CHAPTER 21

3. MARKETING

3.1 What Is Meant By 'Marketing'?
- according to the Institude of Marketing, marketing is the management process that identifies, anticipates and supplies customer needs efficiently and profitably

3.2 The Marketing Mix
Product - anything offered for attention, acquisition, use or consumption
Place - outlets, geographic areas, and distribution channels
Promotion - advertising, publicity, sales promotion
Price - price levels, discounts, allowances, payment terms, credit policy

3.3 Product Issues
~Product definition
- core/generic product - benefit or problem solving service
- actual product - tangible product or intangible service that serves as the medium for receiving core products
- augmented/extended product - measures taken to help the customer put the actual product to use

~ Product positioning
- comparison with our competitors

3.4 Pricing Issues
Cost - the price must be high enough to make a profit
Customers - what are they willing to pay
Competition - comparison of prices with competitors
Corporate objectives

Pricing tactics:
- cost plus pricing - the cost per unit is calculated and then a mark-up added
- penetration pricing - a low price is set to gain market share
- perceived quality pricing - a high price is set to reflect an image of high quality
- price discrimination - different prices are set for the same product in different markets
- going rate pricing - prices are set to match competitors
- price skimming - high prices for new products are dropped to increase demand
- loss leaders - a product sold at a loss to attract customers
- captive product pricing - used when customers must buy 2 products. first is cheap, second is expensive

CHAPTER 20

10. THE PURPOSE OF ORGANISATIONAL CONTROL

~safeguard company's assets - if assets are stolen or damaged, the company will have to spend money to replace them
~ efficiency - inefficient business practices are a waste of the company's money
~ prevent fraud - fraud means the loss of valuable resources belonging to the company/shareholders
~ prevent errors - errors can lead to losses in efficiency or a loss of assets

11. WHY CONTROLS IN SYSTEMS ARE IMPORTANT

Purchasing
~ Safeguard company's assets - ensuring that only goods that have been received are paid for and the goods are in good condition
~ Efficiency - ensuring the best price is negotiated before buying
~ Prevent fraud - preventing purchasing staff accepting payments from suppliers to persuade them to purchase from that supplier
~ Prevent errors - ensuring the correct amount is charged by suppliers and that all purchases are recorded

Sales
~ Safeguard company's assets - ensuring good are only sold to customers who are likely to pay
~ Efficiency - ensuring orders are processed promptly
~ Prevent fraud - ensuring there is no theft od cash from customers
~ Prevent errors - ensuring the correct quantity of goods is despatched and invoiced

Wages
~ Safeguard company's assets - ensuring that cash wages cannot be stolen
~ Efficiency - ensuring that people are only paid for overtime when necessary
~ Prevent fraud - ensuring that there are no 'ghost' employees

Cash
~ Safeguard company's assets - ensuring cash is kept safe from theft
~ Efficiency - ensuring cash is banked promptly so as to gain interest
~ Prevent fraud - ensuring employees do not claim for expenses not incurred
~ Prevent errors - ensuring the entries in th cash book are correct

Inventory
~ Safeguard company's assets - ensuring inventory is kept free from damage
~ Efficiency - ensuring inventory is only produced when it can be sold quickly
~ Prevent fraud - ensuring inventory cannot be stolen from employees
~ Prevent errors - ensuring costs of finished goods are calculated properly

Chapter 23

1. The meaning of internal control and internal check

Internal control- Process designed and effected by management to provide reasonable assurance about the achievement of the entity;s objectives with regard to :
-reliability of financial reporting
-effectiveness and efficiency of operations
-compliance with applicable laws and regulations

Internal check - element of internal control, concerned with ensureing that no single task is executed from start to finish by only one person. Each individual's work is subject to an independent check by another person in the course of that other person's duties

Chapter 22

1. The meaning of internal auditing and external auditing

Internal auditing- Independent activity, established by management to examine and evaluate the organisation's risk management process and systems of control and to make recommendations for the achievement of company objectives

External auditing- independent examination of evidence from which the financial statements are derived, to give the reader the truth and fairness of state of affairs which they disclose.

2. The purpose of internal and external audit

- A legal requirement to produce true and fair annual financial statements

2.1 Internal audit
-Part of organisational control of business.
-Ensure efficient and orderly running of the business

Role of internal auditor:
-Set corporate objectives
-Design and monitor performance measures for these objectives

Corporate governance:
-A properly functioning internal audit department is part of good corporate governance
-Enable management perform proper risk assessments

Function of internal audit in the context of corporate risk management:
-Manage basic data to identify risjs
-Identify techniques for priortising and managing risks
-Report on effectiveness of rish management solutions

Structure and operation of internal audit function
-Annually review the need for one
-Annually review its scrope of work
-Staffed with qualified experienced staff

Scope of internal audit:
-Review internal controls and financial reports
-Review management systems
-Carry out special management
-Conducting operational reviews

Limitations of internal audit:
-Only succeed if it is properly staffed and resourced
-If internal audit identify fraud, they may unwilling to disclose it for fear of the repercussions

Limitations can be reduced if an audit committee:
-Sets work agenda
-Receives interal audit reports
-Able to ensure the internal audit is properly resourced
-Has a"Voice" at main board level

Chapter 23 Internal Financial Control

Chapter 23 Internal Financial Control

Part 1 The Meaning of Internal Control and Internal Check

Part 2 The Purpose of Internal Control

To help management achieve the entity's objectives, especially in terms of ensuring:

-The orderly and efficient conduct of the business

-The safeguarding of assets

-The prevention and detection of fraud and error

-The accuracy and completeness of the accounting records

-The timely preparation of reliable financial information

Why do companies need internal controls?

Internal controls are there to prevent risks occurring or to minimise the impact of risks. Even when controls are in place documents may still get lost of portable assets may go missing. The level and extent of internal controls required depend on what the risks are if such controls fail. It is particularly important that stringent controls exist where there are associated legal requirements.

Chapter 22 Internal and external audit

Chapter 22 Internal and External Audit

Part 2 The Purpose of Internal and External Audit

2.1 Internal Audit

2.2 External Audit

-Purpose - to report his opinion on whether the financial statements give a true and fair view in accordance with an identified financial reporting framework.

-Secondary Objectives - Encourages the employees of the company to document their work properly and dissuade them from fraud as their work may be inspected by external auditors. Also to suggest improvements.

Advantages of an External Audit

-Disputes between management may be more easily settled.

-Major changes in ownership may be facilitated if past accounts contain an unqualified audit report.

-Applications to third parties for finance may be enhanced by audited accounts.

-The audit is likely to involve an in-depth examination of the business and so may enable the auditor to give more constructive advice to management on improving the efficiency of the business.

Disadvantages of an External Audit

-The audit fee.

-The audit involves the client's staff and management in giving time to providing information to the auditor. Professional auditors should therefore plan their audit carefully to minimise the disruption which their work will cause.

Part 3 The Difference Between Internal and External Audit

Internal auditing

• role - advise management on whether the organisation has sound systems of internal controls to protect the organisation against loss.
• legal basis - not a legal requirement. The combined code on corporate governance recommends that if a listed company does not have an internal audit department.
• scope of work - determined by management. It covers all areas of the organisation, operational, financial
• approach - increasingly risk-based; assess risk; evaluate systems of controls; test operation of systems; make recommendations for improvements
• responsibility - to advise and make recommendations on internal control and corporate governance.

External auditing

• role - provide an opinion to the shareholder on whether the financial statements give a true and fair view.
• legal basis - legal requirement for large companies, public companies and many public bodies.
• scope of work - determined by the auditor in order to carry out his statutory duty on report, financial focus.
• approach - increasingly risk-based; test underlying transaction that form the basis of the financial statements.
• responsibility - to form an opinion on whether the financial statements give a true and fair view.

Chapter 21 The Relationship of Accounting with Other Business Functions

Chapter 21 The Relationship of Accounting with Other Business Functions

Part 2 Production
-plan and oversees the production of goods
-it liaises with the accounting departments:

• cost measurement, allocation, absorption - measures quantities of materials and time used, cost allocated and absorbed to calculate production costs based on advice given.
• budgeting - decide how many items of what type are to be produced. cost of producing will be determined by accounting and production department and incorporated into the overall budget.
• cost v quality - discuss the features that can be included in products and the raw materials that should be used. discuss which better quality and features justif the extra costs and discuss how to maximise the quality and profit
• inventory - liaise with the inventory section to ensure that there are sufficient raw materials in stock for the production that is planned.

Part 4 Service Provision

-Companies very often provide services to customers.

Charge-out rates

-This is the hourly rate which the company charges clients. It should be higher than salary, as it should include a share of overheads. However, if the charge-out rate is too high customers will not use the service.

Estimating Costs

-Problems arise in determining the amount of overhead to be included in the charge-out rate. Also, if the service takes longer to provide than expected, the company may not be able to pass on the extra cost.

Problems Measuring Benefits

-Market conditions may mean that the charge-out rate contains a very low profit element. The company may question whether it is worth carrying out these services. The problem is that the benefits are intangible and not easy no measure, but nevertheless real.

A company with effective service provision has happier customers that are more likely to buy from the company in future leading to lower selling costs. But it is hard to measure these benefits.