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Introduction to Control Systems

Session 4 January 30, 2012

Department of Accountancy University of Illinois at Urbana-Champaign

Accountancy Peer Tutor Center


   

Sunday through Wednesday from 6:30-8:30 p.m. 2011 BIF Start: Sunday January 29 For more information see:

http://www.business.illinois.edu/accountancy/programs/tutorcenter.html

Department of Accountancy University of Illinois at Urbana-Champaign

Course Elements


Group Field Project (GFP)


In the Group Field Project, each group will identify, empirically investigate, document and evaluate an accounting control system in an existing organization

Department of Accountancy University of Illinois at Urbana-Champaign

GFP - Assignments
  

Progress Report 1 Progress Report 2 Final report and presentation

Department of Accountancy University of Illinois at Urbana-Champaign

GFP - Process
  

Select a topic Select an organization Plan and conduct field interviews

Department of Accountancy University of Illinois at Urbana-Champaign

What is control?


Control should help an organization reach its goals Those elements of an organization (including resources, systems, processes, culture, structure and tasks) that, taken together, support people in the achievement of the organizations objectives (COCO 1995)

Department of Accountancy University of Illinois at Urbana-Champaign

A simple control system


Room Temperature Objective Thermostat

Temperature sensor

Furnace & Air conditioner

Department of Accountancy University of Illinois at Urbana-Champaign

Evolution of Accounting Control


Purpose

Monitoring

Capability

Department of Accountancy University of Illinois at Urbana-Champaign

COCO Framework
Purpose

Monitoring & Learning

Commitment

Capability

Department of Accountancy University of Illinois at Urbana-Champaign

COCO Framework

Department of Accountancy University of Illinois at Urbana-Champaign

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Applying COCO


Use the criteria to assess the effectiveness of the control system


Whether satisfied?, not just What is?
   

Identify control system in place Specify ideal control system Assess the effectiveness of current control systems Identify possible missing controls

Department of Accountancy University of Illinois at Urbana-Champaign

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Applying COCO


Criteria need to be interpreted in the context of particular objectives The criteria are goals to be worked toward over time; they are not minimum requirements The criteria are interrelated
Control elements cannot be designed or evaluated in isolation from each other

Department of Accountancy University of Illinois at Urbana-Champaign

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COCO Limitations


Broad
Requires individual and specific adaptation/ interpretation

Little guidance on evaluating the effectiveness of controls


Focus is on assessing the existence of controls

No focus on the efficiency of controls

Department of Accountancy University of Illinois at Urbana-Champaign

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Papa Johns and Pizza Hut: Strategies




Papa Johns Chilled/fresh delivery/storage Project next day usage Six feature inspection Secret shoppers/ Inspectors Why? Strategy: Superior quality (Freshness)

Pizza Hut Frozen delivery/storage Thaw and use labels Cookability bar/perfect pizza check Inspectors

Why? Strategy: Whats right for customer; streamlined operations

Department of Accountancy University of Illinois at Urbana-Champaign

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Papa Johns vs. Pizza Hut: Summary




Same industry, direct competitors does not mean that strategies are the same
Maybe same ends, but not same means

If strategies are not the same, controls should not be the same
Controls should reflect strategy What works for one may not work for another (trade-offs)

Department of Accountancy University of Illinois at Urbana-Champaign

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