Designing a management control system

“In small companies with few employees, it is virtually impossible to implement the segregation of duties control plan.” Do you agree? Discuss fully

Explain why each of the following five assumptions might be made by accountants when designing a management control system, and set out in each case also any arguments, which, in your view, raise legitimate doubts about their validity:

Several assumptions are commonly made by accountants when preparing or interpreting management accounting information.

 

a) Performance targets should be reasonably attainable but not too loose.

10 marks

b) Participation by managers in the target setting process leads to better performance.

10 marks

c) Management by exception is the most effective system of routine system of routine reporting.

10 marks

d) A manager’s performance reports should report should exclude all matters, which are not completely under his control. 10 marks

e) The style of managerial use of management control information for performance evaluation is important. 10 marks

Solution: