ACCA Certified Accounting Technician Examination, Paper T5

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2 ACCA Certified Accounting Technician Examination, Paper T5 Managing People and Systems December 2009 Answers and Marking Scheme Section A Questions 1 12 are all worth 2 marks each. 1 D 2 A 3 C 4 C 5 B 6 A 7 A 8 B 9 B 10 C 11 D 12 D Section B Questions 1 4 are worth 14 marks each. Question 5 is worth 20 marks. 1 (a) An organisation can be described as a type of system. A system is a collection of inter-related parts and subsystems that are integrated to accomplish an overall goal. Systems have inputs, processes, outputs and outcomes, with ongoing feedback among these various parts. A change in any of the parts leads to (or results from) a change in some other part or parts. General systems theory makes a distinction between open, closed and semi-closed systems. An open system is connected to and interacts with its external environment. It takes in influences from its environment and also influences this environment by its behaviour. Social organisations such as businesses are open systems. Business organisations have a variety of interchanges with the environment; obtaining inputs from it and generating outputs to it. Businesses are open systems and they interact with the environment. A large part of strategic planning for any organisation is concerned with seeking to manage its relationship with the environment by seeking to understand it and to anticipate changes in that environment which may bring opportunities or cause problems for the business. (b) The external environment of an organisation can be analysed using a PEST analysis. The acronym PEST represents the four key sectors of the external environment which interacts with an organisation: political/legal, economic, social and technological. Each of these four factors are considered and analysed and the key factors impacting on the organisation can be identified and understood. Having identified and understood the key factors in an organisation s external environment, managers within the organisation can then make decisions around how these factors can be managed most effectively. This will take account of the risks of any likely changes forecast and anticipated; and whether they are likely to bring problems or opportunities. Political/legal influences will include legislation on trading, pricing, dividends, tax, employment and also health and safety. The addition or removal of legislative or regulatory constraints can pose major strategic threats and opportunities and so the organisation needs to know about any potential changes to regulations and what their impact might be. The organisation must also be able to react to the policies of the political party in power at the time. The government is often a nation s largest supplier, employer, customer and investor and any change in government spending priorities can have a significant impact on a business. Understanding the economic environment requires an understanding of the general economic conditions and trends that are critical to the success or otherwise of the organisation. This will include interest rates, the availability of credit, inflation, the balance of trade, exchange rates and levels of employment. The organisation needs to know what the economic prospects are for the countries in which it operates and how they might subsequently affect strategy. The social environment includes population information, demographics, social mobility, income distribution, lifestyle changes and attitudes to work. Typical questions that need to be answered might include: What are the current and emerging trends in lifestyle and fashion? What demographic trends will affect the size of the market? Does the trend represent an opportunity or a threat? The technological environment is influenced by spending on research, new discoveries, the speed of technology transfer and rates of obsolescence. Change can take place very rapidly in this environment and the organisation needs to be aware of what is going on and what is likely to occur. Technological change can influence changes in production techniques, the types of products that are made and sold, how services are provided and how markets are identified. By considering all of the PEST factors, managers in organisations will have a better understanding of the key factors affecting the organisation now and those that are likely to have an impact in the future. The basic PEST analysis can also be extended to include a specific legal category and also a category which considers ecological or environmental factors this is called a PESTLE analysis. 9

3 Part (a) 4 marks for an explanation of an open system. Part (b) 2 marks for stating that a PEST (or PESTLE) analysis is a way of undertaking an analysis of the external environment of an organisation, including the identification of the words represented by the acronym. A further 2 marks each for explaining each factor and including examples. No further marks to be awarded if PEST/LE is simply referred to but not explained and examples omitted. 2 Fraud generally occurs when someone has identified an opportunity, a weakness in the company s systems, and believes that the potential rewards will outweigh the risk of being caught. There are three prerequisites for fraud to occur: dishonesty, opportunity and motive. All three are usually required, for example an honest employee is unlikely to commit fraud even if given the opportunity and motive. If one or more of the prerequisites can be eliminated, then the risk of fraud is usually reduced. Most frauds should be prevented by an organisation s system of internal controls. However, there are some particular controls that deal specifically with the prevention of the three prerequisites. Dishonesty is a subjective quality, which is interpreted variously according to different ethical, cultural and legal norms. Dishonesty is generally defined as an individual s pre-disposition or tendency to act in ways that contravene accepted ethical, social, organisational and legal norms for fair and honest trading. Dishonesty can be prevented by careful screening and scrutiny of staff. This can start even before a new employee joins the company. References should be checked thoroughly. Care should be taken where temporary employees, particularly those supplied through an agency, are to be employed permanently. Screening and reference checking are especially important in this case. In addition to a general disposition or willingness to act dishonestly, an individual will still need a specific motivation to do so. This is likely to involve a calculation of whether a given action is worthwhile this will take into account the potential rewards in relation to the potential sanctions or negative consequences of the action; the likelihood of being caught and the likely punishment if caught. The individual s motivation for fraudulent behaviour may be financial (in the case of theft or fraud for monetary gain), a desire to exercise negative power over those in authority or a desire to avoid punishment (for example, in the case of a cover up). Often, the motive for fraud is simply dissatisfaction, based on being passed over for promotion, poor pay or a feeling of carrying more than a fair workload. Giving employees the opportunity to air their grievances and discuss their aspirations could be sufficient to reduce this problem. The motivation to commit fraud can be prevented by: good employment conditions, instant dismissal where appropriate and effective grievance procedures. Even if a person is willing to act dishonestly, and has a motive for doing so, he/she must still find an opportunity or an opening to do so. This can be a loophole in the law or control system that allows the fraudulent activity to go undetected or makes the risk of detection acceptable given the rewards potentially available. Opportunity can be prevented in a number of ways: Separation of duties, this deters opportunity by dividing responsibility. If employees share tasks, it is less likely that a fraud can succeed. Fraud is also less likely if one person has to ask another person to help him/her with a fraudulent activity. Physical security, for example of assets and computer hardware Internal controls: if the proper checks and balances exist, it is more difficult to defraud an organisation. Control over forms and documentation, e.g. cheques. Continuous monitoring and review of all controls to ensure that they are being complied with in practice and are still relevant and effective. 2 marks each for explaining the three key requisites for fraud. 2 marks for explaining how dishonesty could be prevented. 3 marks each for an explanation of how opportunity and motive could be prevented. Total 14 marks 3 Henry Mintzberg offered a flexible framework for analysing organisations, by categorising the five basic component parts which need to exist in any organisation. The five parts that he categorised are: the strategic apex, the operating core, the middle line, the techno-structure and staff support. The strategic apex is made up of the senior management, who are concerned with ensuring that the organisation pursues its objectives and serves the needs of its owners and stakeholders through strategic planning and resource allocation. It also involves managing the boundaries between the organisation and its external environment and stakeholders. The operating core comprises the people directly involved in production. Tasks for the operating core involve securing inputs and processing and distributing them as outputs, i.e. goods and services. The middle line comprises the managers and supervisors within the organisation, who form a chain of command that runs between the strategic apex and the operating core. Tasks for the middle line include the organisation, planning and controlling of the work of the organisation. The middle line acts as an interface between senior management and operational employees and also the organisation and external contacts. The techno-structure comprises the specialist advisors and analysts within the organisation; the technical support staff. The techno-structure offers technical support to the rest of the organisation, designing and maintaining systems to standardise work throughout the organisation (e.g. financial control and HR planning). 10

4 The staff support component comprises the administrative and ancillary support staff of the organisation for example, legal advice, research and development, maintenance and security. 1 mark for each component part identified. 2 further marks for each one explained, up to a maximum of 9 marks. Total 14 marks 4 In order to achieve its goals, an organisation requires a skilled and motivated workforce. This is partly achieved by training and development. The main purpose of training and development is to raise competence and therefore performance standards. It is also concerned with personal development, helping and motivating employees to fulfil their potential. Effective training and development is important to individuals in organisations because it can offer a number of benefits. Some of these benefits are: Increased motivation, the employee might feel reassured that he/she is of continuing value to the organisation Individual goals are more likely to equate with those of the organisation Individual needs and aims to develop their abilities and talents is satisfied New skills can be acquired for future use. Even if not specifically related to the current job, training can be useful in other contexts and the employee becomes more attractive to employers and may have a better chance of promotion. New skills can be acquired, enabling the individual to feel more secure and confident of their marketability and to seek enhanced employment elsewhere. There can be a social benefit in that people s social needs can be met by training courses and they can build up a network of contacts. Effective training and development is important to organisations because it can offer a number of benefits in improving an organisation s ability to compete. Training is often a major contributor to organisational success. Training is necessary to ensure an adequate supply of staff who are technically and socially competent and capable of career enhancement into specialist or management positions. It increases the level of individual and organisational competence. Some of the benefits of training and development to an organisation are: Provision of trained staff. Improvement of existing skills. Increased employee knowledge. Improved job performance. Improved customer service. Greater staff commitment. Increased value of the organisation s human assets. The personal development of employees. 7 marks for an explanation of why training and development is important to the individual. 7 marks for explaining why training and development is important to the organisation. 5 (a) The three key principles of security are: delay, checking and alarm. Delay is concerned with having adequate lines of defence before vulnerable areas and items can be reached. Some examples are: outer doors to main buildings, internal fire doors, reception areas, lockable and/or guarded offices and lockable filing cabinets and safes. Checking involves making sure that there are procedures for authorised access to vulnerable areas or items. This includes the following: identification of authorised staff, checking, signing in and escorting visitors, challenging unauthorised individuals, computerised passwords and checking authorisations before access to buildings or files is permitted. Alarm involves having procedures for alerting those responsible for security breaches. This can be done through the use of electronic security alarms, individual alertness and response and also computerised warning of file access attempts. (b) Most organisations will have some form of formal security measures and a security procedures manual will be an important part of this. A typical security procedures manual is likely to have procedures for the following: Identifying regular staff this might include the requirement to wear an identity badge, or to show identity passes when moving from one building or office to another. It may also include a requirement to sign in and out of premises. Vetting non-staff members typically this will deal with people who visit the organisation, for example supplier representatives, and may include a requirement to collect them from reception and escort them to the department that they are visiting. Identification checks may also be required or a letter of introduction. Non-business visitors this might include friends of employees, perhaps visiting for lunch. Procedures might include identity checks and a requirement to ensure that these visitors are escorted at all times. Some organisations do not permit these types of visitors to go beyond the secure reception area. Protecting the building this might include procedures to ensure that certain doors and access points are kept locked at particular times, in some cases they may be guarded. There may also be procedures that make it clear that it is an individual s responsibility to ensure that their own office windows and doors are locked when the office is vacated. Protecting the organisation s assets this might include requirements to lock away calculators and laptop computers in secure drawers at the close of business each day. 11

5 Protecting documents and information this is likely to include procedures for locking away files and ledgers, or not leaving computer terminals available for someone else to access sensitive files. It may also include procedures for passwords to access files or procedures for ensuring that sensitive information remains protected and can only be accessed by authorised members of staff. Protecting the procedures this will include procedures to protect passwords, procedures to control keys (such as a list of authorised key holders and instructions about where and how keys should be kept). Explaining what to do in the event of a breach of security this is likely to include the names and numbers of the available (and suitably trained) people who might need to be contacted. It might also include instructions about how to deal with intruders and how to report missing or damaged items. Part (a) 3 marks each for explaining the three key principles of security. Part (b) 2 marks for each item identified and explained up to a maximum of 11 marks. 1 mark only to be awarded if an item is included in a list with no explanation or examples. 12