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Exercise 1-6 (15 minutes)
Industry
Type of Risk
Control
Airlines
An airplane might
crash.
Implement a preventive
maintenance program.
Pharmaceutical drugs
A customer might be
harmed by a drug.
Design tamper-proof
packaging.
Package delivery
A package may get lost.
Implement an
electronic package
tracking system.
Banking
Customer credit card
numbers may be
stolen.
Implement computer
system firewalls to foil
computer hackers.
Oil & gas
An oil spill may damage
the environment.
Create contingency
response plans in the
event of an oil spill.
E-commerce
The company’s website
might crash.
Develop a backup
system that can be
easily activated.
Automotive
Customers may not like
the appearance of a
new car model.
Use focus groups to
assess reactions to new
model prototypes.
Exercise 1-8 (10 minutes)
The type of cognitive bias revealed by this data is called self-enhancement
bias. This bias occurs when people overstate their strengths and
Exercise 1-10 (20 minutes)
The purpose of this exercise is to create a platform for students to debate
the merits of the shareholder-focused and stakeholder-focused
philosophies of business management. Student responses are likely to fall
Exercise 1-12 (20 minutes)
2. Perceptive students may realize that this is a classic case of selection
bias. Selection bias arises when decision makers rely on a sample that is
not representative of the entire population being studied. In this case,
the military was relying on a sample that included only those planes that
Appendix 1A
Corporate Governance
Solutions to Questions
1A-1 Example of control activities include (1)
watching high school athletes play prior to
(4) conducting flexibility and weight training for
the players, and (5) conducting practices in the
attending resume writing workshops, (3)
gathering background information about
curricular activities that build skills important to
employers.
system inspections, (3) installing locks on doors,
(4) storing all potentially harmful products in
installing plastic covers over electrical outlets.
1A-4 Examples of controls include using
creating store layouts that require customers to
pass the registers in order to exit, having
boxes to ensure that they do not contain hidden
merchandise, and placing small expensive items
in locked cabinets.
1A-5 Examples of internal controls include
maintaining a locked cash register, limiting
duties of checking out customers, counting the
cash in the drawer and reconciling it with the
purchase order to verify that the goods were
actually ordered by the company for legitimate
should also review a receiving report to verify
that the goods were received in the proper
quantities and in satisfactory condition.
selling to them on credit, separating the duties
of those responsible for generating sales leads
monitor subsequent cash collections.
1A-8 Companies usually count their
company’s accounting records. If a difference
exists between the physical inventory and the
1A-9 Using pre-numbered documents reduces
the likelihood of unauthorized transactions. It
© The McGraw-Hill Companies, Inc., 2015
200 Managerial Accounting, 15th Edition
also makes it easy to ensure that all documents
are recorded and to quickly identify a missing
document.
1A-10 Budgets: (1) define goals and objectives
that can serve as benchmarks for evaluating
subsequent performance, (2) coordinate
activities across the organization, (3)
communicate management’s plans throughout
the organization, (4) force managers to plan for
the future, and (5) allocate resources to those
parts of the organization where they can be
used most effectively.
