The Controller's Function

The Work of the Managerial Accountant

Steven M. Bragg

• Publisher: Wiley
• Year: 2011
• ISBN:
  9781118001431
• Edition: 4
• Topic: Betriebswirtschaft
• Subtopic: Betriebliches Rechnungswesen

The go-to resource managerial accountants can turn to for sustaining their company's competitive advantage

From flex budgeting to detailing the more sophisticated skills like throughput analysis for capital investments and the fast close for public companies, The Controller's Function, Fourth Edition offers numerous real-world examples, expertly balancing both the technical and managerial sides of the job.

• Provides an overview of the functions and responsibilities of the controller/management accountant in a corporation
• Explores how controllers can better perform their jobs
• Offers a solid foundation for those who are new to this area

Comprehensive and practical, this book fully defines the role, functions and responsibilities of the managerial accountant in a corporation.

Chapter 1

The Controller's Job

Today's corporation operates in an increasingly complex environment, where there are far too many activities for a chief executive officer (CEO) to keep track of. To an increasing degree, this monitoring function falls on the shoulders of the controller, who must keep the CEO apprised of the performance of all departments, product sales, costs and profits, control issues in a variety of transaction processing systems, and the impact of new government taxes and other regulations on the conduct of the business. Thus, the controller can reasonably be compared to the ship's navigator, who warns the captain of current or foreseeable problems in the shoals of the business environment that lie ahead and on all sides. In this chapter, we explore the main functions of the controller, what kind of background a controller should have, the positions reporting to the controller, and the role of ethics in the conduct of the job.

Main Job Functions

The controller has a number of distinct job functions. The first four are ones that can be ascribed to any manager in any department. The last two are more specialized and do not refer to management skill. The six functions are:

1. Planning. The controller is responsible for determining who does the work, what work is to be done, and the timing of work completion in the accounting department, especially in regard to the timely processing of transactions and the issuance of accurate financial statements. This also extends to the budget, where the controller guides the budgeting process through other departments.

2. Organizing. The controller is responsible for obtaining and keeping the services of experienced and well-trained accounting personnel; this is by far the most important organizational task. This also involves obtaining sufficient floor space, office equipment, and computer hardware and software to complete all assigned work.

3. Directing. The controller is responsible for ensuring that all employees in the department work together in an orderly manner to achieve the controller's plans.

4. Measuring. The controller is responsible for measuring the performance of all key aspects of the department to ensure that performance matches or exceeds standards and that errors are caught and corrected.

5. Financial analysis. The controller is responsible for the review, interpretation, and generation of recommendations related to corporate financial performance. This requires excellent communication skills (both written and oral), so that the controller's information is properly and effectively conveyed to the other members of the management team.

6. Process analysis. The controller is responsible for periodically reviewing and evaluating the performance of each major process that is involved in the completion of transactions, with the dual (and sometimes conflicting) objectives of maintaining tight financial controls over processes while also running them in a cost-effective and efficient manner.

Job Description

The controller has one of the most complex job descriptions of all company managers because there are so many functional areas for which he or she is responsible. This section provides a detailed job description that is sorted by general category in alphabetical order. The controller's responsibilities are:

Auditing

• The scheduling and management of periodic internal audits, as well as the preparation of resulting audit reports and the communication of findings and recommendations to management and the board of directors.
• The preparation of work papers for the external auditors and the rendering of any additional assistance needed by them to complete the annual audit.

Budgeting

• The coordination of the annual budgeting process, including maintenance of the company budget, and the transfer of final budget information into the financial statements.

Control Systems

• The establishment of a sufficiently broad set of controls to give management assurance that transactions are processed properly.

Cost Accounting

• The coordination of periodic physical inventory counts.
• The periodic analysis and allocation of costs based on activity-based costing pools and allocation methods.
• The continual cost review of products currently under development, using the principles of target costing.
• The periodic compilation and evaluation of inventory costs.

Financial Analysis

• The periodic comparison of actual to budgeted results and the communication of variances to management, along with recommendations for improvement.
• The continuing review of revenue and expense trends and the communication of adverse trend results to management, along with recommendations for improvement.
• The periodic calculation of a standard set of ratios for corporate financial performance and the formulation of management recommendations based on the results.

Financial Statements

• The preparation of all periodic financial statements, as well as their accompanying footnotes.
• The preparation of an interpretive analysis of the financial statements.
• The preparation and distribution of recurring and one-time management reports.

Fixed Assets

• The annual audit of fixed assets to ensure that all recorded assets are present.
• The periodic recording of fixed assets in the financial records and their proper recording under the correct asset categories and depreciation methods.
• The periodic review of fixed assets to determine the existence of any impairment.
• The proper analysis of all capital expenditure requests.

Policies and Procedures

• The creation and maintenance of all policies and procedures related to the control of company assets and the proper completion of financial transactions.
• The training of department personnel in the use of accounting policies and procedures.
• The modification of existing policies and procedures to match the requirements of government regulations.

Process Analysis

• The periodic review of all processes involving financial analysis to see if they can be completed with better controls, lower costs, or greater speed.

Record Keeping

• The proper indexing, storage, and retrieval of all accounting documents.
• The orderly planning for and scheduling of document destruction, in accordance with the corporate document retention policy.

Tax Preparation

• The timely preparation and filing of tax returns, as well as the supervision of all matters relating to corporate taxation, such as conducting an effective tax management program, and both providing and enforcing policies and procedures related to the compliance of all corporate personnel with applicable government tax laws.

Transaction Processing

• The timely completion of all accounting transactions at the intervals and in the manner specified in the accounting policies and procedures manual.
• The proper completion of all transactions authorized by the board of directors or in accordance with the terms of all authorized contracts.
• The proper approval of those transactions requiring them, in accordance with company policy.

This list may appear overwhelming, but just because the controller is responsible for all of the listed areas does not mean that this person must actually do each one. Instead, the controller is mostly involved in the six job functions noted in the preceding section; in other words, the controller primarily manages the work of other people and ensures that they complete most of the tasks just listed. In particular, a controller can rely on the services of assistant controllers who are responsible for smaller portions of the accounting department.

Job Qualifications

To undertake the job description just described, the controller should have a number of qualifications, which are outlined in this section. Although not all controllers will possess these skills, it is most important to have those related to transaction processing and the production of accurate financial statements because these two areas remain the core of the accounting function. The key job qualifications are:

• Analysis of information. The controller must be sufficiently comfortable with financial information to readily understand the meaning of a variety of ratios and trends and what they portend for a company.
• Communication ability. A key component of the controller's function is compiling information and communicating it to management. If the compiling part of the job goes well, but management does not understand its implications, then the controller must improve his or her communication skills in order to better impart financial information to the management team.
• Company and industry knowledge. No accounting system is completely “plain vanilla,” because the companies and industries in which it operates have a sufficient number of quirks to require some variation from the typical accounting system. Accordingly, the controller must have a good knowledge of both company and industry operations to know how they impact the operations of the accounting department.
• Management skill. The controller presumably will have a staff and, if so, will have considerable control over the productivity of that group. Accordingly, the controller must have an excellent knowledge of the planning, organizational, directing, and measurement functions needed to manage the accounting department.
• Provision of timely and cost-effective services. The controller must run the accounting department as if it were a profit center, so that the most efficient methods are used to complete each task and the attention of the department is focused squarely on the most urgent tasks.
• Technical knowledge. Creating an accurate financial statement, especially one for a publicly held company, requires a considerable knowledge of accounting rules and regulations. Accordingly, a controller should be thoroughly versed in all generally accepted accounting principles (GAAP). Also, if the controller's company deals with international financial reporting standards (IFRS), a knowledge of IFRS will also be necessary.

Organizational Structure of the Accounting Department

The controller does not operate alone to complete all the tasks outlined through the last few sections. On the contrary, quite a large accounting staff may complete the bulk of the ...