CHAPTER 8 Quality Control

• Quality control refers to the processes and activities that are put in place to ensure that a product or service meets the specified quality standards.
• Assertions are affirmations or declarations; they are statements of fact regarding the financial activities of the organization
• Transactions and events

  Occurrence: The business transactions recorded actually took place.
• Completeness: All business events and their related transactions that should have been recorded were recorded.
• Accuracy: The transactions were recorded in the corresponding ledgers at their full amounts without errors.
• Cutoff: The transactions were recorded in the appropriate accounting period; neither early nor late.
• Classification: The transactions were recorded in the appropriate general ledger accounts.
• Accounts balances

  Existence: Assets, liabilities, and equity balances exist as shown
• Rights and Obligations: The organization has rights to the assets it owns and is obligated as indicated in the outstanding liabilities reported
• Completeness: All reported asset, liability, and equity balances that should have been recorded were recorded.
• Valuation: Asset, liability, and equity balances are valued and recorded at the proper valuation, and all adjustments were recorded appropriately.
• Presentation and disclosure

  Occurrence: The reported transactions and disclosures occurred.
• Rights and Obligations: The transactions and disclosures are related to the organization
• Completeness: All disclosures that should be disclosed were disclosed in the financial statements.
• Accuracy and valuation: All relevant information is disclosed at the appropriate amounts and reflect the proper value.
• Classification and Understandability: Financial statements are clear, understandable, and present all necessary information appropriately.
• Transactions and events

  • Occurrence
  • Completeness
  • Accuracy
  • Cutoff
  • Classification
• Accounts balances

  • Existence
  • Rights and Obligations
  • Completeness
  • Valuation
• Presentation and disclosure

  • Occurrence
  • Rights and Obligations
  • Completeness
  • Classification and Understandability
  • Accuracy and valuation
• Transactions and events relate to the income statement, account balances relate to the balance sheet, and presentation and disclosure relate to the disclosures that accompany the financial statements.
• MANAGEMENT ASSERTIONS

  
• Economy: The program or process obtains resources at the optimal value to the organization. This is accomplished through the display of care in the procurement of financial, human, or material inputs
• Efficiency: The program or process operates in such a way that it achieves maximum productivity with the lowest possible wasted effort, expense, or time.
• Effectiveness: The program or process achieves or exceeds its objectives. Effectiveness pertains to the achievement of desired results, so if the program or process under review does not have clearly defined objectives, it is essentially impossible to assess effectiveness other than anecdotally.
• Ethics: The operation acts under acceptable moral principles that govern the organization’s behavior
• Equity: The program or operation acts in ways consistent with expectations of equality, and fairness when dealing with individuals or other organizations
• Ecology: The operation’s activities protect and promote protection of the natural environment.
• Excellence: The program and related activities adhere to the highest possible degree of quality and seeks near-zero error rates as much as reasonably possible.
• Reduce: Use fewer resources in the first place. Reduce the amount of inputs by cutting back from what is being used presently
• Reuse: Before recycling or disposing of items, consider repurposing the item so its useful life can be extended. Upgrading computers, reselling, or donating vehicles and cellphones can help reduce costs or realize tax benefits
• Recycle: While this is the most recognizable of the 3Rs, it is the third in order of environmental protection because it requires the use of resources, such as water, electricity, fuel to collect, transport, process, and redistribute the reprocessed items
• Six Sigma is a process improvement methodology designed to make sure that a process will deliver its output within a prescribed tolerance range
• Mike Harry and Richard Schoeder define Six Sigma as“…a business process that allows companies to drastically improve their bottom line by designing and monitoring everyday business activities in ways that minimize waste and resources while increasing satisfaction.”
• The term Six Sigma is based on statistical modeling, whereby the maturity, stability, and conformance with expected accuracy yields is described by a sigma rating
• Six Sigma is a business process that allows companies to drastically improve their bottom line by designing and monitoring everyday business activities in ways that minimize waste and resources while increasing satisfaction
• The most common methodology in Six Sigma is DMAIC

  • DEFINE
  • MEASURE
  • ANALYZE
  • IMPROVE
  • CONTROL
• D—Define the current process, system, high-level project goals and capture details about customer requirements and expectations (i.e., the voice of the customer)
• M—Measure key aspects of the current process, collect relevant data, and determine the capability of the process in its current state (i.e., the “as-is” process capability).
• A—Analyze the data to investigate and verify cause-and-effect relationships. Determine what the relationships are. Search for the root cause of the defect under investigation.
• I—Improve the current process based on the data analysis performed. Use techniques such as design of experiments, Poka Yoke (i.e., mistake proofing)