Chapter 17 – The Management & Control of Quality
Reading 17-7: Brian H. Maskell and Frances A. Kennedy, “Why Do We Need Lean Accounting
and How Does It Work?” The Journal of Corporate Accounting and Finance (March/April
2007), pp. 59-73. (Published online in Wiley InterScience, www.interscience.wiley.com, DOI
10.1002/jcaf.20293.)
The authors of this article offer a rationale for a change from traditional accounting and control systems to
“lean accounting.” As well, they provide an overview of the workings of a lean accounting system.
Discussion Questions:
1. Some managers might contend that “lean manufacturing” is just another fad. How do the
authors respond to this assertion?
First, the authors reference some survey evidence regarding the sheer number of manufacturing
companies that have embraced, to some extent, lean manufacturing. Second, they indicate that “lean
thinking” is applicable to service entities as well as to manufacturing entities. Third, the authors suggest
2. Provide a short summary of the deficiencies of traditional accounting and control systems, as
suggested by the authors of this article.
The authors make a bold assertion, which provides a good attention-director for students: traditional
accounting systems are not benign—rather, they are “actively harmful to the lean transformation.” The
following deficiencies are offered by the authors:
a) Traditional systems use the wrong performance indicators (which, in turn, have dysfunctional
consequences)
b) Traditional systems calculate the wrong costs (that is, they focus on the cost of individual products
3. As proposed by the authors, what are the primary objectives of a “lean accounting system”?
The authors propose the following primary objectives of a lean accounting system:
a) Provide accurate, timely, and understandable information to motivate lean transformation throughout
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Chapter 17 – The Management & Control of Quality
4. What lean accounting methods and tools are available to support the primary objectives referred
to in (3) above? (Hint: Please refer to Exhibit 5 in the article.)
As indicated in the text of the article, and specifically in Exhibit 5, the tools that can be used to support
the objectives of a lean accounting system are not really new. These tools can be classified according to
three key aspects of a lean organization: visual management, value stream management, and continuous
improvement.
Visual management includes the use of box scores, development of appropriate performance metrics
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Reading 17-8: Shaun Aghili, “A Six Sigma Approach to Internal Audits,” Strategic Finance
(February 2009), pp. 38-43.
The author of this article provides an overview of the Six Sigma process, as well as how that process
might be applied to the development or strengthening of internal control processes.
Discussion Questions:
1. According to the author, what is the motivation for devoting resources to the development of an
effective internal control system?
The basic business reasons for developing an effective internal control system are:
a) Improve profitability by avoiding non-value-added expenses (from the standpoint of your targeted
customers) and by improving the effectiveness and efficiency of various organizational controls.
b) Apart from the potential positive impact on the bottom line, companies need an effective internal
2. What are the elements of the performance-improvement model typically used to implement Six
Sigma projects?
The elements or phases associated with a typical Six Sigma project are reflected in the acronym
DMAIC: Define, Measure, Analyze, Improve, and Control—see Table 1 in the article). These phases
3. What role is played by “cause-and-effect” diagrams in a typical Six Sigma project? What is the
“Pareto principle” and how is this applied to a Six Sigma implementation?
a) “Cause-and-effect” diagrams are used in conjunction with phase 3 (analysis stage) of the internal
audit project. These diagrams (also referred to as Ishikawa diagrams) are useful tools for determining
quality problems.
b) The Pareto Principle (or, Pareto diagrams) help managers focus attention on the most important
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Chapter 17 – The Management & Control of Quality
4. Provide a brief summary of Six Sigma certifications.
This question is designed to give accounting students greater knowledge of the certification process
associated with Six Sigma. Please see the section of the article entitled “Six Sigma Training:
Requirements and Learning Objectives.” As indicated therein:
To become a Black belt, a candidate must complete various educational requirements plus a series of
smaller Six Sigma projects and, ultimately, a capstone project. The author of the article maintains that
certification as a Black belt Six Sigma specialist is a great complement to the CMA professional
certification.
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Chapter 17 – The Management & Control of Quality
Reading 17-9: John Gillett, Ross Fink, and Nick Bevington, “How Caterpillar Uses 6 Sigma to
Execute Strategy,” Strategic Finance (April 2010), pp. 25-28.
In 2001, Caterpillar launched its 6 Sigma program to drive change to achieve the company’s long-term
strategic goals (Caterpillar uses 6 Sigma to identify its Six Sigma initiatives). This 6 Sigma process was,
and continues to be, extremely successful. Some of the results include first-year benefits that exceeded
implementation cost and achievement of the revenue goal two years earlier than planned. In this article
the authors briefly discuss Six Sigma in general, describe Caterpillar, and show the entrenchment of 6
Sigma within the company’s strategic planning process.
Discussion Questions
1. According to the authors, what is “Six Sigma”?
covers virtually the entire distribution and in this sense can be used to establish quality-performance
expectations. If we think in terms of “good” output, then Six Sigma performance standards imply very,
very few defects per million items produced.
2. Explain the DMAIC process and how this relates to “Six Sigma.”
Six Sigma focuses on the control of processes. Under strict control conditions, the process should
produce very few defective (i.e., poor-quality) outputs. This raises the issue as to what tools are
3. Provide an overview of the application of Six Sigma at Caterpillar.
Six Sigma was introduced at Caterpillar (a Fortune 100 company) in 2001. (As indicated in the article,
Caterpillar is the world’s largest manufacturer of construction and mining equipment, diesel and
natural gas engines, and industrial gas turbines.) The bulk of its sales are made through dealerships,
rather than direct selling to customers/end users.
The implementation of Six Sigma at Caterpillar was time-consuming: the authors report that its initial
authors report that the company has even shared its expertise in the area of a significant number of
suppliers and a significant number of it dealers, worldwide.
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Chapter 17 – The Management & Control of Quality
The article is applicable to Chapter 17 because it deals with a focus on process improvements as part
of an organization’s comprehensive model for managing and controlling quality.
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