a span of two to five years of which it can be extended. Eventually, long-term plans are translated to immediate needs whilst detailed plans are included in the budget. Long-term plans assist in the establishment of future plans. The accounting information and data is provided to assist in decision making process which analyses the products to be sold, the intended market, the price and proposals for spending the capital (DRURY 2013). The short-term plans provide data related to past performance. This data is utilized as a model of future performance. The accountant uses the data to establish budget procedures and schedules as well as coordinate short-term plans regarding the entire business sections. The accountant also centralizes all other plans into a single business plan and forwards it for approval by the executives (Chartered Institute of Management Accountants 2011). Controlling This involves performance of a comparative analysis to ascertain whether deviations exist to business plans. The identification of such deviations is corrected in time. The control process is very important to the organization since it draw up the performance reports which compare the actual units to budgeted revenue in regard to responsibility centres. The accountant is then obligated to issue a warning to the managers about the occurrence of activities that are contrary to the plans. The process guides the control function through identification of problems and provision of immediate action measures (Chartered Institute of Management Accountants 2011). Organizing This establishes the main internal frame through which all the intended activities within the firm are carried out. The organizing function designates the roles to the appropriate personnel. Organizing requires concrete definition of managerial accountability as well as line of authority. It involves decentralization where departments are interlinked within hierarchy of proper communication structure as well as staff relationship. Identification of an organizational structure is more relevant is respect to proper function of management accounting system which then allows preparation of internal reporting system in regard to the structure. It also gives suggestions of a more suitable organizational structure in which the concepts of authority, responsibility as well as expertise are included. This ensures actual performance. The management accountant designs and implements an accounting system that defines as well as strengthens these connections (Chartered Institute of Management Accountants, 2011). Communicating The accountant is obligated to establish and maintain an efficient communication stream as well as a reliable reporting system. After this is set, he is mandated to communicate the performance reports to managers. This shows how efficient he is in terms of managing his activities as well as highlighting sensitive issues requiring thorough investigation via ‘management by exception’.  Motivating This entails making an influence towards human behaviour with an aim of making participants identify themselves with firm’s goals as well as make concrete decisions to align themselves with the goals. An efficient manager is able to motivate the subordinates in achieving the company’s objectives established by the executives. The budget plans as well as performance reports prepared by management accountants have a direct influence in motivating organizational staff. Budgets acts as targets that intends to motivate the managers to attain organizational objectives. Performance reports intends to instil individual performance through communication of data that is linked to targets. The accountant directly participates in the staff motivation through provision of valued assistance in identifying problematic areas within the structure and giving an in-depth highlight of the areas that needs management attention (DRURY 2013). Apparently, management accountants are needed in global companies to set up strategy-setting roles in order for such companies to achieve optimal sustainability outcomes. There is a global move that intends to incorporate non-financial and the financial data. Management accountants are ideally placed to provide the required alignment-mechanisms as well as collaborate with the senior executives in producing integrated reports and reflecting sustainability strategies needed to fulfil stakeholders’ interests. According to CIMA, management accountants are fully fulfilling their traditional responsibilities of financial specialists. In the business world where collection as well as analysis of good is obvious, issue-specific information is important to sustainability decisions. Sustainability requires management accountants to examine and manage non-traditional data for guiding strategic decisions. In this regard, there is a high potential for the accountants to perform as collaborators of achieving sustainability goals although the potential has not been fully grasped (Chartered Institute of Management Accountants, 2011). 2. Articles a) U.S. anti-money laundering regulations well-developed The concepts in this article emanates from a management accounting field. The article analyses the magnitude of anti-money laundering measures instituted by the US government. According to Financial Action Task Force which is an intergovernmental body tasked with the promotion of policies to curb money laundering as well as terrorist financing, the US government has won from the already instilled measures. FAFT has been evaluating the US regulatory system since the year 2006 and is confident from the progress made in terms of investigation and prosecution made toward the victims (Tysiac 2016). According to FAFT, there has a widespread comprehension regarding the risks emanating from money laundering. This has been made possible through communication of Bank Secrecy Act across the financial institutions in the country. Since the financial sector is the more prone to money laundering vice, the sector has continued to instil preventive measures which include transactions monitoring, customers’ on boarding as well as issuing reports regarding suspicious transactions (Tysiac 2016). According to the FAFT evaluations, there are many gaps existing within anti-money laundering regulations. In this respect, FAFT issued guidelines requiring member governments to institute anti-money laundering accountability as well as oversight over practicing professionals such as accountants, advocates, real estate agents as well as other independent professionals. According to research, the United States is yet to implement the recommendations given by FAFT where anti-money laundering accountability should be instituted over professionals. However, in regard to the accountancy profession, the issue of anti-money laundering is well emphasized by the Bank Secrecy Act, but do not regulate the accountants. Nevertheless, the accountants within such financial institutions recognizing and practicing Bank Secrecy Act are regulated by the Act (Tysiac 2016). The Financial Action Task Force highlighted the gaps existing within the US regulations as follows; first, there is minimal coverage of the regulations to some institutions and key businesses. Secondly, the regulations cover minimal number of professionals and business that are non-financial in nature. For instance, the measures require casinos to report any suspicious deal or issue pertaining to money laundering. The key professionals within the financial institution sector such as accountants, lawyers, real estate agents, service providers as well as trust companies are not subject to the regulations. Thirdly, there lack concrete and adequate information to determine the true owners or beneficiaries of different companies. This creates an avenue of money launderers to withhold illicit proceeds. Fourthly, FAFT reported that there is lack of uniform approach on effort undertaken by state agencies to curb money laundering (Tysiac 2016). b) To be a management accountant, take the initiative and listen CPA stands for Certified Public Accountant. This is a professional qualification for accountants over the globe. According to the article, an individual who has pursued this profession will feature in the taxation, auditing or accounting filed. The public regard the professionals as business advisers or consultants. But the diversified nature of their work is never communicated by either the institutions or the professionals themselves (Sheff 2017). The articles share a story of fourteen accountants who participated in a trial to determine their business needs. The fourteen accountants were fetched from across the country. They were supposed to change their accounting roles and participate in the financial planning and analysis. The professionals were supposed to perform basis sales duties such as selling of products through making calls as well as conduct field visits. After the assignment, two of the accountants quit working. After the second-year period, seven of the accountants had quit employment. This batch of nine employees was replaced with fresh graduates and students with strong aptitudes within the field of analysis and data evaluation. Two of the professionals accepted financial planning and analysis as their career and are currently very successful. Value Demonstration - an accountant working in firm with limited roles of accounting such as a real estate company should demonstrate his value to earn an important role within the firm. An individual who has pursued CPA has unquestionable technical ability and are performers. Therefore, the professional should separate himself to be more engaging in the business. Such an initiative should commence from visiting social events that add him experience (Sheff 2017). In case of presenting any data, the accountant should present it in a manner that will give out the meaning. Convincing the Manager – the company or management may at one time fail to appreciate the effort made by an accountant. The accountant may proof his worth by solving a particular problem within the firm. Therefore, a practicing accountant in the sales field should conduct an analysis of the challenges existing within the field. He should then find out the solution and present it in a way that it is convincing to the managers. This will present his true worth for the company (Sheff 2017). Trust as the Bottom line – it is quite inevitable for a management account to be industrious. The payoffs as a result are immeasurable. In times of rewards such as promotions, the management always look for the individuals thy have developed trust on. This means that the key factor is to build trust either through business engagement and or perfecting in personal relationships. c) The top global risks for 2017 December 2016 article found business environment worldwide to be riskier than in the past. According to survey, global businesses aren’t devoted to provide resources to curb the eminent business risks. The top ten eminent business risks in the year 2017 continue to grow compared to what transpired last year. This is according to the results of study conducted by a consultancy firm Protiviti as well as North Carolina State University Enterprise Risk Management Initiative. The survey conducted polled members across the United States as well as other regions facing business risks in their institutions. All members totalled 735 while business risks were rated on a 1 to 10-point scale (Amato 2016). In the previous year, regulatory changes as well as scrutiny surpassed economic conditions from the list of top risks. The main reason behind it was as a result of a higher rate of potential impact ratings consisting a rating of six and above. However, in the year 2017, economic conditions acted as the biggest potential risk with a substantial number of those pooled asserting that economy will pose the greatest effect. The second potential risk was regulation which recorded a whopping 66 percent of those interviewed. According to the American Institute of Certified Public Accountants, regulatory requirement has been among the risks facing US business in the previous past (Amato 2016). The probability that global firms will devote resources to curb eminent risks has dipped in yet another period. As aforementioned, the probable was conducted through a 1 to 10-point scale system where 1 represented ‘the unlikely change’ whilst 10 represented ‘high propensity potential for change’ In the present year, 6.0 was recorded compared to 6.1 and 6.2 in the year 2016 and 2015 consecutively. According to survey, both magnitude and severity of risk is rising steadily. However, the most probable responses seem to be going down mainly due to the fact that many firms are facing constrictions in resources or that the executive are satisfied with the investment value dedicated on the risk in the previous years (Amato 2016). According to the article, among the top ten risks are the operational risks (these are risks within the business that leads to loss emanating from inadequate and or failed procedures, policies as well as systems. Example of such risks includes fraud, system errors, staff errors or any negative in-eventuality disrupting the business. While evaluating operational risks, the management should take remedial measures aimed at eliminating exposure as well as ensure successful response), strategic risks (these are uncertainties as well as untapped opportunities that are embedded in the strategic intent of a firm. It entails thorough comprehension of the company’s corporate strategy, risks involved in adopting it and risks pertinent in executing it. The risks are either triggered externally or internally. The most important thing is to fully comprehend what the risks are all about. Once the management understands them, it becomes easier to develop effective and strategic risk mitigation) and macroeconomic risks (there are different categories of macroeconomic risks impacting the financial sector ranging from economic risks impacting the stock to political risks impacting government and businesses These includes inflation, market factors, prices and unemployment). In regard to risk categories, the top business professionals (CEO’s and CFOs) rated the risk at 4.5 meaning they foresee a riskier business environment. However, the other executives are not foreseeing the risks as being very susceptible to business environment (Amato 2016). References Chartered Institute of Management Accountants, 2011. Sustainability and the role of the management accountant, Retrieved from: http://www.cimaglobal.com/Documents/Thought_leadership_docs/Sustainability%20and%20Climate%20Change/Management-control_NZICA.pdf, on 6th February 2017 DRURY, C.M., 2013. Management and cost accounting. Springer. Tysiac, K. 2016. U.S. anti-money laundering regulations well-developed, analysis finds, Retrieved from: http://www.journalofaccountancy.com/news/2016/dec/us-anti-money-laundering-regulations-201615620.html#sthash.l1J6nNZH.dpuf, on 6th February 2017 Sheff, D. 2017. To be a management accountant, take the initiative and listen, Retrieved from: http://www.journalofaccountancy.com/issues/2017/jan/dale-sheff-cpa.html#sthash.Cnaz7CNh.dpuf, on 5th February 2017 Amato, N. 2016. The Top Global Risks for 2017, Retrieved on 5th Feb 2017 from: http://www.journalofaccountancy.com/news/2016/dec/top-business-risks-for-2017-201615723.html, on 6th February, 2017. Read More