The Essential Controller

Steven M. Bragg, CPA, has been the chief financial office or controller of four companies, as well as a consulting manager at Ernst & Young and auditor at Deloitte. He is the author of over thirty books primarily targeted toward controllers and their needs. Bragg received a master’s degree in finance from Bentley College, an MBA from Babson College, and a bachelor’s degree in economics from the University of Maine.

Preface ix Chapter 1 Accounting in the Corporation 1

Importance of This Chapter 1

Tasks of the Accounting Function 2

Role of the Accounting Function 5

Role of the Controller 6

Impact of Ethics on the Accounting Role 8

Evolving Role of Accounting 12

Chapter 2 Controller’s Responsibilities 13

Importance of This Chapter 13

Variations on the Title 14

Planning Function 14

Control Function 16

Reporting Function 17

Accounting Function 17

Additional Controller Functions in Smaller Companies 18

Controller’s Job Description 22

Relationship of the Controller to the Chief Financial Of cer 24

Future Changes in the Controller’s Origins and Responsibilities 26

Managing Rapid Growth 28

Chapter 3 Chief Financial Of cer: From Controller to Facilitator of Change 31

Importance of This Chapter 31

Understanding What Chief Executive Of cers Want 32

Task of the CFO 32

Develop and Communicate a Compelling Finance Agenda 33

Build a Commitment to Change within Finance 36

Change Executive Management Practices 40

Enlist the Support of the Chief Executive Of cer 42

Mobilize the Organization 44

Institutionalize Continuous Improvement 46

Chapter 4 Operational Accounting 49

Importance of This Chapter 49

Create Departmental Job Descriptions 50

Create a Departmental Training Program 52

Clear Out Excess Documentation 55

Streamline the Accounting Work- ow 56

Document All Major Processes 58

Correct the Underlying Causes of Errors 59

Use Best Practices 62

Outsource Selected Accounting Functions 64

Chapter 5 Cost Accounting and Costing Systems 71

Importance of This Chapter 71

Purpose of Cost Accounting Information 72

Input: Data Collection Systems 73

Processing: Data Summarization Systems 77

Processing: Job Costing 79

Processing: Process Costing 87

Processing: Standard Costing 90

Processing: Direct Costing 93

Processing: Throughput Costing 96

Processing: Activity-based costing 101

Processing: Target Costing 103

Outputs: Cost Variances 107

Chapter 6 Ratio and Trend Analysis 113

Importance of This Chapter 113

How to Use Ratios and Trends 114

A Caveat 115

Measures for Pro tability 118

Measures for the Balance Sheet 122

Measures for Growth 128

Measures for Cash Flow 129

Measures for Non nancial Performance 132

Interrelationship of Ratios 152

Setting Up a System of Ratios and Trend Analyses 154

Chapter 7 Internal Control Systems 157

Importance of This Chapter 157

Objectives 158

Responsibility for Internal Controls 159

Examples of Internal Controls 161

When to Eliminate Controls 164

Types of Fraud 167

Preventing Fraud 169

How to Deal with a Fraud Situation 174

Foreign Corrupt Practices Act 176

Chapter 8 The Fast Close 179

Importance of This Chapter 179

Different Types of Fast Close 180

How to Achieve a Fast Close 181

Enhanced Closing Process 196

Chapter 9 Internal Audit Function 197

Importance of This Chapter 197

Reporting Relationships 198

Composition of the Audit Committee 199

Role of the Audit Committee 201

Internal Audit Objectives 203

Internal Audit Activities 206

Managing the Internal Audit Function 209

Chapter 10 Recruiting, Training, and Supervision 215

Importance of This Chapter 215

Recruiting Sources 216

Factors to Consider When Recruiting 219

Factors to Consider When Promoting 221

Importance of Reduced Turnover 223

Importance of Developing Career Plans for Employees 228

Importance of Communications with Employees 231

How to Motivate Employees 233

Chapter 11 Controller’s Role in Investor Relations 235

Importance of This Chapter 235

Objectives of the Investor Relations Function 236

Evolving Nature of the Function 237

Communication Vehicles for

Investor Relations 238

Investor Relations Message Recipients 239

Information Needs of the Financial Analyst 240

Information Needs of Other Groups 243

Disclosure Policy 243

Organization Structure for Investor Relations 245

Role of the Controller and Other Principals 246

Some Suggested Financial Market Objectives 250

Some Suggested Methods 251

Chapter 12 Taxation Strategy 253

Importance of This Chapter 253

Accumulated Earnings Tax 255

Cash Method of Accounting 256

Inventory Valuation 257

Mergers and Acquisitions 258

Net Operating Loss Carryforwards 259

Nexus 261

Project Costing 262

Property Taxes 262

S Corporation 263

Sales and Use Taxes 264

Transfer Pricing 266

Unemployment Taxes 269

About the Author 271

Index 273