The Management Control Environment

In this and the next three chapters, we describe the nature of the management control process and the use of accounting information in that process. This chapter describes the environment in which management control takes place: the organization, the rules and procedures governing its work, the organization’s culture, and the organization’s exter- nal environment.

Management control focuses on organization units called responsibility centers. There are four types of responsibility centers that can be used: revenue centers, expense centers, profit centers, and investment centers. Profit centers and investment centers may require the use of transfer pricing, which this chapter also addresses.

Management Control

An organization has goals;