Foundations in Accountancy Passcards Foundations in Accountancy / ACCA Business and Technology (FBT/BT) For exams from 1 September 2020 to 31 August 2021Foundations in Accountancy/ACCA Business and Technology (FBT/BT)First edition 2011, Eighth edition February 2020 ISBN 9781 5097 3082 7 e ISBN 9781 5097 2409 3 British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Published by BPP Learning Media Ltd, BPP House, Aldine Place, 142-144 Uxbridge Road, London W12 8AA www.bpp.com/learningmedia Printed in the United Kingdom Your learning materials, published by BPP Learning Media Ltd, are printed on paper obtained from traceable sustainable sources. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of BPP Learning Media. 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Page iii_ | (=| af wo Pp NO Business organisations and their stakeholders The business environment The macroeconomic environment Microeconomic factors Business organisation, structure and strategy Organisational culture and committees Corporate governance and social responsibility The role of accounting Control, security and audit Page 1 5 17 29 43 51 57 65 75 Identifying and preventing fraud Leading and managing people Recruitment and selection Diversity and equal opportunities Individuals, groups and teams Motivating individuals and groups Training and development Performance appraisal Personal effectiveness and communication Ethical considerations Page 87 97 111 127 135 143 155 167 177 1931: Business organisations and their stakeholders Types of business organisation Stakeholders This chapter explains why organisations are formed and considers some of the different types of organisation. Organisations are influenced by stakeholders. The second part of this chapter identifies different stakeholder groups, and considers how management may respond to these groups.ee Stakeholders) Oe Organisation ‘A social arrangement which pursues collective goals, which controls its own performance and which has a boundary separating it from its environment.’ ORR LRU They enable people to be more PRODUCTIVE: Ownership — public or private sector UIA NI Control - owners, workers or government Overcoming individual limitations Activities Saving time | Profit orientation - or not Accumulating and sharing knowledge Legal status — limited company/partnership Enabling synergy Size - small or multinational Enabling specialisation Sources of finance Technology usage Other organisation types to consider are co-operative societies, mutual associations and non-governmental organisations (NGOs).( Types of business "earns organisation Stakeholders Those individuals or groups that have an interest in what the organisation does. Internal External lela Contractual Contractual relationships = Employees = Community Shareholders relationships = Management = Government Customers = Pressure groups Suppliers Financiers Each of these groups has its own particular interests to defend, such as: Jobs (employees) Loan security (financiers) Different interests and aims can lead to conflict Tax revenues (governments) Page 3 1: Business organisations and their stakeholdersTypes of business Stakeholders organisation LEVEL OF INTEREST Low High High C POWER Low A = Key players are to be found in segment D = Those in segment B should be kept informed = Those in segment C should be kept satisfied = Minimal effort should be expended on segment APoa eM USSR OMSL! Analysing the environment Employment protection Data protection Health and safety protection Social, cultural and technological trends Porter An organisation has many interactions with its environment, and general environmental trends can be usefully summarised in the PEST model. The PEST model is here drawn out into its component parts. The chapter concludes with the competitive forces which can shape the organisation, and the value chain within it.Data protection Health and safety protection Social, cultural and technological trends Employment protection Analysing the Cn All organisations must take account of the environment in which they operate. POLITICS TECHNOLOGY “COMPETING > ORGANISATIONS CAPITAL, SOCIETY (& CULTURE) {C50 expec o™ ECONOMY GENERAL ENVIRONMENTLegal factors affecting all companies i TaCelg Example General legal framework: | Basic ways of doing business, negligence proceedings contract, tort, agency Theft, insider dealing, bribery, deception Company law Directors and their duties, reporting requirements, takeover proceedings, shareholders’ rights, insolvency Employment law Trade Union recognition, Social Chapter provisions, minimum wage, unfair dismissal, redundancy, maternity, Equal Opportunities Health and Safety Fire precautions, safety procedures Data protection Use of information about employees and customers Marketing and sales Laws to protect consumers (eg refunds and replacement, ‘cooling off' period after credit agreements), what is or isn't allowed in advertising |Environment —_| Pollution control, waste disposal Tax law Corporation tax payment, Collection of income tax (PAYE) and National Insurance contributions, sales tax (VAT) Page 7 2: The business environmentAnalysing the environment Employment protection Data protection Health and safety protection ‘\{ Social, cultural and \f technological trends The impact of government There are several ways in which the government can affect the economic structure of an industry, by encouraging or stifling: Role is felt in: Capacity expansion Demand for goods and services Product standards Divestment strategies . Environmental protection Emerging industries Monetary policy Entry barriers R&D Competition Regional policy Labour costs Political change complicates the planning activities of many firms, and this is particularly felt in international trade — higher level of political risk.Analysing the environment ae Tig protection Page 9 Employment law Much legislation has been aimed at this area. Legislation Retirement Resignation Dismissal - wrongful — unfair Disciplinary procedures Redundancy Equal opportunities safety protection Health and Social, cultural and technological trends > Companies must be very careful when handling these matters. Note that you will not be examined on specific legislation and exam questions will not be country specific. 2: The business environmentHealth and Social, cultural and Porter safety protection technological trends The main legislation in the UK is the Data Protection Act 2018, (TSO, 2018) covered here as an example of ‘typical’ data protection legislation. Data Protection Principles Lawfullness, fairness and transparency Purpose limitation Data minimisation 1 2 3 4 Accuracy 5 — Storage limitation 6 Integrity and confidentiality (security)( Analysing the environment Employment protection Data protection Employers and employees have duties and obligations. Although laws differ in different countries, the main points and principles are often similar. Employer duties All work practices must be safe Environment must be safe implement Plant/machinery maintained ra Training promote Communication of policies Risk assessments and controls Share information Identify those most at risk Employ competent advisers Page 11 CELL} safety protection f Social, cultural and nei technological trends aye) Cece} Take reasonable care Allow employer to carry out duties Not interfere with machinery Inform employer of dangers Use all equipment properly Health and safety policy Statement of principles Detail of safety procedures Compliance with the law Detailed equipment instructions Training requirements 2: The business environment~ Data protection Health and safety protection Analysing the environment Employment protection STC MCU Ue Li-TaLe bloated Tele ccuT) Population affects an organisation's supply of labour and hence its human resources policies. Cultural trends will also have an impact on a business and demand for its products/services. Social changes Changing age structure Income and wealth Older workers Health and diet Family life cycle Equal opportunities Social structures/class Environmentalism Buying patternsImpact of technology Technology has often resulted in reduced staff + reduced spans of control; reduced layers: ‘flatter’ organisations Information systems such as intranets —— Centralised systems can help to foster unity and coherency ———___» Decentralised systems Bieta RU ace em Ure Ce Re Ole eles Routine processing is quicker For the employee it can lead to information Digital information and recordkeeping overload, and changes in the nature of Employee skills base changing work. For the accountant, it helps to foster Continued change to keep up close business relationships regardless Customer service enhanced of geographical location, and allows more Information as a ‘commodity’ flexible working arrangements. Impact of social media Outsourcing of operations to specialists Page 13 2: The business environmentEmployment protection Analysing the Health and Social, cultural and environment safety protection technological trends The value chain FIRM INFRASTRUCTURE 2 Ee HUMAN RESOURCE MANAGEMENT as 28 TECHNOLOGY DEVELOPMENT RS y PROCUREMENT 4 & ey & INBOUND. OPERATIONS | OUTBOUND | MARKETING Ss LOGISTICS LOGISTICS | & SALES nnd PRIMARY ACTIVITIESPNT Comment Inbound logistics Receiving, handling and storing inputs to the production system: warehousing, transport, inventory control Convert resource inputs into a final product. Resource inputs are not only materials. People are a resource especially in service industries. Operations Outbound logistics Storing the product and its distribution to customers: packaging, testing, delivery Marketing and sales Informing customers about the product, persuading them to buy it, and enabling them to do so: advertising, promotion Installing products, repairing them, upgrading them, providing spare parts After sales service Procurement Acquire the resource inputs to the primary activities (eg purchase of materials, subcomponents equipment). Technology development Product design, improving processes and/or resource utilisation. Human resource management Firm infrastructure Recruiting, training, developing and rewarding people. Planning, finance, quality control: Porter believes they are crucially important to an organisation's strategic capability in all primary activities. Page 15 2: The business environmentAnalysing the Employment Data Health and Social, cultural and environment protection protection safety protection technological trends Porter's five forces model (Porter, 1980) Potential entrants Five competitive forces influence the state of competition in an industry, which collectively determine the profit (ie long-run return on capital) potential of the industry as a whole. Threat of new entrants Bargaining Bargaining power of Industry competitors power of suppliers customers Suppliers Customers Rivalry among existing firms Threat of substitute products or service Substitute3: The macroeconomic environment Government policies and objectives The business cycle National income and economic growth Inflation and unemployment Fiscal and monetary policy The balance of payments Macroecomonics is a branch of economics which considers the economy as a whole. This chapter presents an overview of the goals of macroeconomic policy. Macroeconomic policy objectives relate to economic growth, inflation, unemployment and the balance of payments, looking at the complete national economy.Government policies EU Ryall The business National income Inflation and Fiscal and The balance of cycle and economic growth |} unemployment monetary policy payments Income (Y) Households i Consumption (C) Total expenditure (E) Saving (S) Investment spending (I) Taxation (T) pli Government spending (G) Import demand (M) Export demand (X) Diagram: Circular flow of income showing withdrawals and injectionsAll modern governments are expected to manage their national economies to some extent. en Government influences over company decisions aa pyran) eying Output capacity Grants or tax incentives to invest Competition = Forbid or allow takeovers/mergers = Outlaw anti-competitive practices = Opening markets to new entrants (eg gas) Break them up; regulate them To achieve economic growth - an increase in national income To control price inflation To achieve full employment To achieve a balance between exports and imports (known as the balance of payments) Page 19 3: The macroeconomic environmentGovernment policies EU Ryall The balance of payments Fiscal and monetary policy Inflation and unemployment National income and economic growth The business cycle ee Market demand >| Overall economic policy fl ~—— | _Cost of finance —_—> Taxation al Protection vs Free Trade —+| | anil Grants, incentives, sponsorship ET Industry policy ——_____ | Regulation (eg investor protection, company law) Environment and Entry barriers, capacity ——, infrastructure policy Distribution _ Workplace regulation, employment law | ——————+| Social policy = ——__| Labour supply, skills, education | —_________-» ‘Trade promotion, export credits — Foreign policy <-———[EUandWTO obligations |] ——m Wii Export promotion to allies,aid recipients). __——p qHqa2zames22m90m< O YD Zo-aArwn-2zroewoSMT) (Tels Government policies National income Inflation and Fiscal and The balance of and objectives and economic growth || unemployment monetary policy payments Actual output Trend in output Governments will seek to stabilise the system and avoid wide fluctuations. Diagram: The business cycle TimeNational income and economic growth Government policies The business and objectives cycle Equilibrium national income Inflation and Fiscal and The balance of unemployment monetary policy payments Inflationary gap Deflationary gap Stagflationpopulation cycle J I Growth in potential Growth in demand output (capacity) eee aaeeemneett These should move in step, but they will depend on: Advantages of growth Higher income per head High levels of consumption Better standard of living Welfare provision Page 23 Economic growth can be measured by increases in the real gross national product (GNP) per head of the Actual economic growth is the annual % increase in national output, which typically fluctuates with the trade ale) New investment = Technological Natural resources progress Labour = Terms of Capital international trade Disadvantages of growth Use of natural resources Creation of pollution Structural unemployment Needs higher levels of saving to be able to invest more > cut in consumption 3: The macroeconomic environment“Government policies \( The business ){ National income \(MMinttWenel( Fiscal and \{ The balance of and objectives cycle and economic growth | Tv) Tut} monetary policy payments Inflation Inflation is the name given to an increase in price levels. Causes A A Ce a eee) eg Demand pull factors Redistribution of income and wealth Cost push factors Balance of payments effects Import cost factors Uncertainty of the value of money Expectations create it Price uncertainty Increase in the money supply Resource cost of changing prices Harmful to growth and investment Goods and services are grouped into a single price index in order to measure how the real value of money is changing. Based upon a chosen basket of items, the resulting consumer price index can be used for various purposes. = RPI = RPIX (excluding mortgage payments) = CPI = RPIY (excluding sales tax as well)The rate of unemployment can be calculated as: Number of unemployed meme X 100% Total workforce Consequences of unemployment Loss of output Loss of human capital Inequalities in income distribution Social costs Increased burden of welfare payments Categories = Real wage unemployment = Frictional * - 'matching' period . = Seasonal * — yearly patterns . Page 25 Government options Spending money directly on jobs Encouraging private sector growth Encouraging training Offering grant assistance Encouraging labour mobility Restricting trade union negotiating strength Abolishing minimum wage regulations = Structural - changed industry conditions Technological - skills, redundancy Cyclical — following the trade cycle short-term only 3: The macroeconomic environmentGovernment policies The business National income Inflation and eile) The balance of and objectives cycle and economic growth |, unemployment TT claaLli(a payments Fiscal policy Fiscal policy aims to manage aggregate demand in the economy. (Aggregate demand is the total demand for goods and services in the economy.) Exercised through A Expenditure planning B_ Revenue raising (especially taxation) 4 C Borrowing when A exceeds B (‘PSNCR' in the UK) Options 1 Increase expenditure and reduce taxes = stimulated demand, higher PSNCR 2 Reduce expenditure and increase taxes = reduced demand, reduced PSNCR 3 Increase expenditure and finance with higher taxes 4 Reduce expenditure and use these savings to reduce taxes. Direct or indirect = Revenue raiser = Redistribute income si = Discourages certain and wealth Aims for: activities = Protection ftom <<" TAXATION Flexibility = To cover social costs foreign competition Efficiency of some products = Stabilising effect Non-distorting effectsMonetary policy Monetary policy uses money supply, interest rates, exchange rates or credit controls to influence aggregate demand and control inflation (reducing economic uncertainty, stimulating investment and output). WEN a) CIEL LC) eel ee ory = Increase in money ‘The price of money’ Affects price of a . supply will raise prices and incomes Restrictions on Assumes a country's exports oe oe i relationship between Depends upon reduce demani interest rates and domestic rate of expenditure inflation and interest Effective and rapid i mechanism Page 27 3: The macroeconomic environmentGovernment policies and objectives The balance of PE NTUHG) The business cycle Fiscal and monetary policy Inflation and unemployment National income and economic growth The balance of payments The UK balance of payments consists of the following elements A 42mmnmDCO zcacoa0d T Trade in goods (‘balance of trade’) Trade in services Income from overseas investment/employment Transfers (payments/receipts to/from overseas bodies such as the EU) Capital account, eg public sector capital flows; loans Financial account, eg investment in overseas facilities The deficit or surplus on the current account is often referred to as the ‘balance of payments’, even though it is not the full picture. Rectify via: DEFICIT SURPLUS = Devaluing the currency Importing more than it is exporting Exporting more than importing = Restrict imports, eg via tariffs = Domestic deflation to reduce Higher borrowings from abroad Invest abroad demand Selling assets, eg shares Add to official reserves4: Microeconomic factors The market Demand Elasticity of demand Supply Elasticity of supply The price mechanism Maximum and minimum prices In this chapter we look at how the price of a product and the amount of it demanded and supplied are determined through the interaction of demand and supply. This is another chapter on fundamentals that must be understood properly. Also pay attention to the factors other than price that affect demand and supply, and the difference between movements along a curve, as opposed to a shift in the curve. These are fruitful sources of exam questions.Demand \{ Elasticity of Vf Supply demand A market Potential buyers and potential sellers come together for the purpose of exchange. In economics, sellers are referred to as firms. Buyers of consumer goods and services are known as households. Utility is the pleasure or benefit or satisfaction derived from the consumption of a good. Marginal utility is the extra utility derived from the consumption of one additional unit. Elasticity of ‘\{ The price “\f Maximum and) minimum prices supply mechanism Consumers are rational = They prefer more to less. = They will substitute one good for another if the price is right. = They attempt to maximise total utility from a limited income. = Marginal utility from a good diminishes as consumption of it increases. = Quantities purchased will be adjusted until their marginal utilities are equal. If this is not So, it means that the consumer would actually prefer to consume more of one good and less of another.( ] Elasticity of ‘The price ‘\( Maximum and) ] The market | EL) f Elasticity of ie Supply supply mechanism minimum prices demand Substitutes are goods that are alternatives (eg tea and coffee). A tise in the price of a good is likely to produce an increase in demand for its substitutes. The demand curve Relates quantity demanded to price payable Slopes down because D marginal utility declines as consumption increases Complements are goods that are bought and used together (eg tea and milk). A rise in the price of a good is likely to produce a fall in demand for its complement. Demand is influenced by Price of the good Price of other goods (substitution effect) Income (income effect) Taste and fashion Expectation of price changes If demand for a good rises when household income rises, it is a normal good (eg holidays). If demand falls, it is an inferior good (eg coach travel, which could be substituted for rail or air travel). 4: Microeconomic factors Page 31The market Elasticity of Supply Elasticity of The price Maximum and demand supply mechanism minimum prices A movement along the demand curve shows how demand responds to a change in price and nothing else! Any change in the other factors that affect demand cause a shift in the position of the demand curve. PCCM MUM emer Bye $ A fall in household income (including A tise in household income an increase in direct taxes) (including a reduction in direct A fall in the price of substitutes taxes) A tise in the price of complements A tise in the price of substitutes 0 Q A rightward shift may be caused by A fall in the price of complements A change in taste towards the good An expected fall in price demand curve An expected rise in price A change in taste away from the jood g Original An expectation of a fall in price will lead consumers to put off their purchases in the hope of benefiting from the lower price later. An expected price rise will lead consumers to buy early and stockpile in order to avoid paying a higher price later.The market \{ Demand | ERs Supply i Elasticity of ‘The price “VO Maximum and demand supply mechanism minimum prices Price elasticity of demand (PED) A measure of the change in demand for a good in response to a change in its price. When demand is elastic a small change in price produces a large change in demand. When the demand is inelastic, a large change in price produces only a small change in demand. Percentage change in quantity demanded Price and quantity may be values at a point D = of averages over an arc. Percentage change in picture PED < 1 means that demand is inelastic. An increase in price from P, to Pg leads to a rise in total expenditure: Area X is greater than area Y. PED > 1 means that demand is elastic. Price i An increase in price from P, to Pg leads to a fall in total expenditure: Area Y is greater than area X. Pa Quantity Quantity Notice that elasticity varies along a straight line demand curve! Page 33 4: Microeconomic factorsTAR ead demand Maximum and minimum prices The price mechanism Elasticity of supply Price PED =0 Price PED = 0 Demand is perfectly inelastic and Demand is unlimited at the remains constant at any price. —————— current price and zero ata D D higher price. Quantity Quantity When PED = 1, demand responds proportionally to any change in price and total expenditure is constant, whatever the price. This is known as unit elasticity. PED is affected by Availability of substitutes The most important influence. Easy availability of substitutes makes demand more elastic: price rises lead to substitution. The definition of the market can also affect PED (eg demand for a particular brand of bread will be more elastic than demand for bread overall). I Elasticity is low in the Demand for goods which are If expenditure on a short term. Over the necessary for everyday life tends to good only longer term provision of _ be relatively inelastic while demand constitutes a small substitutes and for luxury goods is elastic. proportion of a awareness of them — Goods which are habit-forming tend consumers’ income, Mn to be inelastic (eg cigarettes; alcohol), demand for itis likely to be inelastic.Income elasticity of demand (IED) is a measure of the change in demand for a good in response to a change in household income. Demand for normal goods increases as household income rises. If demand for a good falls when household income rises, the good is an inferior good. IED % change in quantity demanded % change in household income Demand for a good is income elastic if its IED > 1 and income inelastic if IED < 1. Inferior goods have a negative income elasticity of demand. Cross elasticity of demand (CED) is a measure of the change in demand for a good in response to a change in the price of another good. CED = % change in quantity of good A demanded % change in price of good B If CED is positive, the goods are substitutes (eg a fall in the price of B will cause a fall in demand for A). If CED is negative, the goods are complements (eg a fall in the price of B will cause a rise in demand for A). A change in household income, or in the price of another good, shifts the demand curve to the left or right. Page 35 4: Microeconomic factorsThe market Demand demand Elasticity of |) supply mechanism minimum prices The supply curve Factors influencing supply $ A shift of the supply curve to the $ Ss Ss right could be caused by any of the factors below. Q Shows the quantity of a good which . suppliers would want to produce at a given price. As with demand, a shift in price will cause = a movement along the supply curve, buta » change in the other factors will cause a shift in the supply curve. Expectation of a future fall in price, to obtain a better price now A fall in the price of a substitute in supply A ise in the price of a good in joint supply Technological improvements Fall in the cost of factors of production Introduction of a subsidy , 7 The opposite effects will move the curve to the left. Remember: a firm's supply curve is its marginal cost curve (above its average variable costs in the short term).Elasticity of Tee) Price elasticity of supply Elasticity of demand % change in quantity supplied Elasticity of supply = % change in price Perfectly inelastic supply Unit elastic supply Perfectly elastic supply Price Price Price (8) Lh (8) ($s) Quantity supplied Quantity supplied Quantity supplied (Supply curve passes through origin)The market Elasticity of demand aE aed i Inelastic supply (<1) Elastic supply (<1) Price Price (Supply curve cuts ‘Quantity supplied’ vi axis) — (Supply curve cuts ‘Price’ axis) Quantity supplied Quantity suppliedFactors affecting elasticity of supply Existence of inventories of all kinds of goods and their perishability Ease of adjusting labour inputs up or down; availability of labour Spare capacity Availability of raw materials and components Barriers to entry make supply inelastic Time scale Elasticities vary with time = During the market period only existing inventories and levels of output are available. Supply is very inelastic. = Over the short run, quantities can be adjusted by working overtime or short time. Supply is quite elastic. = Over the long run plant can be built or shut down. Supply is very elastic. Page 39 4: Microeconomic factorsva + Demand \{ Elasticity of Vf Supply i if Elasticity of Be ite) demand supply aE minimum prices The market The price mechanism MeO Price Market prices and their movements act as signals to producers, enabling them to produce what is most needed. When a firm operates efficiently, responding to market signals and controlling its costs, it receives a reward in the form of profit. The actions of firms in responding to the profit opportunities allocate resources to their best use. Q Quantity The price mechanism brings supply and a demand together at the equilibrium price, P. Consumer surplus: some S This is also the market clearing price since Would have paid more than quantity Q is both supplied and demanded so the market price. there is neither surplus nor shortage. At prices above P, there will be excess supply. Producer surplus: some D At prices below P, there will be excess would have sold at less than . ph il il i the market price. Quantity“The market \{ Demand Elasticity of Wil Supply i Elasticity of y The price BY Maximum and demand supply mechanism minimum prices Some governments attempt to overcome market forces by regulating prices. = A maximum (ceiling) price might be used to combat inflation or to make basic goods affordable. = A minimum (flow) price might be used to secure the incomes of favoured producers, such as farmers. Price A maximum price set below the equilibrium price P produces a shortage quantity AB, since at price M, quantity B is demanded, but only quantity A is ph---- supplied. However, quantity A could be fully utilised by purchasers who are prepared to pay price Z, so a black market may be created to divert production to these consumers at this price. SAIN A Q B Quantity Page 41 4: Microeconomic factorsWeve) minimum prices i if Elasticity of i supply l Elasticity of Vf demand ~The market) The price mechanism A minimum price set above the equilibrium price P produces a surplus quantity AB, since at price M, quantity A is demanded, but quantity B is supplied. This leads to excess supply, as with the EU Common Agricultural Policy. Governments may introduce production quotas, to limit production. Alternatively, they may purchase the excess, putting it into store, or dumping it overseas, or producers ANN ENE. Quantity might sell at less than the official minimum price. Minimum wages set by law are intended to ensure that the lowest paid workers are not exploited. If a minimum wage is set above the equilibrium price, it is likely to cause unemployment. However, where there is effectively a single purchaser (monopsonist) of labour a minimum wage may increase employment. When such employers hold wages down they generally have vacancies: a minimum wage makes it easier for them to recruit.5: Business organisation, structure and Srl eh This chapter identifies the various influences upon organisational structure: hierarchy, strategy, departmentation and centralisation. Informal organisation Organisational structure Levels of strategy in the organisation Centralisation and decentralisation( Centralisation and decentralisation “\f Levels of strategy i in the organisation Organisational structure eau Oe Eel ol The informal organisation exists alongside the formal one. It is loosely structured, flexible and spontaneous, with constantly fluctuating membership and relationships. i icati [+] Satisfying to members Aspects of the informal organisation |=] Can distract energy/attention from task objectives = Relationships, social networks and cliques 4 Can cut through red-tape, inefficiency = Informal ways of doing things, customs a [=] Can ‘cut corners' > safety, quality risks = Informal channels of communication ————+ |] Can bypass lengthy channels, communication via networks blockages | [+] a sharing of information/ideas for problem- ‘ solvin The ‘grapevine i? ] Inaccuracy may undermine management communication fi The ‘grapevine’ or 'bush telegraph’ is the informal information network. It is typically very fast and Managers can harness the power of the informal inaccurate, circulating gossip and rumour. It exists organisation by: gathering information from it; using it even where the formal communication system of to disseminate information; encouraging positive goals the organisation is adequate. for networking (eg problem-solving or innovation).Informal Ce TIC ele organisation Levels of strategy Tan ( Centralisation and | in the organisation decentralisation Mintzberg (1979) believes that all organisations can be analysed into five components. Strategic Methods of departmentation Support Functional ei Geographic Product/brand Customer Operating Core Page 45 5: Business organisation, structure and strategyCeCe er una Further structural concepts 1 2 3 4 5 Entrepreneurial Functional Matrix Divisional Boundaryless Outsourcing Offshoring Shared services Dominated by a single entrepreneur or management team Structured by function, for example Production, Finance, Marketing Cross-functional teams A corporate centre and a number of strategic business units (SBUs) Eliminates barriers that separate hierarchy and functions. Examples include modular (different components outsourced to different suppliers), virtual (dispersed physically but together on the internet) and hollow (all non-core activities outsourced) Contracting out specific activities to an external vendor Sending work to a different country Establishing a service centre to provide a support function across an organisationSPAN OF TALL V SCALAR CONTROL MINI FLAT NNN CHAIN Number of subordinates Tall Flat Chain of command Page 47 5: Business organisation, structure and strategyECC a meee ered Informal Org: nal organisation structure decentralisation CORPORATE STRATEGY Levels of strategy , What businesses are we (or want to be) in? How do we enter or exit? BUSINESS BUSINESS BUSINESS STRATEGY STRATEGY STRATEGY Strategies relevant to a particular area Strategic SBU SBU Business Unit (SBU)T T FUNCTIONAL STRATEGIES R&D OPERATIONS MARKETING HRM ITS FINANCE = Products = Capacity = Orientation = Recruitment = Systems = Sources ™ Processes = Process technology = Marketing mix = Selection = Technology = Uses = Design = Work flows = Product planning = HRD = Management = Development = Quality = Marketing information = Appraisal = Testing = Outsourcing = Segmentation = Reward = Services STRATEGIES INVOLVING MANY FUNCTIONS (EG CHANGE MANAGEMENT, TOTAL QUALITY, RE-ENGINEERING) This diagram reflects the Anthony hierarchy = Strategic management (ie corporate) — ‘direction setting’ (Anthony, 1965) = Tactical management (business) ‘day to day = Operational management (functional)} management! Page 49 5: Business organisation, structure and strategyInformal organisation Organisational structure oT Lea) Teel a) \{ Levels of strategy ') in the organisation A centralised organisation is one in which authority is concentrated in one place. PONCE cee manele elt) Easy co-ordination of decisions Wider view can be taken Different interests can be balanced Quality of decisions higher (in theory) Cheaper to run Crisis decisions taken quickly Standardised policies and procedures ET Cle ome eS elt) Avoids heavy workloads Improves motivation of junior managers Greater awareness of local issues Greater speed of decision-making Develops the skills of junior managers Controls and direct accountability are clearer Use of communication technology allows local decision making, with HO input if requiredMIO] CeCe RUC) Organisational departments and functions Organisation culture Culture and structure Committees The concept of culture is important when thinking about how organisations work. Organisation culture is, broadly, the distinctive way an organisation does things. Particular Structures suit particular cultures, and these are reinforced by informal networks. Committees are also considered — they are one of the main mechanisms for organisational consultation and communication.CATES ie COME M SEU RTT Culture and Committees structure Organisation culture Research & Purchasing Production Development Quantity, quality, Creating outputs from Product and price, delivery inputs, with added Finance puocess value Raising money; working capital management; recording and controlling; Service providing information; strategic planning; operations teporting to stakeholders; ‘financial Specific nature and dimensions management’, 'management of i” FUNCTIONS » such as issues of intangibility, inseparability and reliability. No physical product Financial Treasury a accounting accounting piman Administrative pareeting (oo ine Marketing mix: 4Ps Effective use of people as eu pie ea Product; Place; Promotion; an asset ce Price.Organisational departments and functions Organisation culture Organisation culture is the complex body of shared beliefs, attitudes and values in an organisation. Aspects of culture Beliefs and values ‘unwritten rules of ‘trophies’, style of relationships, types of people employed = Rituals: formal repeated behaviours, ceremonies, celebrations = Symbols: signs of status and success, corporate logos, badges of identity = Customs: norms, acceptable ways of behaving, = Artefacts: buildings, decor, dress rules, display Colton) CTT Culture and structure Committees Underlying attitudes to (for example): - The customer, quality - Risk, learning, mistakes - Work, the organisation, management Be Cromer eee Model desired behaviours/attitudes from the top Express desired values (eg in mottos, literature) Practise leadership: create an inspiring vision Recruit and select people who will fit the new culture Appraise, reward and promote according to cultural criteria: encourage people to ‘buy in or get out’ = Symbolise the values in visible expressions of ‘style’ Overtly expressed beliefs (slogans, mottos, standing jokes) Page 53 6: Organisational culture and committeesOrganisational Organisation Culture and Committees departments and functions culture Siac Charles Handy (2007): four ‘ideal cultural types Apollo Zeus : 4 Power culture Role culture Athena Task culture Person culture Dionysus isContingency approach It is possible for different cultures to prevail within the same organisation, so a contingency approach is often required. Handy matched his cultural types with Anthony's classification of managerial activity: Strategic management — direction setting > power culture = Tactical management ~ mobilising resources > task culture = Operational management = routine activities > role culture The Hofstede model describes four main dimensions of difference between national cultures. Power distance Uncertainty avoidance Individuality ig eccuinity ad collectivity femininity Page 55 6: Organisational culture and committeesPurpose New ideas Communication Participation and problem- solving Combining abilities Co-ordination Representation of interests Giving advice Recommendations Supported by: The Committee Chair and Secretary Organisational departments and functions Organisation culture Committees are a key part of organisational communication processes. Executive Standing Ad hoc Sub-committees Joint committees Management committees Committees work best when There are well defined areas of authority The Chair is an effective leader The committee itself is not too large The members have the necessary experience Culture and structure em LC CUI Too large sometimes Time consuming Expensive Compromises made The Secretary circulates minutes and action points The benefits justify the cost There is plenty of time to make decisions7: Corporate governance and social responsibility Principles of corporate governance Developments in corporate governance Role of the board Governance reporting and corporate social responsibility Ethics, law, governance and social responsibility This chapter covers the main areas of corporate governance, the role of the board in communicating with shareholders and corporate social responsibility.tel cnes Developments in Corer urus-§ | corporate governance “\ Ethics, law, governan and social responsibility “Vf Role of *\( the board Governance reporting and corporate social responsibility There are different views associated with the ownership and management of organisations: STEWARDSHIP THEORY | managers are stewards of the assets AGENCY STAKEHOLDER THEORY THEORY managers seek to look after management has a duty of their own interests care to stakeholders Governance principles Minimise risk via compliance Adherence to strategic objectives Fulfil stakeholder responsibilities Balance required: Corporate governance vs ‘conformance’ Establish clear accountability Maintain independence ' Accurate/timely reporting Encourage owner involvement Promote integrity Strategic ‘performance’a \| Ethics, law, governance and social responsibility (Role of \( the board Principles of corporate governance Developments in COC MN Ces Governance reporting and corporate social responsibility Corporate governance is the system by which organisations are directed and controlled by senior officers. Supervision nase Driving forces Be ' Framework for ethical and ionalisati isati i Internationalisation/globalisation reduction rah effective dealings Treatment of ae ADVANTAGES Financial reporting issues a “ Cultural significance fl Apply the spirit as well High profile scandals Accountability as the letter of the law Backed up by: — Accounting standards Codes of professional conduct Commissions on standards of behaviour Page 59 7: Corporate governance and social responsibility| Ethics, law, governance | and social responsibility ( Role of \{ the board Principles of LAC) Due corporate governance | (epee tear Governance reporting and corporate social responsibility Features of poor corporate governance Domination by a single individual Lack of independent scrutiny Lack of involvement of board Lack of contact with shareholders Lack of adequate control function Emphasis on short term profitability Lack of supervision Misleading accounts and informationPrinciples of \{ Developments in \(§jeeuia{ — Governance reporting and \{ Ethics, law, governance } corporate governance | corporate governance | is0-17-) corporate social responsibility and social responsibility If the board is to act effectively, its role must be defined carefully. Role of the board Responsible for taking major policy and strategic decisions Mix of skills and relevant expertise Regular performance assessment and increased accountability Formal procedures administered by a nomination committee Balance between executive management and independent non-executive directors Role of Chair and Chief Executive to be held by two different people (not mandatory in the UK) Remuneration set by a remuneration committee Regular review of risk management and internal control Audit committees to liaise with external audit and review accounts/controls Page 61 7: Corporate governance and social responsibility\{ Role of ) the board Principles of ( Developments in ) Governance reporting and corporate governance || corporate governance | Ethics, law, governance Cee my eet) ie and social responsibility Annual reports must convey a fair and balanced view of the organisation, stating whether the organisation has complied with governance regulations and codes: = Narrative statement on how principles have been applied = Statement on compliance throughout accounting period Strategies for social responsibility = Proactive — full responsibility = Defence — minimising or avoiding obligations = Reactive — unresolved until others find out! = Accommodation — taking responsibility, when encouraged Corporate governance requirements and social responsibility may be seen as additional rules and guidance for companies and individuals. They bridge the gap between what the law requires and what society expects.‘0 >) Role of the board Developments in corporate governance Governance reporting and corporate social responsibility Litto CL NC} ET Recaro cei deli | Principles of corporate governance The relationship between law, governance, social responsibility and ethics Corporate governance | Social responsibility Ei Rules individuals and Publicly listed No regulation. Values and principles. companies must follow. | companies only are Individuals and Individuals and regulated. Others are companies have a free companies are expected encouraged to follow choice. Some social to follow. ‘best practice’. pressure to act ina Adopting an ethical socially responsible position is down to free choice. The minimum level of behaviour society allows. More regulation, less freedom of choi ion, more freedom of choice. Page 63 7: Corporate governance and social responsibilitySe EA rd ENC ReE Cy Tet ei Principles of Developments in Governance reporting and Corporate governance || corporate governance corporate social responsibility Society's Pressure for ethics social responsibility EXTERNAL PRESSURES INTERNAL, PRESSURES " Business needs to lene 7 appear socially Needs of responsible shareholders8: The role of accounting This chapter introduces some basic ideas about accounts and accounting information and its purpose. The operation of financial systems is also considered. The purposes of accounting information Nature, principles and scope of accounting The regulatory system Control over transactions The main financial systems Computerised accounting and databases‘Control over \{ The main Computerised transactions || financial systems | accounting and databases fr z ~\ Nature, principles and scope of accounting SUCRE Eee UELCL) (The regulatory ) | system Accounting is a way of recording, analysing and summarising the transactions of a business. The accounting function also provides information and advice to other departments. Te Rem Umer] system = Size Formalised and procedural, to comply = Type of organisation with wide range of regulations = Organisation structure Good accounting information Managers Employees Shareholders Analysts and Relevance = Objectivity Comprehensibility = Timeliness Trade contacts advisers Finance providers = Government HM Revenue & The public Customs . . = Reliability = Comparability = CompletenessFINANCE DIRECTOR r 1 TREASURER FINANCIAL CONTROLLER MANAGEMENT ACCOUNTANT | I I CASHIER FINANCIAL ACCOUNTANTS, COST ACCOUNTANTS Non-current asset register Cost accounting Receivables ledger — Inventory reporting and valuation Debt collection — Materials costing Credit control — Labour costing/payroll Payables ledger — Expense and overheads costing Wages and salaries (payroll) — Job costing (contract costing) Financial accounts (general — Process costing eae quarterly Ti, — Budgetary control reports latutory accounts i i Sales tax (VAT) returns STi Taxation Management accounting — Budget co-ordination — Analysis and investigations — Project appraisal Page 67 8: The role of accountingNature, principles and scope of accounting Financial sis Management (or cost) accounting Note the distinction between:(~The purposes of »\(Nature, principles and \Gnes regulatory (Control over \{ Themain Computerised ‘| accounting information | scope of accounting system transactions || financial systems || accounting and databases et OER SUE MCU ere Factors which have shaped financial accounting: Company law Accounting concepts and individual judgement (eg on valuations or R&D) Accounting standards (for comparability) The European Union Other international influences (eg IASB and global accounting standards) Generally accepted accounting practice (GAAP) ‘True and fair view' Page 69 8: The role of accounting{The purposes of ») (Nature, principles and || The regulatory | [evn We) ey 7-13 (The main Computerised ) accounting information || scope of accounting system HEE ( (| financial systems || accounting and databases Common Purchasing — raw materials or goods Rules and procedures Human resources — staff and their welfare will govern each, eg functi ions Finance — transactions, cash balances authorisation policies Sales and marketing - orders and advertising for the purchase of non- General administration — wide ranging, eg secretarial support current assets Biren ei <= puncnasine 2» Making sales Making purchases Paying expenses Paying employees Transaction Purchasing non-current assets wa Dependent upon effective SIGE systems and procedures This diagram shows, in a simplified form, the flow of funds, documentation and information.The purposes of accounting information scope of accounting PAYROLL PURCHASES Key controls: Key controls: Documentation/ Authorisation authorisation (buying) Calculation of Custody (goods wages/salaries inwards) Payment of wages/ Accounting salaries (recording) Authorisation of deductions Inputs Processing Outputs Page 71 each system has these Nature, principles and }/ The regulatory | Control over Key controls: Authorisation (selling) Custody (goods outwards) Accounting (recording) MTU) Cash and petty cash must be regularly and fully recorded, reconciled but funds transfer is generally by: Company cheque Bank transfer Internet transfer Standing order Direct debit 8: The role of accounting°)(‘Nature, principles and (The regulatory ){ Control over \{ The main ean cur) scope of accounting transactions || financial systems |Eeeotiueeiek tse (The purposes of accounting information The most important point to remember is that the principles of computerised accounting are the same as those of manual accounting. The same terms are used (day book, ledgers, double entry, trial balance). Information is expressed via codes. An accounting package consists of several accounting modules (eg receivables ledger). Manual systems inferior to computers teem Uy Sedu oreo Invoicing Each module may Productivity = Ease of alteration Inventory be integrated with Speed = Quality Error rate = Buk oe the others, so that urchases all modules are General ledger updated by one data Payroll entry, eg sales and Cash book inventory modules Job costing both updated by the Non-current asset register despatch of an Report generator invoice to a customer AccessibilityIntegrated accounting system Decision ‘support system General sen jer module Executive information system Receivables module Inventory module Job costing module Non-current assets) Nature, principles and | (The regulatory | ( Control over ( The main (ey utr) The purposes of scope of accounting CUNO RTICUIee ES cue) accounting and databases’ accounting information A database is a pool of data, which can be used by any number of applications. Its use is not restricted to the accounts department. Main virtues Input data Common data to share No duplication of files No inconsistent data Database User +} management Database queries system l NE on Be shared Application Be up to date programs Be relevant for all users Be capable of evolving . Sal Branch and applications lijpersennall eee Other Note also the use of spreadsheets — statistics statistics analysis hain essentially an electronic piece of paper * The range of applications which make use of a database will vary widely, depending on which provides an easy way of what data is held in the database files. performing numerical calculations.9: Control, security and audit Internal control systems Internal control environment and procedures Internal audit and internal control External audit IT systems security and safety Building controls into an information system and cyber security Impact of financial technology (Fintech) on accounting systems This chapter discusses the main elements of internal control systems that organisations operate. Internal and external audit are a large part of such systems, as are issues related to computerised information.Internal audit and internal control Nar Internal control Ce) Cues | environment and procedures IT systems security and safety audit Internal controls Help organisations to counter risks, maintain the quality of reporting and comply with laws and regulations. They consist of actions taken by management to enhance the likelihood that established objectives and goals will be achieved. INTERNAL CONTROL SYSTEM Techy = Information and communication processes Control Control = Monitoring environment procedures Overall context Detailed controls Limitations include: potential for human error; collusion; management override; dealing with non-routine transactions.Internal audit and internal control NE ered co environment and procedures Internal control systems IT systems security and safety External audit The control environment egregation of duties This is the overall attitude, awareness and actions of directors and management regarding internal controls and their importance. It is reflected in the philosophy and operating system of the organisation. hysical uthorisation and approval anagement ESSA ue} upervision procedures and/or rganisation Administration and accounting Prevent, detect and correct rithmetical and accounting vu rF ON sz Fr TDW Discretionary and non-discretionary Voluntary and mandated Manual and automated General and application Financial and non-financial ersonnel Remember that internal controls should not be confused with internal checks, which have a more restricted definition as checks on day-to-day transactions. Page 77 9: Control, security and audit{Internal control systems ) Internal audit and internal control Ey environment and procedures IT systems security and safety External audit Characteristics of a good internal control system Clearly defined organisation structure Adequate internal checks Acknowledgement of work done Physical security Formal documentation Pre-review System for authorising transactions Post-review Authorisation, custody and re-ordering procedures Personnel with necessary capabilities/qualifications Internal audit departmentIT systems security and safety Internal) Internal control control systems || environment and procedures CEE Te es) CE slic] audit Internal audit Independent, internal appraisal activity - examining and evaluating the adequacy and effectiveness of other controls. Its two main features are independence and appraisal. Objectives Review of the accounting and internal control systems Operational Examination of financial and operating information Systems Review of economy, efficiency and effectiveness Transactions Review of compliance Social Review of asset safeguards Management investigations Review of implementation of corporate objectives Identification of risks, and risk management Special investigations into any aspect of the organisation The internal auditor is accountable to the highest executive level in the organisation, preferably the audit committee of the Board of Directors. Page 79 9: Control, security and auditInternal TUT) audit Internal audit and internal control IT systems security and safety Internal control control systems | environment and procedures External audit Is the periodic examination of the books of account and records of an entity carried out by an independent third party to ensure that they have been properly maintained, are accurate and comply with established concepts, principles, accounting standards, legal requirements and give a true and fair view of the financial state of the entity. Internal audit External audit Internal audit is an activity designed to add External audit is an exercise to enable auditors to value and improve an organisation's operations. | express an opinion on the financial statements. Internal audit reports to the board of directors, | The external auditors report to the shareholders, or or others charged with governance, such as the | members, of a company on the stewardship of the audit committee. directors. Relating to _| Internal audit's work relates to the operations of | External audit's work relates to the financial the organisation. statements. They are concerned with the financial records that underlie these. Relationship | Internal auditors are very often employees of External auditors are independent of the company with the the organisation, although sometimes the and its management. They are appointed by the compan internal audit function is outsourced. shareholders. Internal audit has a much wider scope than external audit.Internal audit and internal control Internal) Internal control control systems || environment and procedures External IT systems audit [RCE EE Cy Security covers the protection of data from accidental or deliberate threats, and the protection of an information system from such threats. Aspects of security ders U1) Physical access controls Prevention Fire PINs Detection Water Deterrence Weather Door locks Card entry systems Logs Recovery Terrorism Correction Accidents Threat avoidance Sabotage Computer theft Hacker Page 81 9: Control, security and auditBuilding controls into an information system and cyber security Such controls can be classified as: CONTINGENCY SECURITY INTEGRITY CONTROLS Accidental/deliberate Data Systems Unscheduled threats interruptions that require disaster recovery plans Data will maintain its integrity if complete and not corrupted. Input, processing and output must all be controlled, including the use of back ups and archives, and creation of passwordsETT ere ce MO CLL) Impact of financial technology system and cyber security (Fintech) on accounting systems Cyber risk Cyber-attacks Cyber securityame alc Phishing Pharming Hacking Distributed Denial of Service (DDoS) attack Webcam manager File hijacker/ransomware Keylogging Screenshot manager Building controls into an information | Impact of financial technology ‘ (Fintech) on accounting systems ACHES am at Cea A LLU) Access control Boundary firewalls and internet gateways Malware and virus protection Patch management Secure configurationImpact of financial technology (Fintech) on accounting systems Cloud computing Automation Cloud accounting Artificial intelligenceTu tame ME UAC lm Cui oleh (Fintech) on accounting systems Building controls into an information system and cyber security Big data Distributed ledger technology (Blockchain) Data analytics10: Identifying and preventing fraud What is fraud? Potential for fraud Implications of fraud Systems for detecting and preventing fraud Responsibility for detecting and preventing fraud Money laundering This chapter considers the various types of fraud, its prevention and detection. The consequences of fraud can be very serious for both the organisation and its direction.Wien ( Potential Vf Systems for detecting Vf Money biel id for fraud of fraud and preventing fraud and preventing fraud laundering Fraud Deprivation by deceit There are two main categories: Re AC em CCR elt EM st) Theft of cash Theft of inventory Overvaluation of inventory Payroll fraud il Fictitious sales Teeming and lading Manipulation of year end events Intentional misrepresentation of the financial position Understating expenses Manipulation of depreciation figures Fictitious customers Collusion with customers Bogus supply of goods Paying for goods not received Manipulation of cash book Misuse of assetsGTC) Potential fraud? lm ccULs) of fraud {implications Vf ‘Systems for detecting , and preventing fraud Responsibility for detecting VY Money and preventing fraud laundering Y Lack of integrity Dishonesty Excessive pressures Motivation Paoneonttal systems Opportunity These pre-conditions a must exist in order to make fraud a External factors possibility. General environment Industry features Technology Economic changes Page 89 Unusual transactions Factors crop up time and l » time again as potential Lack of audit fraud situations evidence Taco) New personnel New systems New operations Restructuring 10: Identifying and preventing fraudenc SMC TT Implications of fraud Systems for detecting and preventing fraud Responsibility for detecting and preventing fraud Money laundering ih deviating from Turnover increasing Secretive Expensive Long industry norms rapidh behaviour lifestyle hours ~ 9 tapidly ae ri ean Business risks mull ea ris! ' all Market Complex group Large Low ¥ | Autocratic opinion structure organisation morale Lack of segregation style of duties Computer fraud The computer is frequently the vehicle through which fraud is carried out. t ' t 4 Lack of Computer Risk User-friendly and training hackers awareness flexible systemsResponsibility for detecting and preventing fraud Money laundering sie ny of fraud and preventing fraud Potential for fraud The precise ways in which the firm is affected depends on the type of fraud being carried out. Artificially enhanced: | ‘Systems for detecting Seer es funds Profits are lower or assets Business has fewer Intentional Distributions too high assets misrepresentation Retained profits low Net asset position Shortfalls in working capital weakened Incorrect decisions Returns to Stakeholders misled shareholders fall Results understated: bara working Returns may be reduced Capital Share price falls Cannot operate Loan finance restricted effectively Negative publicity Company collapses Legal consequences in serious cases Page 91 10: Identifying and preventing fraud(What is Potential fraud? for fraud General prevention policies Emphasising ethics Recruitment procedures Personnel controls Training and awareness Segregation of duties Appropriate documentation Limitation controls Physical security Authorisation policies Standard procedures Computer security )| Systems for detecting Money laundering | Responsibility for detecting and preventing fraud and preventing fraud Managing the risk of fraud is a key part of managing business risks in general. There must be a willingness to enforce controls. Managers and staff need to be aware of their responsibilities. There may even be a fraud officer. Fraud detection is helped by having information readily available, and encouraging employees to report any suspicions — ‘whistleblowing' Internal audit staff must ensure that systems and controls are thoroughly reviewed. External audit staff must assess the risk of fraud having a material impact. Investigation procedures include establishing the extent of the loss, how it occurred, who was implicated and the role of the control system.~ Potential for fraud "| {implications Vf ‘Systems for detecting , of fraud Money laundering Responsibility for detecting EP eu RCT) and preventing fraud It is the responsibility of the directors to take such steps as are reasonable to prevent and detect fraud. oye Cole} Ensure that: = Assets are safeguarded = Activities are honest = Financial information is reliable Also: = Deter fraudulent conduct = Detect any that occurs Page 93 External auditors Express an opinion as to true and fair view Design procedures so as to have a reasonable expectation of detecting fraud Document findings and report to management Arrange for reporting to an appropriate authority if serious enough Qualify audit report if necessary 10: Identifying and preventing fraudWhat is Potential “\f Implications {Systems for detecting Vv Responsibility for detecting '} Uy fraud? for fraud of fraud and preventing fraud and preventing fraud LFTs (alaT} Money laundering The rules on money laundering in the UK are il aly The term given to attempts to make the proceeds of found mainly in the FSA SYSC Handbook (FSA, i i I 2016). Similar regulations exist in other juristictions. Cea LSD Deb ayanen cos. = Acquisition, possession or use of such proceeds Assisting another to retain such proceeds Concealing such proceeds Failure to report knowledge/suspicion of ML Tipping off (warning a suspected launderer) Pee CHT CE Le Rel Ulm eet ORL: CR CM MUM ema ULC) POET CORUM UNM eRe mel cle} which may result in a prison term and/or Lie There are three phases in the process of money laundering: = Placement - the actual disposal of the proceeds of initial illegal activity Laundering = Layering -_ the transfer of monies to conceal the original source = Integration - having been layered, the money has the appearance of legitimate funds Companies need to take action to be aware of anti-money laundering regulations.Financial Action Task Force (FATF) FATF is a inter-government body made up of over 30 member states and international organisations. It aims to: = Develop and promote policies to combat ML = Prevent proceeds being used in future criminal activity FATF has developed 40 recommendations, the first of which is that all countries should take steps to ratify and implement the Vienna Convention. The Council of Europe also makes recommendations re ML which are similar to FATFs. The International Monetary Fund recommends the FATF standards and promotes itself as a forum for sharing information. The nature of money laundering makes it ideal to carry out internationally, transferring money between countries. This UMUCLCM a Ua OMe mee OR mie eee Cli’ that it is illegal in as many countries as possible. Page 95 10: Identifying and preventing fraud11: Leading and managing people The purpose and process of management Writers on management Management and supervision What is leadership? Leadership skills and styles This chapter attempts an overview of the manager's task, and traces the development of management theory away from universal principles towards contingency approaches and a focus on areas such as leadership and other skills.