AFM482 Study Guide - Economic Value Added, Internal Audit, Income Statement
25 Oct 2014
School
Department
Course
Professor
Document Summary
Elements of management control systems include: strategic planning, budgeting, resource allocation, performance measurement, evaluation and reward, responsibility centre allocation, transfer pricing. Management control is a must in any organization that practices decentralization. One view argues that strategy is first developed through a formal and rational process, and this strategy then dictates the design of the firm"s management systems. An alternative perspective is that strategies emerge through experimentation, which are influenced by the firm"s management systems. When firms operate in industries where environmental changes are predictable, they can use a formal and rational process to develop the strategy first, and then design management control systems to execute that strategy. However, in rapidly changing environments, it is difficult for a firm to formulate the strategy first and then design the management control systems to execute it. Elements of a control system: every control system has at least 4 elements:
