Chapter 20—Basic Elements of Control Key
1. Control provides an organization with a mechanism for adjusting its course if performance falls outside of
acceptable boundaries.
2. A properly designed control system can help management anticipate, monitor, and respond to changing
circumstances.
3. One purpose of control is to simplify organizations.
4. The responsibility for managing control rests on the CEO.
5. Financial resource controls are interrelated with the control of all other organizational resources.
6. Strategic controls are concerned with how well the organization aligns itself with the environment.
7. The last step in the control process is to change the standard.
8. As much as possible, standards established for control purposes should reflect the goals of the organization.
9. After comparing performance against control standards managers should never change the standard.
10. Reporters who verify stories with additional sources are using screening control.
11. An after-action report is a screening control.
12. The most common controls are screening controls.
13. An effective way to promote employee participation in the control process is to use screening controls.
14. Operations controls monitor input, transformation, and output.
15. Businesses must manage their finances so that revenues are sufficient to cover costs. Not-for-profit
organizations such as universities do not have the same concerns.
16. An operating budget is a budget that determines the number of units to be produced during the coming time
period.
17. Sources of cash include sales revenue, short- and long-term loans, the sale of assets, and the issuance of new
stock.
18. Many contemporary organizations do not allow managers to participate in the budget process.
19. External audits examine the efficiency and appropriateness of financial and accounting procedures.
20. Internal audits examine the efficiency and appropriateness of financial and accounting procedures.
21. Internal audits are not as effective as external audits.
22. Bureaucratic control focuses on enhanced performance that exceeds minimum acceptable standards.
23. Decentralized control relies heavily on self-control by the organization’s employees.
24. Bureaucratic control is outdated and not effective any more.
25. Strategic control in global organizations is the same as domestic organizations.
26. Information systems are an essential element of strategic control.
27. The planning and controlling functions are interrelated.
28. Toyota is designing a new car. At the same time it is planning the recycling abilities of the parts. Toyota is
effectively integrating planning and control processes.
29. Managers make a surprisingly large number of decisions based on inaccurate information.
30. If objective data are available, they will provide more useful information than will mere subjective
impressions.
31. As the number of things being controlled by the organization increases, the likelihood that employees will
resist those controls tends to decrease.
32. The basic purpose of control is
33. Organizational control is
34. The purpose of control is to
35. A properly designed control system is important to an organization because it can be used to
36. Army helicopter pilots follow a preflight checklist because small things here and there can add up to disaster
in the air later. This illustrates
37. The Sarbanes-Oxley Act, passed after the fall of Enron and Arthur Andersen, requires accounting firms to
separate the auditing function from the consulting function. This example illustrates
38. Cody Kretsinger was charged with a computer breach at Sony Pictures Entertainment. User data was stolen.
Hackers now threaten companies of all sizes and require constant security updates. This example illustrates how
a control system can be used to
39. Income statements, balance sheets, and audits are examples of the control of
40. According to the text, what are the two broad schemes by which controls can be classified?
41. Cody Kretsinger was charged with a computer breach at Sony Pictures Entertainment. User data was stolen.
Hackers now threaten companies of all sizes and require constant security updates. This is an example of the
need for ____ control.
42. Google partnered with Nielsen Co. to poll users about ads on Google+. Nielsen then packaged the
information for advertisers. This was a response to advertiser complaints about the effectiveness of ads on the
social network. This indicates that Google is placing an emphasis on ____ controls.
43. The credit crisis and the Federal Reserve’s response to it faced criticism from Congress. The Treasury
Department requested a review of the central bank’s structure and governance. There is now broad support for
auditing the Fed using the Government Accountability Office. The change in the economic and political
environment of the Fed means the Fed needs to adapt its ____ control.
44. Secretary of Defense, Gates, shifted the pentagon’s budget from expensive, high tech weapon systems to
timely, responsive systems. Small defense contractors were more responsive to the change and won more
contracts. In this case ____ control helped the small companies.
45. Businesses that use H-form or M-form organizational design may have several ____ who are responsible for
helping line managers with their control functions, for coordinating the organization’s overall control system,
and for gathering and assimilating relevant information.
46. Implementing the control process includes which of the following steps?
47. The last step in the control process is to
48. The ____ at McDonald’s fast-food restaurants is to fill each order within 90 seconds and to have no
customer wait longer than 3.5 minutes.
49. Standards used in organizational control are most like
50. To the extent possible, standards used for control purposes should be derived from
51. McDonald’s fast-food restaurants aim to fill each order within 90 seconds and to have no customer wait
longer than 3.5 minutes. This is derived from the company’s
52. After evaluation, an appropriate decision may be to
53. Anu is comparing the performance of her small landscaping business against the standards she established.
When she has finished her comparisons, any of the following actions may be appropriate EXCEPT
54. Apple iPhones are notorious for cracked screens. When a customer brings one in to an iStore, the employee
checks the customer records and may replace the screen for free. Which step in the control process does this
represent?
55. eBay partnered with Nielsen Co. to poll users about ads on eBay. Nielsen then packaged the information for
advertisers. This was a response to advertiser complaints about the effectiveness of ads on the Internet.
Verifying ad effectiveness of other companies before buying ad space on eBay is a ____ control for the
businesses.
56. Thousands of people audition each year to be contestants on American Idol. The audition is an example of a
____ control.
57. Everyone working or volunteering for Girl Scouts has a background check before they can work with girls
or handle money. What kind of operations control is this?
58. To what part of a system are preliminary controls applied?
59. During episodes of the Biggest Loser, contestants compete to lose weight and stay at the ranch, because
someone leaves each week. This is an example of a ____ control.
60. A college admissions board required students to have certain grade point averages and SAT scores to be
accepted at the school. What form of operations control do these requirements represent?
61. Screening controls
62. Politicians transform information from many sources into decisions about policies for the area they govern.
When politicians “float an idea” by having a staff member leak it to the press to gauge reaction, the politician’s
staff is using ____ control.
63. Which of the following is NOT a major form of operations control discussed in the text?
64. As the product being produced becomes more complex, which of the following types of operations controls
would logically become more important?
65. Politicians transform information from many sources into decisions about policies for the area they govern.
When politicians follow poll results during legislative debate, the politicians are using ____ control.
66. Politicians transform information from many sources into decisions about policies for the area they govern.
When politicians follow poll results after the passage of legislation, the politicians are using ____ control.
67. Amazon asks customers to rate their experience with the product and service. This is an example of ____
control.
68. The percentage of graduates who find a job within six months of graduation is a ____ control for colleges
and universities.
69. Postaction control is most appropriate when the
70. Once a year Boy Scout troops submit financial reports describing income and expenditures. This is an
example of ____ control.
71. Budgets
72. Which of the following is a type of financial budget that deals with forecasting the organization’s assets and
liabilities in the event all other budgets are met?
73. Which of the following is NOT a type of financial budget?
74. Which of the following is NOT a type of operating budget?
75. At the end of each fiscal year, managers report in their performance report if they are under budget. This is
an example of a(n) ____control.
76. The University of Michigan develops a budget that shows its projected income from sources such as the
state of Michigan, tuition and fees, alumni contributions, and research grants. This is an example of a(n) ____
budget.
77. The ____ budgets are organizational budgets that outline quantities of product/service to be produced and
what resources will be used.
78. A plant manager is told that she has 8,000 labor hours to allocate in a week. This is an example of a(n) ____
budget.
79. Deirdre is a freelance editor. She knows how many chapters she needs to edit and approximately how long
each chapter takes. She is calculating what she needs to do to meet her next deadline. She is making a ____
budget.
80. Which of the following statements does NOT describe a weakness associated with budgeting?
81. A(n) ____ is a financial statement that lists all of the organization’s assets and liabilities at a given point in
82. A(n) ____ is a financial statement that presents a picture of the organization’s financial performance over a
period of time as opposed to a single point in time.
83. Which of the following would NOT be included in the typical balance sheet?
84. You are looking at a document that has entries for such items as revenues, expenses, and profit. You are
looking at a(n)
85. A(n) ____ ratio is a measure of the firm’s ability to meet its long-term financial obligations.
86. You are a banker reviewing a loan application from a local business. Which of the following ratios would
you look at to get a quick measure of the business’s ability to meet its long-term financial obligations?
87. If Suzlon Energy Ltd. wants to focus on the strength of its wind-turbine division, it will use ____ ratios.
88. The ____ shows an organization’s bottom line (profit or loss) and summarizes activities over a period of
time.